US starts 2027 fiscal year with record October budget deficit of US$404bil

WASHINGTON: The US government started the 2027 fiscal year with a US$404 billion budget deficit for October, a record for the month and an increase of US$120 billion or 42 per cent from the year-earlier period, as receipts shrank and outlays grew sharply, the Treasury Department said on Thursday.

The record October deficit marks another fiscal setback for Treasury Secretary Scott Bessent after the Treasury reported a full-year fiscal 2026 deficit of nearly US$2 trillion, marking the largest budget shortfall in five years.

Bessent has set a goal to reduce the deficit to 3.0 per cent of US GDP, but the 2026 budget gap was estimated at 6.2 per cent of GDP, up from 5.8 per cent for fiscal 2025.

October 2026 receipts fell by US$35 billion, or 9.0 per cent, to US$369 billion, due partly to a 39 per cent drop in net customs collections to US$19.2 billion from US$31.3 billion in October 2025, when President Donald Trump's global tariff revenues reached their peak.

October individual non-withheld tax receipts fell by US$29 billion, or 36 per cent, to US$51 billion from the year ago period, when they were swelled by tax payments after the expiration of delayed filing deadlines for Californians affected by wildfires in early 2025.

After calendar-related adjustments made because benefit payments for November were shifted into October for both fiscal years, the Treasury said the adjusted deficit would have been $285 billion, an increase of US$94 billion, or 49 per cent, from the year-ago period.

FARM, MILITARY, INTEREST OUTLAYS

But the reported October outlays came to a record for that month of US$773 billion, up US$84 billion, or 12 per cent, from year-ago levels.

The outlay increases were driven in part by a US$14 billion, or 80 per cent, increase in US Department of Agriculture spending due to farm relief payments and a US$28 billion, or 30 per cent, increase in military spending, representing an October payment to military trust funds that was delayed by last year's government shutdown, along with increases spread across operations, maintenance and procurement.

Gross interest on the federal debt also rose US$11 billion, or 11 per cent, from the previous October to US$115 billion.