News Release

FOR WIRE TRANSMISSION: 8:30 A.M. EST, FRIDAY, December 16, 2005
BEA 05-54

U.S. International Transactions: Third Quarter 2005



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Note: Revisions to trade in services.
Douglas B. Weinberg:  (202) 606-9590                                  BEA 05-54


          U.S. International Transactions: Third 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 $195.8
billion (preliminary) in the third quarter of 2005 from $197.8 billion (revised)
in the second quarter.  The decrease was more than accounted for by a decrease
in net outflows for unilateral current transfers, a shift to a surplus on income
from a deficit, and an increase in the surplus on services.  In contrast, the
deficit on goods increased.

Goods and services

        The deficit on goods and services increased to $182.8 billion in the
third quarter from $173.6 billion in the second.

        Goods

        The deficit on goods increased to $197.9 billion in the third quarter
from $186.9 billion in the second.

        Goods exports increased to $225.2 billion from $223.5 billion.  Automotive
vehicles, engines, and parts, capital goods, and consumer goods more than
accounted for the increase.  Foods, feeds, and beverages decreased.

        Goods imports increased to $423.2 billion from $410.5 billion.  Petroleum
and petroleum products accounted for eighty percent of the increase, and
automotive vehicles, engines, and parts accounted for nearly all of the remainder.

        Services

        The surplus on services increased to $15.1 billion in the third quarter
from $13.3 billion in the second.

        Services receipts increased to $95.5 billion from $93.7 billion.  The
increase was mostly attributable to increases in other private services (such
as business, professional, and technical services, insurance services, and
financial services), in transfers under U.S. military agency sales contracts,
and in other transportation (such as freight and port services).  In contrast,
both travel and passenger fares decreased.

        Services payments were virtually unchanged at $80.4 billion.  Decreases
in travel and in passenger fares were offset by increases in other services
categories, particularly in other private services.

Income

        The balance on income shifted to a surplus of $0.5 billion in the third
quarter from a deficit of $1.5 billion in the second.

        Investment income

        Income receipts on U.S.-owned assets abroad increased to $118.0 billion
from $110.4 billion.  The increase was accounted for by increases in other
private receipts (which consists of interest and dividends) and in direct
investment receipts.

        Income payments on foreign-owned assets in the United States increased
to $115.9 billion from $110.5 billion.  Increases in other private payments
(which consists of interest and dividends) and in U.S. Government payments
(which consists of interest) were partly offset by a decrease in direct
investment payments.

        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 edged up to $2.3 billion from $2.2 billion.

Unilateral current transfers

        Unilateral current transfers were net outflows of $13.5 billion in the
third quarter, down from net outflows of $22.6 billion in the second; the
decrease was more than accounted for by a decrease in private remittances and
other transfers.  The decrease in this category mostly resulted from unusually
large claims received by U.S. companies from foreign insurance companies as a
result of the extensive damage caused by hurricanes Katrina and Rita.

                     Capital and Financial Account

                          Capital Account

        Capital account transactions were net outflows of $0.3 billion in the
third quarter, unchanged from the second quarter.

                         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 $272.9 billion in the third quarter, up from $150.6 billion in the
second.  Financial outflows for U.S.-owned assets abroad slowed, and financial
inflows for foreign-owned assets in the United States picked up.

U.S.-owned assets abroad

        U.S.-owned assets abroad increased $124.0 billion in the third quarter,
following an increase of $225.2 billion in the second.

        U.S. claims on foreigners reported by U.S. banks increased $107.9 billion
in the third quarter, following an increase of $171.0 billion in the second.

        Net U.S. purchases of foreign securities were $34.0 billion in the third
quarter, down from $42.0 billion in the second.  Net U.S. purchases of foreign
stocks were $34.6 billion, up from $23.9 billion.  Transactions in foreign bonds
shifted to net U.S. sales of $0.7 billion from net U.S. purchases of $18.1 billion.

