The U.S. current-account deficit narrowed more than forecast in the fourth quarter to $132.8 billion, reflecting a narrower gap in trade of goods. The shortfall, the broadest measure of trade because it includes transfer payments and investment income, was the smallest since 2003 and followed a revised $181.3 billion gap in the previous three months, the Commerce Department said today in Washington. Funding the budget deficit requires the U.S. to attract approximately $1.9 billion a day from abroad or risk a drop in the value of the dollar and Treasury securities. China, which funds much of the U.S. imbalance, expressed concern last week about whether its holdings of Treasuries are a safe investment. ``The improvement in the current account is occurring for all the wrong reasons,'' Joseph Brusuelas, a director at Moody's Economy.com in West Chester, Pennsylvania, said before the report. ``It has to do with the sharp decline in international trade and financial activity during the fourth quarter of 2008. There's nothing on the table right now that suggests global trade will improve in the near term.'' Economists forecast a deficit of $137.1 billion, according to the median of 36 estimates in a Bloomberg News survey, after an initially reported $174.1 billion shortfall the previous quarter. Forecasts ranged from deficits of $116 billion to $172 billion. Foreign earnings on U.S. assets declined to $130.2 billion from $162.8 billion in the prior three months. U.S. income on overseas assets, including wages and compensation, decreased to $166.7 billion from $192.3 billion. Income Payments That left a $36.5 billion surplus on income payments, compared with a $29.6 billion surplus in the prior quarter. U.S. government payments to foreigners and other private transfers abroad posted decreased to $28.9 billion from $30 billion. The decline reflected a drop in private remittances overseas. The trade gap, which accounted for most of the current- account imbalance, narrowed to $140.4 billion in the fourth quarter from $180.9 billion the previous three months. The figures, which aren't adjusted for inflation, reflected lower imported oil costs. A drop in consumer spending will likely boost household savings and further decrease imports, offsetting a pickup in government borrowing this year. Some economists forecast the federal budget gap will exceed $1 trillion in the fiscal year that ends in September. The record U.S. budget deficit widened further in February as the excess of spending over revenue rose to $192.8 billion, compared with a gap of $175.6 billion in the same month a year earlier, the Treasury Department said last week. Gross Domestic Product The current account gap amounted to 3.7 percent of gross domestic product, compared with 5 percent in the prior quarter. The deficit was 6.6 percent of GDP during the last quarter of 2005, the highest level since records began in 1960. Adjusted for prices, which are the numbers used to calculate gross domestic product, the trade deficit widened last quarter, according to the Commerce Department. Trade subtracted half a percentage point from economic growth in the last three months of 2008. International demand for long-term U.S. financial assets fell in January, reflecting sales of corporate and government agency debt and China's smallest net purchase since May, figures from the Treasury Department showed this week. Net sales of long- term equities, notes and bonds totaled $43 billion, compared with buying of $34.7 billion in December.

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