The US federal government reported a monthly budget deficit of $149.2bn for July. Whereas, consensus was expecting the monthly budget deficit to reach $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, notes Barclays. 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, notes Barclays.



"US federal government annual budget deficit is expected to reduce by $58bn in 2015 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", estimates Barclays.