News Release

FOR WIRE TRANSMISSION: 8:30 A.M. EDT, FRIDAY, September 16, 2005
BEA 05-41

U.S. International Transactions: Second Quarter 2005



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Note: Revisions to trade in services.
Douglas B. Weinberg:        (202) 606-9590                            BEA 05-41


             U.S. International Transactions: Second Quarter 2005

                                Current Account

        The U.S. current-account deficit--the combined balances on trade in goods
and services, income, and net unilateral current transfers--decreased to $195.7
billion in the second quarter of 2005 (preliminary) from $198.7 billion
(revised) in the first quarter.  The decrease was more than accounted for by a
decrease in net outflows for unilateral current transfers.  A small increase in
the surplus on services also contributed.  In contrast, the balance on income
shifted to a deficit from a surplus, and the deficit on goods increased.

Goods and services

        The deficit on goods and services increased to $173.3 billion in the
second quarter from $173.1 billion in the first.

        Goods

        The deficit on goods increased to $186.9 billion in the second quarter
from $186.3 billion in the first.

        Goods exports increased to $223.5 billion from $213.8 billion.  Much of
the increase was in capital goods, in industrial supplies and materials, and in
foods, feeds, and beverages.

        Goods imports increased to $410.5 billion from $400.2 billion.  Both
petroleum products and nonpetroleum products increased.  The increase in
nonpetroleum products was mostly accounted for by an increase in capital goods.

        Services

        The surplus on services increased to $13.6 billion in the second
quarter from $13.3 billion in the first.

        Services receipts increased to $93.7 billion from $92.6 billion.  The
increase was more than accounted for by an increase in travel.  Other
transportation (such as freight and port services) and passenger fares also
increased.  These increases were partly offset by decreases in other private
services (such as business, professional, and technical services, insurance
services, and financial services), and in royalties and license fees.

        Services payments increased to $80.1 billion from $79.3 billion.
Increases in other private services, in travel, and in passenger fares were
partly offset by a decrease in other transportation.

Income

        The balance on income shifted to a deficit of $0.5 billion in the
second quarter from a surplus of $0.6 billion in the first.

        Investment income

        Income receipts on U.S.-owned assets abroad increased to $112.6 billion
from $106.2 billion.  The increase was almost entirely accounted for by
increases in direct investment receipts and in other private receipts (which
consists of interest and dividends).

        Income payments on foreign-owned assets in the United States increased
to $111.6 billion from $104.1 billion.  Increases in other private payments
(which consists of interest and dividends), in direct investment payments, and
in U.S. Government payments (which consists of interest) all contributed.

        Compensation of employees

        Receipts for compensation of U.S. workers abroad were virtually
unchanged at $0.8 billion, and payments for compensation of foreign workers in
the United States were virtually unchanged at $2.2 billion.

Unilateral current transfers

        Unilateral current transfers were net outflows of $21.9 billion in the
second quarter, down from net outflows of $26.3 billion in the first.  The
decrease was mostly attributable to a decrease in U.S. Government grants.

                         Capital and Financial Account

                               Capital Account

        Capital account transactions were net outflows of $0.3 billion in the
second quarter, down from net outflows of $4.5 billion in the first.

                              Financial Account

        Net recorded financial inflows--net acquisitions by foreign residents
of assets in the United States less net acquisitions by U.S. residents of
assets abroad--were $142.3 billion in the second quarter, down from $161.9
billion in the first.  Financial outflows for U.S.-owned assets abroad picked
up more than financial inflows for foreign-owned assets in the United States.

U.S.-owned assets abroad

        U.S.-owned assets abroad increased $250.8 billion in the second
quarter, following an increase of $81.5 billion in the first.

        U.S. claims on foreigners reported by U.S. banks increased $171.0
billion in the second quarter, in contrast to a decrease of $49.3 billion in
the first.