        Net financial flows for U.S. direct investment abroad shifted to net
inflows of $27.1 billion in the third quarter from net outflows of $21.4 billion
in the second.  Reinvested earnings shifted to an inflow of $27.2 billion from
an outflow of $16.0 billion, largely reflecting the drawdown of cumulative
reinvested earnings in affiliates abroad to support the increased distribution
of earnings to parents in the United States. Most of this drawdown was in
response to the tax incentives provided by the American Jobs Creation Act of
2004.  In addition, net equity capital outflows decreased, and net intercompany
debt inflows increased.

        U.S. official reserve assets decreased $4.8 billion in the third quarter,
in contrast to an increase of $0.8 billion in the second.

Foreign-owned assets in the United States

        Foreign-owned assets in the United States increased $396.9 billion in the
third quarter, following an increase of $375.8 billion in the second.

        U.S. liabilities to foreigners reported by U.S. banks increased $88.7
billion in the third quarter, following an increase of $149.1 billion in the second.

        Net foreign purchases of U.S. Treasury securities were $40.9 billion in
the third quarter, up from $9.9 billion in the second.

        Net foreign purchases of U.S. securities other than U.S. Treasury
securities were a record $160.7 billion in the third quarter, up from $114.1
billion in the second.  Net foreign purchases of U.S. stocks were $26.6 billion,
up from $13.7 billion.  Net foreign purchases of U.S. corporate bonds were $99.5
billion, up from $80.0 billion.  Net foreign purchases of federally sponsored
agency bonds were $34.5 billion, up from $20.4 billion.

        Net financial inflows for foreign direct investment in the United States
were $38.8 billion in the third quarter, up from $14.5 billion in the second.
A shift to net inflows on intercompany debt from net outflows and an increase
in net equity capital inflows were partly offset by a decrease in reinvested
earnings.

        Foreign official assets in the United States increased $38.4 billion in
the third quarter, following an increase of $82.6 billion in the second.

        Net U.S. currency shipments to foreigners were $4.7 billion in the
third quarter, up from $4.5 billion in the second.

        The statistical discrepancy--errors and omissions in recorded
transactions--was a negative $76.8 billion in the third quarter, compared with
a positive $47.5 billion in the second.

        In the third quarter, the U.S. dollar appreciated 1 percent on a
trade-weighted quarterly average basis against a group of 7 major currencies.


                       Special Developments in the Accounts

Insurance

        The extensive damage caused by the hurricanes Katrina and Rita in the
third quarter of 2005 gives rise to large net unilateral current transfers.
Claims received by U.S. companies from foreign insurance companies that are in
excess of "expected" claims are reflected in the private remittances and other
transfers component of the net unilateral current transfers account.  "Expected"
claims are estimated as premiums multiplied by the historical average of claims
as a percentage of premiums.  In addition, donations from abroad for hurricane
relief are reflected in this account.  These two increases in U.S. receipts
cause net unilateral current transfers to become less negative and, taken by
themselves, reduce the current-account deficit in the third quarter.

        Insurance services payments and receipts, which are components of other
private services payments and receipts in the current account, are unaffected by
the occurrence of hurricanes Katrina and Rita.  This is because insurance
services performed are based on premiums, and these were set before the events
occurred.

U.S. direct investment abroad income and financial flows

        The American Jobs Creation Act of 2004, which was signed into law on
October 22, 2004, reduces the rate of taxation on U.S. multinational companies'
qualifying dividends from abroad for a period of 1 year (calendar year 2004 or
2005 at taxpayers' option, for calendar year taxpayers).

        In the current account, the size of income receipts (earnings) on U.S.
direct investment abroad is unaffected by the Act, although the composition of
earnings has been altered significantly as the amount of earnings reinvested in
affiliates abroad has been drawn down to support the increased distribution of
earnings to parents in the United States.

