US federal government posts budget deficit of $149.2bn in July

The US federal government reported a monthly budget deficit of $149.2bn for July, in line with CBO projections and slightly wider than consensus expectations ($140bn). The monthly deficit widened by about $55bn over the same period last year. Much of this widening was due to calendar effects and the timing of payments, accordingly to CBO analysis. Adjusting for these effects shows a deficit that was $11bn wider from last July. A $14bn increase in individual income and payroll taxes helped total budget receipts grow 5.1% y/y. Partially offsetting these gains were small declines in other revenues from fees and fines. 

On the spending side, outlays reported by the Treasury Department rose 21.2% y/y. CBO analysis suggests outlays would have been up just 6.8% y/y if adjusted for the time-shifting of payments. Much of this increase was driven by increases in entitlement spending; outlays for Medicaid, Medicare and Social Security grew an estimated $8bn. The July data bring the 12-month trailing deficit to $488.4bn, from $433.8bn last month. 

"With just two months remaining in the fiscal year, the CBO projects a FY 2015 deficit of $425bn. This estimate is in line with our own forecast, and represents a narrowing of $58bn versus FY 2014. We expect the deficit to narrower further in FY 2016 as employment and income gains drive growth in individual income tax receipts," notes Barclays.