(Updates with closing market prices in fifth paragraph.)
June 10 (Bloomberg) -- The U.S. government posted a budget deficit of $57.6 billion in May, narrower than a year earlier, reflecting increasing tax revenue and a reduction in the estimated cost of the government’s financial industry bailout.
In May 2010, the shortfall was $135.9 billion, according to the Treasury Department’s monthly budget statement, released today in Washington.
The economy has been adding jobs since October and corporate profits have climbed, leading to higher personal income and business tax collections. At the same time, the annual shortfall is projected to tie a record as spending also increases, based on data from the Congressional Budget Office.
“It would be misleading to look at the headline number and think things are drastically improved,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York.
Stocks fell amid concern the global economy is slowing. The Standard & Poor’s 500 Index dropped 1.4 percent to 1,270.98 at the 4 p.m. close in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 2.97 percent from 3 percent late yesterday.
The median forecast of seven economists surveyed by Bloomberg News projected the budget deficit would shrink to $59 billion in May. Forecasts ranged from $59 billion to $65 billion.
The CBO also projected a smaller monthly shortfall of $59 billion for May. About $43 billion of the reduction from the same month last year “resulted from shifts in the timing of certain payments and revisions to the estimated costs of certain credit programs, mostly the Troubled Asset Relief Program,” the CBO said in a budget estimate released this week.
This year’s federal budget gap is projected to reach $1.4 trillion, according to the CBO, matching the previous record in fiscal 2009. In fiscal year 2010, the annual budget deficit totaled $1.3 trillion, the second largest.
The CBO’s estimate for the fiscal 2012 deficit under the Obama administration’s proposed budget is $1.2 trillion, according to the non-partisan agency.
Congress is under pressure to find agreement on raising the $14.3 trillion debt limit before Aug. 2, the date on which the Treasury said it will have exhausted all its borrowing authority.
“We are afraid the failure to agree is going to bring the markets once again to the brink in early August as they struggle to pass the debt ceiling legislation,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before today’s report. “We have spent beyond our means as a nation, partly to deal with the Great Recession, and now to fix the long-term deficit problem we may need to live with less.”
For the fiscal year to date, the budget deficit totaled $927.4 billion compared with $935.6 billion the prior fiscal year to date, according to the Treasury’s data.
In May, revenue and other fees increased 19 percent to $174.9 billion, according to the Treasury’s statistics.
Year to date, individual income tax payments rose 28 percent to $701.8 billion, while corporate tax receipts increased 5 percent.
Spending by the government fell 18 percent in May from the same month last year to $232.6 billion.
--Editors: Carlos Torres, Kevin Costelloe
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