Analysts at Nomura point out that the US monthly budget report has shown a rapidly increasing FY18 deficit with corporate tax receipts down sharply this year following the enactment of the December 2017 tax overhaul.
“At $607bn, the FY deficit is currently $84bn wider than at this point last year. Historically, Treasury posts a deficit in July, indicating further widening from the July budget statement should be expected. In addition, the July report will also provide additional information on how quickly defense spending has ramped up following the budget agreement in March. We expect the bulk of the spending impact on growth to occur in H2 2018.”