Federal deficit hits $5 billion in June

The federal deficit hit $5 billion in June as spending rose dramatically and tax revenues fell, the finance department said Friday.

That amounted to an abrupt turnaround from the $1.6 billion surplus recorded in June 2008.

The department said revenues were $18.2 billion — down $2.7 billion from a year earlier — as collections from personal and corporate income tax and the GST brought in significantly less.

Program spending in June soared 25.2 per cent from a year earlier — up $4.2 billion to $20.7 billion — as the recession led to much higher employment insurance benefit payouts. Subsidies for the struggling automotive industry added to the monthly deficit.  

EI benefit payments in June were up 39 per cent from June 2008. Figures from Statistics Canada showed unemployment rose to 8.6 per cent in June, with almost 1.6 million out of work — a jump of 306,000 from a year earlier.

Q1 deficit soars to $12.5 billion

In the first three months of the fiscal year, government figures show the federal deficit stood at $12.5 billion.

That compares to a surplus of $800 million reported in the first quarter of last year.

The Finance Department said the latest Q1 deficit figures are "consistent" with the most recent fiscal projections, which forecast an annual deficit of $50.2 billion.

U.S. deficit to soar

In the U.S., White House budget officials told several wire service agencies late Friday that the Obama administration next week will raise its 10-year budget deficit projection by almost $2 trillion US.

The sources said the current 10-year deficit projection of $7.11 trillion US will be formally bumped up to about $9 trillion US.

As of May, the U.S. was running a budget deficit of $1.84 trillion US for the current fiscal year, which ends Sept. 30.