FOR WIRE TRANSMISSION: 10:00 A.M. EST, WEDNESDAY, DECEMBER 9, 1998 Harlan W. King: (202) 606-9571 BEA 98-37 Christopher L. Bach: 606-9545 Recorded Message: 606-5362 U.S. International Transactions: Third Quarter 1998 Current account The U.S. current-account deficit -- the combined balances on trade in goods and services, investment income, and net unilateral transfers -- increased to $61.3 billion in the third quarter from $56.7 billion (revised) in the second, according to preliminary estimates of the Commerce Department's Bureau of Economic Analysis. An increase in the deficit on investment income, a decrease in the surplus on services, and an increase in net unilateral transfers accounted for the rise. The deficit on goods was virtually unchanged. Goods and services The deficit on goods and services increased to $45.8 billion in the third quarter from $43.9 billion in the second. Goods The deficit on goods was $64.4 billion in the third quarter, virtually unchanged from the second. Goods exports decreased to $163.6 billion from $164.8 billion. Both agricultural and nonagricultural exports decreased. Goods imports decreased to $227.9 billion from $229.3 billion. The decrease was in petroleum imports; nonpetroleum imports were unchanged. Services The surplus on services decreased to $18.6 billion in the third quarter from $20.6 billion in the second. Service receipts decreased to $63.8 billion from $65.8 billion. Declines in travel, passenger fares, and royalties and license fees more than accounted for the decrease. Service payments were $45.2 billion, virtually unchanged. Decreases in travel and passenger fares were offset by increases in "other" private services and "other" transportation. Investment income The deficit on investment income increased to $5.5 billion in the third quarter from $3.4 billion in the second. Income receipts on U.S. assets abroad decreased to $60.4 billion from $61.9 billion. Direct investment receipts accounted for most of the decrease, but "other" private receipts and U.S. Government receipts decreased, too. Income payments on foreign assets in the United States increased to $65.9 billion from $65.3 billion. Increases in "other" private payments and in direct investment payments were partly offset by a decrease in U.S. Government payments. Unilateral transfers Net unilateral transfers were $10.1 billion in the third quarter, compared with $9.4 billion in the second, mostly as a result of an increase in U.S. Government grants. Capital transactions Net recorded capital inflows -- the difference between changes in U.S. assets abroad and changes in foreign assets in the United States -- were $64.8 billion in the third quarter, compared with $55.1 billion (revised) in the second. Capital inflows for foreign assets in the United States decelerated less than capital outflows for U.S. assets abroad. U.S. assets abroad U.S. assets abroad increased $48.1 billion in the third quarter, compared with an increase of $109.8 billion in the second. U.S. claims on foreigners reported by U.S. banks increased $28.3 billion in the third quarter, following an increase of $24.6 billion in the second. Although there was a step-up in lending to industrial countries to meet a surge in demand for short-term credit during a period of unsettled financial conditions, that step-up was partly offset by a decrease in lending to international bond mutual funds in the Caribbean late in the quarter. Transactions in foreign securities shifted to net U.S. sales of $17.0 billion in the third quarter from net purchases of $27.9 billion in the second. U.S. transactions in foreign bonds shifted to net sales of $8.7 billion from net purchases of $26.9 billion, and U.S. transactions in foreign stocks shifted to net sales of $8.3 billion from net purchases of $1.0 billion. Net capital outflows for U.S. direct investment abroad were $21.2 billion in the third quarter, compared with $40.6 billion in the second. Net equity capital outflows dropped substantially, net intercompany debt shifted to net inflows, and reinvested earnings decreased. U.S. official reserve assets increased $2.0 billion in the third quarter, following a $1.9 billion increase in the second. Foreign assets in the United States Foreign assets in the United States increased $112.9 billion in the third quarter, compared with an increase of $164.9 billion in the second. U.S. liabilities to foreigners reported by U.S. banks, excluding U.S. Treasury securities, increased $82.7 billion in the third quarter, following an increase of $37.7 billion in the second. U.S. banks received a large amount of funds from foreigners as a result of uncertainty in financial markets, as well as borrowed from abroad to finance their overseas lending. In addition, banks reported an exceptional increase in banks' custody liabilities, which represented inflows from overseas placements of short-term paper by U.S. nonbanks. Foreign private transactions in U.S. Treasury securities shifted to net sales of $0.3 billion from net purchases of $26.9 billion, mostly as a result of a large shift to net sales in the Caribbean. Net foreign purchases of U.S. securities other than U.S. Treasury securities were $22.9 billion in the third quarter, down from $71.0 billion in the second. Net foreign purchases of U.S. bonds were $28.3 billion, one-half the second quarter