U.S. Government Budget Deficit in July 2023

(Reuters) – The U.S. government recorded a $244 billion budget deficit for July, marking a 10% increase from the previous year. However, accounting for calendar differences, the actual gap would have been $45 billion narrower, according to the Treasury Department on Monday.

The Treasury noted that last month’s deficit rose by $23 billion compared to the $221 billion deficit reported in July 2023. Economists surveyed by Reuters had forecasted a $242 billion deficit.

The nominal increase is primarily attributed to lower-than-usual benefit outlays in July last year, particularly for Medicare, as those payments were made in June 2023 due to the beginning of last July falling on a weekend.

Taking these adjustments into consideration, the current month’s deficit is estimated to be 16% below the July 2023 figure.

July Receipts and Outlays

In July, receipts reached $330 billion, a 20% increase from a year earlier. However, adjusting for deferred tax receipts would show an increase of 12%.

On the other hand, July outlays surged by 16% to $574 billion, primarily driven by a $72 billion increase in Medicare costs. It’s important to note that last year’s outlays were artificially low because payments occurred at the end of June 2023. Adjusting for these variations, July’s outlays would have actually been 1% lower.

Rising Debt Service Costs

Federal debt service costs continue to rise, with interest on the debt increasing 21% to $89 billion last month. The weighted average interest rate also rose by 49 basis points to 3.33%, as stated by a Treasury official.

Year-to-Date Deficit Overview

For the first 10 months of the fiscal year 2024, the U.S. deficit has decreased by 6% to $1.517 trillion from $1.614 trillion during the same period of fiscal 2023. The government’s fiscal year concludes on September 30.

Year-to-date receipts are up 11% to $4.085 trillion, while outlays for the period have risen 6% to $5.602 trillion, according to the Treasury.