(Bloomberg) –The budget deficit in the U.S. this year will be wider than predicted four months ago as weaker-than-expected economic growth in the first half hurt tax revenue, the Congressional Budget Office said.
The projected shortfall will be $506 billion in the 12 months ending Sept. 30, compared with an April prediction for $492 billion, the nonpartisan CBO said today in a report. That would be 2.9 percent of gross domestic product, compared with a gap of $680 billion, or 4.1 percent, last fiscal year, it said.
The economy will expand 1.5 percent in the fourth quarter of 2014 from the same period last year, compared with 3.1 percent growth predicted in February, the CBO said. Unemployment this year will average 6.2 percent before declining to an average of 5.9 percent next year, it said.
“The economy will grow slowly this year, on balance, and then at a faster but still moderate pace over the next few years,” the CBO said in the report.
U.S. Treasuries advanced as the collapse of yields in Europe prompted investors to reach for higher-yielding U.S. debt.
The Treasury 10-year yield dropped two basis points, or 0.02 percentage point, to 2.37 percent at 10:15 a.m. New York time, according to Bloomberg Bond Trader data.
The gap will keep narrowing next year as the jobless rate falls, lifting individual and corporate tax revenue, the CBO said. It will be the sixth consecutive year of declining deficits as measured as a share of GDP since a level of 9.8 percent — the widest on record — was reached in 2009, according to CBO data.
The 2015 deficit is seen at $469 billion, unchanged from the CBO’s April forecast.
The U.S. budget deficit over the first 10 months of this fiscal year was $460.5 billion, 24 percent slimmer than it was during the same period a year earlier, according to Treasury data released earlier this month. Revenue over that period rose 8 percent compared with a year earlier, while spending gained 1.2 percent, the Aug. 12 report showed.