        Net U.S. purchases of foreign securities were $36.0 billion in the
second quarter, down from $38.7 billion in the first.  Net U.S. purchases of
foreign stocks were $20.8 billion, down from $39.8 billion.  Transactions in
foreign bonds shifted to net U.S. purchases of $15.2 billion from net U.S.
sales of $1.2 billion.

        Net financial outflows for U.S. direct investment abroad were $33.6
billion in the second quarter, up from $27.0 billion in the first.  Both net
equity capital outflows and reinvested earnings increased, and net intercompany
debt inflows decreased.

        U.S. official reserve assets increased $0.8 billion in the second
quarter, in contrast to a decrease of $5.3 billion in the first.

Foreign-owned assets in the United States

        Foreign-owned assets in the United States increased $393.1 billion in
the second quarter, following an increase of $243.5 billion in the first.

        U.S. liabilities to foreigners reported by U.S. banks increased $168.9
billion in the second quarter, in contrast to a decrease of $67.7 billion in
the first.

        Net foreign purchases of U.S. Treasury securities were $4.9 billion in
the second quarter, down from $75.9 billion in the first.

        Net foreign purchases of U.S. securities other than U.S. Treasury
securities were $115.3 billion in the second quarter, up from $80.0 billion in
the first.  Net foreign purchases of U.S. stocks were $12.7 billion, down from
$21.2 billion.  Net foreign purchases of U.S. corporate bonds were $82.3
billion, up from $58.1 billion.  Net foreign purchases of federally sponsored
agency bonds were $20.4 billion, up from $0.7 billion.

        Net financial inflows for foreign direct investment in the United States
were $17.6 billion in the second quarter, down from $35.1 billion in the first.
The decrease was more than accounted for by a shift to net outflows on
intercompany debt from net inflows.  A decrease in net equity capital inflows
also contributed.  In contrast, reinvested earnings increased.

        Foreign official assets in the United States increased $82.3 billion in
the second quarter, following an increase of $25.3 billion in the first.

        Net U.S. currency shipments to foreigners were $4.5 billion in the
second quarter, up from $1.1 billion in the first.

        The statistical discrepancy--errors and omissions in recorded
transactions--was a positive $53.6 billion in the second quarter, compared with
a positive $41.2 billion in the first.

        In the second quarter, the U.S. dollar appreciated 3 percent on a trade-
weighted quarterly average basis against a group of 7 major currencies.

The American Jobs Creation Act of 2004, which was signed into law on October
22, 2004, allows U.S. companies that repatriate an historically large amount of
earnings from their foreign subsidiaries for a period of 1 year (calendar year
2004 or calendar year 2005 at taxpayers' option, for calendar year taxpayers)
to be taxed at reduced rates on the increased distributions.  In the current
account, distributed earnings that U.S. parent companies receive from their
foreign affiliates are one component of foreign affiliates' earnings; earnings
are recorded in direct investment income receipts when they are earned (table
1, line 14).  The distribution of earnings affects only the form in which
earnings are received, and not its overall amount.  For a given amount of
earnings, an increase in distributed earnings would lead to an equal and
offsetting decrease in reinvested earnings, the other component of foreign
affiliates' earnings.  In the financial account, reinvested earnings on U.S.
direct investment abroad are one component of direct investment outflows (table
1, line 51).  A decrease in reinvested earnings would therefore result in
smaller direct investment outflows.  Depending on the method of settlement, the
decrease in direct investment outflows would be balanced or offset by changes
in one or more other financial account components.  It is not possible for BEA
to separately identify transactions arising from the American Jobs Creation
Act.  More information is available on BEA's Web site at
www.bea.gov/bea/faq/international/FAQ.htm.

                                   Revisions


        The first-quarter international transactions are revised from previously
published estimates.  The current-account deficit was revised to $198.7 billion
from $195.1 billion.  The goods deficit was unrevised at $186.3 billion; the
services surplus was revised to $13.3 billion from $14.6 billion; the income
surplus was revised to $0.6 billion from $3.8 billion; and unilateral current
transfers were revised to net outflows of $26.3 billion from $27.1 billion.
Net recorded financial inflows were revised to $161.9 billion from $165.4
billion.

