U.S. posts $165 billion July deficit

WASHINGTON (Reuters) - The United States racked up a $165.04 billion budget deficit during July, 8.7 percent below the year-ago gap as economic stimulus and bailout spending subsided from peak levels, the Treasury Department said on Wednesday.

So far in the first 10 months of fiscal 2010, which ends on September 30, the shortfall between the government's income and its spending totaled $1.169 trillion, down from last year's record 10-month deficit of $1.267 trillion.

July's deficit marked a 22nd straight month of red ink for the U.S. government, the longest string on record, due to heavy spending aimed at pushing the economy out of a prolonged slump, coupled with weak tax revenues.

Late last month, the Obama administration trimmed its full year fiscal 2010 deficit forecast by $84 billion to $1.471 trillion. But the White House raised its fiscal 2011 deficit forecast by $149 billion to $1.42 trillion.

July is typically a deficit month, with the Treasury reporting only two July surpluses in the past 56 years, in 2000 and 2001.

The Treasury said spending outlays for July fell 3.5 percent to $320.59 billion from $332.16 billion in July 2009, which was a record for any month. A Treasury official attributed the decline largely to lower spending on economic stimulus programs and the Troubled Asset Relief Program.

Meanwhile, receipts rose 2.7 percent to $155.55 billion from $151.48 billion a year earlier, due to higher corporate income tax collections and higher Federal Reserve earnings on investment securities. Individual income tax collections declined slightly.

(Reporting by David Lawder; Editing by Diane Craft)