        In the financial account, the reinvested earnings component of U.S.
direct investment abroad has been significantly reduced as a result of the Act,
resulting in smaller direct investment outflows or in inflows.  The reduction
in reinvested earnings in the first and second quarters led to smaller direct
investment outflows, and the large reduction in reinvested earnings in the third
quarter led to a shift to direct investment inflows.  Depending on the method of
settlement, changes in direct investment flows are balanced or offset by changes
in one or more other financial account components.

        Detailed estimates of direct investment transactions (including
distributed and reinvested earnings) are shown in table 6a of the standard
presentation of the quarterly international transactions accounts, available on
BEA's Web site.  It is not possible for BEA to separately identify transactions
arising from the Act.


                                  Revisions

        The second-quarter international transactions are revised from previously
published estimates.  The current-account deficit was revised to $197.8 billion
from $195.7 billion.  The goods deficit was unrevised at $186.9 billion; the
services surplus was revised to $13.3 billion from $13.6 billion; the income
deficit was revised to $1.5 billion from $0.5 billion; and unilateral current
transfers were revised to net outflows of $22.6 billion from $21.9 billion.
Net recorded financial inflows were revised to $150.6 billion from $142.3 billion.


                            *          *          *

	Release dates in 2006:

        Fourth quarter and year 2005...................March 14, 2006 (Tuesday)
        First quarter 2006...............................June 16, 2006 (Friday)
        Second quarter 2006.........................September 18, 2006 (Monday)
        Third quarter 2006...........................December 18, 2006 (Monday)

                            *          *          *

        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.

                                                                                                                                                              December 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       II r     III p     II-III

                                               Current account

            1 Exports of goods and services and income receipts.............................  1,530,975  363,494  376,564  385,874  405,041  413,395  428,414  439,496   11,082

            2    Exports of goods and services..............................................  1,151,448  277,093  285,099  290,370  298,887  306,444  317,267  320,764    3,497

            3        Goods, balance of payments basis.......................................    807,536  193,789  200,072  204,801  208,874  213,840  223,540  225,226    1,686

            4        Services...............................................................    343,912   83,304   85,027   85,569   90,013   92,604   93,727   95,538    1,811
            5            Transfers under U.S. military agency sales contracts...............     14,814    3,899    3,756    3,604    3,555    4,525    4,425    4,843      418

            6            Travel.............................................................     74,481   17,900   18,675   18,686   19,220   20,008   21,380   21,156     -224
            7            Passenger fares....................................................     18,858    4,521    4,654    4,909    4,774    5,162    5,492    5,408      -84
            8            Other transportation...............................................     36,862    8,907    9,188    9,124    9,643    9,859   10,115   10,518      403

            9            Royalties and license fees.........................................     52,643   12,677   12,573   12,947   14,446   14,872   14,078   14,294      216
           10            Other private services.............................................    145,433   35,202   35,975   36,094   38,163   37,968   38,031   39,109    1,078
           11            U.S. Government miscellaneous services.............................        821      198      206      205      212      210      206      210        4

           12    Income receipts............................................................    379,527   86,401   91,465   95,504  106,154  106,951  111,147  118,732    7,585
           13        Income receipts on U.S.-owned assets abroad............................    376,489   85,657   90,738   94,734  105,357  106,207  110,391  117,968    7,577
           14            Direct investment receipts.........................................    233,067   55,096   57,053   57,863   63,053   58,180   59,635   61,787    2,152
           15            Other private receipts.............................................    140,424   29,758   32,972   36,117   41,577   47,299   49,993   55,576    5,583
           16            U.S. Government receipts...........................................      2,998      803      713      754      727      728      763      605     -158
           17        Compensation of employees..............................................      3,038      744      727      770      797      744      756      764        8

           18 Imports of goods and services and income payments............................. -2,118,119 -487,324 -522,684 -537,085 -571,026 -585,804 -603,554 -621,779  -18,225

           19    Imports of goods and services.............................................. -1,769,031 -415,945 -437,141 -447,835 -468,108 -479,496 -490,866 -503,559  -12,693