                            *          *          *

	Release dates in 2005:

        Third quarter 2005...........................December 16, 2005 (Friday)

                            *          *          *

        Summary BEA estimates are available on recorded messages at the time of
public release at the following telephone numbers:

                      (202) 606-5306 Gross domestic product
                               -5303 Personal income and outlays

        BEAs national, international, regional, and industry estimates; the
Survey of Current Business; and BEA news releases are available without charge
on BEAs Web site at www.bea.gov.  By visiting the site, you can also subscribe
to receive free e-mail summaries of BEA releases and announcements.
                                                                                                                                                      September 16, 2005

    Table 1. U.S. International Transactions
    [Millions of dollars, quarters seasonally adjusted]

                                                                                                            2004                                2005               Change:
                                          (Credits +, debits -)                                  2004                                                               2005
                                                                                                            I        II       III      IV       I r      II p       I-II

                                            Current account

            1 Exports of goods and services and income receipts..............................    1,530,975  363,494  376,564  385,874  405,041  413,395  430,628   17,233

            2     Exports of goods and services..............................................    1,151,448  277,093  285,099  290,370  298,887  306,444  317,284   10,840

            3         Goods, balance of payments basis.......................................      807,536  193,789  200,072  204,801  208,874  213,840  223,540    9,700

            4         Services...............................................................      343,912   83,304   85,027   85,569   90,013   92,604   93,744    1,140
            5             Transfers under U.S. military agency sales contracts...............       14,814    3,899    3,756    3,604    3,555    4,525    4,485      -40

            6             Travel.............................................................       74,481   17,900   18,675   18,686   19,220   20,008   21,564    1,556
            7             Passenger fares....................................................       18,858    4,521    4,654    4,909    4,774    5,162    5,342      180
            8             Other transportation...............................................       36,862    8,907    9,188    9,124    9,643    9,859   10,164      305

            9             Royalties and license fees.........................................       52,643   12,677   12,573   12,947   14,446   14,872   14,705     -167
           10             Other private services.............................................      145,433   35,202   35,975   36,094   38,163   37,968   37,277     -691
           11             U.S. Government miscellaneous services.............................          821      198      206      205      212      210      207       -3

           12     Income receipts............................................................      379,527   86,401   91,465   95,504  106,154  106,951  113,344    6,393
           13         Income receipts on U.S.-owned assets abroad............................      376,489   85,657   90,738   94,734  105,357  106,207  112,588    6,381
           14             Direct investment receipts.........................................      233,067   55,096   57,053   57,863   63,053   58,180   61,682    3,502
           15             Other private receipts.............................................      140,424   29,758   32,972   36,117   41,577   47,299   50,077    2,778
           16             U.S. Government receipts...........................................        2,998      803      713      754      727      728      829      101
           17         Compensation of employees..............................................        3,038      744      727      770      797      744      756       12

           18 Imports of goods and services and income payments..............................   -2,118,119 -487,324 -522,684 -537,085 -571,026 -585,804 -604,410  -18,606

           19     Imports of goods and services..............................................   -1,769,031 -415,945 -437,141 -447,835 -468,108 -479,496 -490,611  -11,115

           20         Goods, balance of payments basis.......................................   -1,472,926 -345,241 -364,059 -372,576 -391,050 -400,169 -410,469  -10,300

           21         Services...............................................................     -296,105  -70,704  -73,082  -75,259  -77,058  -79,327  -80,142     -815
           22             Direct defense expenditures........................................      -29,299   -7,099   -7,399   -7,433   -7,368   -7,545   -7,535       10