           20        Goods, balance of payments basis....................................... -1,472,926 -345,241 -364,059 -372,576 -391,050 -400,169 -410,469 -423,151  -12,682

           21        Services...............................................................   -296,105  -70,704  -73,082  -75,259  -77,058  -79,327  -80,397  -80,408      -11
           22            Direct defense expenditures........................................    -29,299   -7,099   -7,399   -7,433   -7,368   -7,545   -7,491   -7,495       -4

           23            Travel.............................................................    -65,635  -15,886  -16,491  -16,603  -16,655  -17,425  -18,106  -17,337      769
           24            Passenger fares....................................................    -23,701   -5,740   -5,882   -5,896   -6,183   -6,221   -6,536   -6,204      332
           25            Other transportation...............................................    -54,169  -12,914  -13,158  -13,614  -14,483  -15,882  -15,115  -15,217     -102

           26            Royalties and license fees.........................................    -23,901   -5,407   -5,731   -6,591   -6,172   -6,429   -6,147   -6,273     -126
           27            Other private services.............................................    -95,666  -22,776  -23,492  -24,150  -25,246  -24,859  -26,051  -26,910     -859
           28            U.S. Government miscellaneous services.............................     -3,734     -882     -929     -972     -951     -966     -951     -972      -21

           29    Income payments............................................................   -349,088  -71,379  -85,543  -89,250 -102,918 -106,308 -112,688 -118,220   -5,532
           30        Income payments on foreign-owned assets in the United States...........   -340,255  -69,219  -83,331  -87,040 -100,666 -104,140 -110,493 -115,931   -5,438
           31            Direct investment payments.........................................   -105,146  -20,014  -27,973  -27,520  -29,640  -29,803  -31,145  -27,078    4,067
           32            Other private payments.............................................   -145,370  -29,040  -33,355  -36,246  -46,729  -48,333  -51,377  -58,752   -7,375
           33            U.S. Government payments...........................................    -89,739  -20,165  -22,003  -23,274  -24,297  -26,004  -27,971  -30,101   -2,130
           34        Compensation of employees..............................................     -8,833   -2,160   -2,212   -2,210   -2,252   -2,168   -2,195   -2,289      -94

           35 Unilateral current transfers, net.............................................    -80,930  -22,271  -20,515  -15,771  -22,374  -26,259  -22,641  -13,538    9,103
           36    U.S. Government grants.....................................................    -23,317   -7,744   -4,961   -4,911   -5,701   -9,035   -5,724   -6,314     -590
           37    U.S. Government pensions and other transfers...............................     -6,264   -1,554   -1,556   -1,548   -1,607   -1,558   -1,569   -1,589      -20
           38    Private remittances and other transfers....................................    -51,349  -12,973  -13,998   -9,312  -15,066  -15,666  -15,348   -5,635    9,713


                                                                                                                                                              December 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        II r     III p     II-III

                                         Capital and financial account

                                                Capital account

           39 Capital account transactions, net.............................................     -1,648     -428     -372     -393     -455   -4,466     -315     -311        4

                                               Financial account

           40 U.S.-owned assets abroad, net (increase/financial outflow (-))................   -855,509 -295,140 -133,886 -137,525 -288,957  -81,510 -225,202 -124,020  101,182

           41    U.S. official reserve assets, net..........................................      2,805      557    1,122      429      697    5,331     -797    4,766    5,563
           42        Gold...................................................................       ....     ....     ....     ....     ....     ....     ....     ....     ....
           43        Special drawing rights.................................................       -398     -100      -90      -98     -110    1,713      -97    2,976    3,073
           44        Reserve position in the International Monetary Fund....................      3,826      815    1,345      676      990    3,763     -564    1,951    2,515
           45        Foreign currencies.....................................................       -623     -158     -133     -149     -183     -145     -136     -161      -25

           46    U.S. Government assets, other than official reserve assets, net............      1,215      727       -2      -11      501    4,487      971      562     -409
           47        U.S. credits and other long-term assets................................     -3,044     -561     -668   -1,270     -545     -519     -708     -383      325
           48        Repayments on U.S. credits and other long-term assets..................      4,221    1,374      544    1,299    1,004    1,083    1,586      961     -625
           49        U.S. foreign currency holdings and U.S. short-term assets, net.........         38      -86      122      -40       42    3,923       93      -16     -109

           50    U.S. private assets, net...................................................   -859,529 -296,424 -135,006 -137,943 -290,155  -91,328 -225,376 -129,348   96,028
           51        Direct investment......................................................   -252,012  -52,367  -58,425  -41,222  -99,997  -26,997  -21,390   27,072   48,462
           52        Foreign securities.....................................................   -102,383  -15,532  -30,181  -38,444  -18,226  -38,675  -41,979  -33,954    8,025
           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    8,978  -14,599  -23,577
           54        U.S. claims reported by U.S. banks, not included elsewhere.............   -356,133 -173,073  -41,010  -44,787  -97,263   49,278 -170,985 -107,867   63,118

           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  375,816  396,919   21,103

           56    Foreign official assets in the United States, net..........................    394,710  147,401   77,039   75,792   94,478   25,277   82,646   38,394  -44,252
           57        U.S. Government securities.............................................    311,133  124,010   63,456   66,899   56,768   39,244   44,068   30,122  -13,946
           58            U.S. Treasury securities...........................................    272,648  112,586   62,977   55,357   41,728   14,306   22,448    9,651  -12,797
           59            Other..............................................................     38,485   11,424      479   11,542   15,040   24,938   21,620   20,471   -1,149
           60        Other U.S. Government liabilities......................................        488     -109       45      710     -158     -650      297      709      412
           61        U.S. liabilities reported by U.S. banks, not included elsewhere........     70,329   22,058   11,350    4,867   32,054  -15,843   34,190      826  -33,364
           62        Other foreign official assets..........................................     12,760    1,442    2,188    3,316    5,814    2,526    4,091    6,737    2,646

           63    Other foreign assets in the United States, net.............................  1,045,395  275,622  227,898  178,436  363,437  218,174  293,170  358,525   65,355
           64        Direct investment......................................................    106,832    8,503   31,039   35,666   31,622   35,056   14,454   38,773   24,319
           65        U.S. Treasury securities...............................................    106,958   31,931   60,424   -1,107   15,710   75,911    9,923   40,863   30,940
           66        U.S. securities other than U.S. Treasury securities....................    369,793   45,476   81,678   84,401  158,238   79,973  114,064  160,669   46,605
           67        U.S. currency..........................................................     14,827   -1,800    8,754    2,560    5,313    1,072    4,507    4,679      172
           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    1,153   24,845   23,692
           69        U.S. liabilities reported by U.S. banks, not included elsewhere........    322,627  146,889   42,116   42,164   91,458  -67,735  149,069   88,696  -60,373

           70 Statistical discrepancy (sum of above items with sign reversed)...............     85,126   18,646   -4,044   50,672   19,856   41,193   47,482  -76,767 -124,249

             Memoranda:
           71 Balance on goods (lines 3 and 20).............................................   -665,390 -151,452 -163,987 -167,775 -182,176 -186,329 -186,929 -197,925  -10,996
           72 Balance on services (lines 4 and 21)..........................................     47,807   12,600   11,945   10,310   12,955   13,277   13,330   15,130    1,800
           73 Balance on goods and services (lines 2 and 19)................................   -617,583 -138,852 -152,042 -157,465 -169,221 -173,052 -173,599 -182,795   -9,196
           74 Balance on income (lines 12 and 29)...........................................     30,439   15,022    5,922    6,254    3,236      643   -1,541      512    2,053
           75 Unilateral current transfers, net (line 35)...................................    -80,930  -22,271  -20,515  -15,771  -22,374  -26,259  -22,641  -13,538    9,103
           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 -197,781 -195,821    1,960
    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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