           23             Travel.............................................................      -65,635  -15,886  -16,491  -16,603  -16,655  -17,425  -18,127     -702
           24             Passenger fares....................................................      -23,701   -5,740   -5,882   -5,896   -6,183   -6,221   -6,508     -287
           25             Other transportation...............................................      -54,169  -12,914  -13,158  -13,614  -14,483  -15,882  -14,835    1,047

           26             Royalties and license fees.........................................      -23,901   -5,407   -5,731   -6,591   -6,172   -6,429   -6,372       57
           27             Other private services.............................................      -95,666  -22,776  -23,492  -24,150  -25,246  -24,859  -25,808     -949
           28             U.S. Government miscellaneous services.............................       -3,734     -882     -929     -972     -951     -966     -957        9

           29     Income payments............................................................     -349,088  -71,379  -85,543  -89,250 -102,918 -106,308 -113,799   -7,491
           30         Income payments on foreign-owned assets in the United States...........     -340,255  -69,219  -83,331  -87,040 -100,666 -104,140 -111,619   -7,479
           31             Direct investment payments.........................................     -105,146  -20,014  -27,973  -27,520  -29,640  -29,803  -32,612   -2,809
           32             Other private payments.............................................     -145,370  -29,040  -33,355  -36,246  -46,729  -48,333  -51,155   -2,822
           33             U.S. Government payments...........................................      -89,739  -20,165  -22,003  -23,274  -24,297  -26,004  -27,852   -1,848
           34         Compensation of employees..............................................       -8,833   -2,160   -2,212   -2,210   -2,252   -2,168   -2,180      -12

           35 Unilateral current transfers, net..............................................      -80,930  -22,271  -20,515  -15,771  -22,374  -26,259  -21,873    4,386
           36     U.S. Government grants.....................................................      -23,317   -7,744   -4,961   -4,911   -5,701   -9,035   -5,332    3,703
           37     U.S. Government pensions and other transfers...............................       -6,264   -1,554   -1,556   -1,548   -1,607   -1,558   -1,564       -6
           38     Private remittances and other transfers....................................      -51,349  -12,973  -13,998   -9,312  -15,066  -15,666  -14,977      689


                                                                                                                                                       September 16, 2005
    Table 1. U.S. International Transactions (Continued)
    [Millions of dollars, quarters seasonally adjusted]

                                                                                                            2004                                2005              Change:
                                          (Credits +, debits -)                                  2004                                                              2005
                                                                                                            I        II       III      IV       I r      II p      I-II

                                      Capital and financial account

                                             Capital account

           39 Capital account transactions, net..............................................       -1,648     -428     -372     -393     -455   -4,466     -266    4,200

                                            Financial account

           40 U.S.-owned assets abroad, net (increase/financial outflow (-)).................     -855,509 -295,140 -133,886 -137,525 -288,957  -81,510 -250,793 -169,283

           41     U.S. official reserve assets, net..........................................        2,805      557    1,122      429      697    5,331     -797   -6,128
           42         Gold...................................................................         ....     ....     ....     ....     ....     ....     ....     ....
           43         Special drawing rights.................................................         -398     -100      -90      -98     -110    1,713      -97   -1,810
           44         Reserve position in the International Monetary Fund....................        3,826      815    1,345      676      990    3,763     -564   -4,327
           45         Foreign currencies.....................................................         -623     -158     -133     -149     -183     -145     -136        9

           46     U.S. Government assets, other than official reserve assets, net............        1,215      727       -2      -11      501    4,487      258   -4,229
           47         U.S. credits and other long-term assets................................       -3,044     -561     -668   -1,270     -545     -519     -586      -67
           48         Repayments on U.S. credits and other long-term assets..................        4,221    1,374      544    1,299    1,004    1,083      838     -245
           49         U.S. foreign currency holdings and U.S. short-term assets, net.........           38      -86      122      -40       42    3,923        6   -3,917

           50     U.S. private assets, net...................................................     -859,529 -296,424 -135,006 -137,943 -290,155  -91,328 -250,254 -158,926
           51         Direct investment......................................................     -252,012  -52,367  -58,425  -41,222  -99,997  -26,997  -33,609   -6,612
           52         Foreign securities.....................................................     -102,383  -15,532  -30,181  -38,444  -18,226  -38,675  -36,004    2,671
           53         U.S. claims on unaffiliated foreigners reported by
                          U.S. nonbanking concerns...........................................     -149,001  -55,452   -5,390  -13,490  -74,669  -74,934   -9,642   65,292
           54         U.S. claims reported by U.S. banks, not included elsewhere.............     -356,133 -173,073  -41,010  -44,787  -97,263   49,278 -170,999 -220,277

           55 Foreign-owned assets in the United States, net (increase/financial inflow (+)).    1,440,105  423,023  304,937  254,228  457,915  243,451  393,069  149,618

           56     Foreign official assets in the United States, net..........................      394,710  147,401   77,039   75,792   94,478   25,277   82,324   57,047
           57         U.S. Government securities.............................................      311,133  124,010   63,456   66,899   56,768   39,244   44,341    5,097
           58             U.S. Treasury securities...........................................      272,648  112,586   62,977   55,357   41,728   14,306   22,721    8,415
           59             Other..............................................................       38,485   11,424      479   11,542   15,040   24,938   21,620   -3,318
           60         Other U.S. Government liabilities......................................          488     -109       45      710     -158     -650      229      879
           61         U.S. liabilities reported by U.S. banks, not included elsewhere........       70,329   22,058   11,350    4,867   32,054  -15,843   33,663   49,506
           62         Other foreign official assets..........................................       12,760    1,442    2,188    3,316    5,814    2,526    4,091    1,565

           63     Other foreign assets in the United States, net.............................    1,045,395  275,622  227,898  178,436  363,437  218,174  310,745   92,571
           64         Direct investment......................................................      106,832    8,503   31,039   35,666   31,622   35,056   17,590  -17,466
           65         U.S. Treasury securities...............................................      106,958   31,931   60,424   -1,107   15,710   75,911    4,913  -70,998
           66         U.S. securities other than U.S. Treasury securities....................      369,793   45,476   81,678   84,401  158,238   79,973  115,335   35,362
           67         U.S. currency..........................................................       14,827   -1,800    8,754    2,560    5,313    1,072    4,507    3,435
           68         U.S. liabilities to unaffiliated foreigners reported by
                          U.S. nonbanking concerns...........................................      124,358   44,623    3,887   14,752   61,096   93,897     -548  -94,445
           69         U.S. liabilities reported by U.S. banks, not included elsewhere........      322,627  146,889   42,116   42,164   91,458  -67,735  168,948  236,683

           70 Statistical discrepancy (sum of above items with sign reversed)................       85,126   18,646   -4,044   50,672   19,856   41,193   53,645   12,452

              Memoranda:
           71 Balance on goods (lines 3 and 20)..............................................     -665,390 -151,452 -163,987 -167,775 -182,176 -186,329 -186,929     -600
           72 Balance on services (lines 4 and 21)...........................................       47,807   12,600   11,945   10,310   12,955   13,277   13,602      325
           73 Balance on goods and services (lines 2 and 19).................................     -617,583 -138,852 -152,042 -157,465 -169,221 -173,052 -173,327     -275
           74 Balance on income (lines 12 and 29)............................................       30,439   15,022    5,922    6,254    3,236      643     -455   -1,098
           75 Unilateral current transfers, net (line 35)....................................      -80,930  -22,271  -20,515  -15,771  -22,374  -26,259  -21,873    4,386
           76 Balance on current account (lines 1, 18, and 35 or lines 73, 74, and 75).......     -668,074 -146,101 -166,635 -166,982 -188,359 -198,668 -195,655    3,013
    r Revised.  p Preliminary.

    NOTE:  Details may not add to totals because of rounding.     Source:  U. S. Bureau of Economic Analysis

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