record of $56.9 billion, and foreign transactions in U.S. stocks shifted to net sales of $5.4 billion from net purchases of $14.1 billion. Net capital inflows for foreign direct investment in the United States were $27.1 billion in the third quarter, compared with $19.1 billion in the second. The step-up was more than accounted for by a doubling of net equity inflows and a small increase in reinvested earnings, and was partly offset by a decrease in net intercompany debt inflows. Net U.S. currency shipments were $7.3 billion in the third quarter, compared with $2.3 billion in the second. Foreign official assets in the United States decreased $46.4 billion in the third quarter, following a $10.3 billion decrease in the second. Most of the decrease in the third quarter was concentrated in a few non-industrial countries, augmented by declines in many industrial countries. The statistical discrepancy -- errors and omissions in recorded transactions -- was a negative $3.5 billion in the third quarter, compared with a positive $1.6 billion in the second. In the third quarter, the value of the U.S. dollar was unchanged on a trade-weighted quarterly average basis against the currencies of 10 industrial countries. Revisions The second-quarter current-account balance and its components were revised from previously published estimates. The current-account deficit for the second quarter was revised to $56.7 billion from $56.5 billion. The goods deficit was revised to $64.4 billion from $64.8 billion; the services surplus was revised to $20.6 billion from $20.9 billion; the deficit on investment income was revised to $3.4 billion from $3.2 billion; and net unilateral transfers were revised to $9.4 billion from $9.3 billion. * * * Release dates for 1999: Fourth quarter and 1998 ...............................................March 11 (Thursday) First quarter 1999 ............................................................June 17 (Thursday) Second quarter 1999 ................................................September 14 (Tuesday) Third quarter 1999 ...................................................December 14 (Tuesday) * * * BEA's major national, regional, international, and industry estimates; the Survey of Current Business; and BEA news releases are available on BEA's web site: http://www.bea.gov STAT-USA maintains an electronic bulletin board (EBB) and an Internet site, which contains BEA estimates, BEA news releases, and the Survey of Current Business. 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U.S. International Transactions December 9, 1998 [Millions of dollars, quarters seasonally adjusted] 1997 1998 Change: (Credits +, debits -) 1997 1998 I II III IV I IIr IIIp II-III 1 Exports of goods, services, and income ................................................. 1,179,380 283,765 295,287 300,481 299,843 299,061 292,483 287,751 -4,732 2 Goods, adjusted, excluding military 1/................................................ 679,325 163,499 169,240 172,302 174,284 171,469 164,821 163,560 -1,261 3 Services 2/........................................................................... 258,268 62,685 64,776 65,628 65,175 65,070 65,762 63,757 -2,005 4 Transfers under U.S. military agency sales contracts ............................... 18,269 4,338 4,890 4,883 4,158 4,672 4,088 4,151 63 5 Travel.............................................................................. 73,268 18,197 18,542 18,325 18,204 17,967 18,141 16,728 -1,413 6 Passenger fares..................................................................... 20,895 5,130 5,189 5,212 5,364 5,198 5,223 4,672 -551 7 Other transportation................................................................ 26,911 6,698 6,724 6,678 6,809 6,460 6,292 6,404 112 8 Royalties and license fees ......................................................... 33,676 8,306 8,407 8,580 8,381 8,675 8,908 8,543 -365 9 Other private services ............................................................. 84,465 19,813 20,833 21,750 22,069 21,903 22,913 23,062 149 10 U.S. Government miscellaneous services............................................... 784 203 191 200 190 195 197 197 .... 11 Income receipts on U.S. assets abroad................................................. 241,787 57,581 61,271 62,551 60,384 62,522 61,900 60,434 -1,466 12 Direct investment receipts.......................................................... 109,407 26,716 28,286 28,935 25,470 26,391 25,848 24,738 -1,110 13 Other private receipts.............................................................. 128,845 30,018 32,041 32,717 34,069 35,302 35,105 34,810 -295 14 U.S. Government receipts............................................................ 3,535 847 944 899 845 829 947 886 -61 15 Imports of goods, services, and income.................................................. -1,294,904 -311,881 -321,342 -329,130 -332,549 -336,316 -339,731 -338,966 765 16 Goods, adjusted, excluding military 1/................................................ -877,279 -213,222 -218,336 -221,598 -224,123 -227,167 -229,264 -227,920 1,344 17 Services 2/........................................................................... -170,520 -41,092 -42,195 -43,437 -43,795 -44,379 -45,190 -45,152 38 18 Direct defense expenditures......................................................... -11,488 -2,796 -2,699 -2,938 -3,055 -3,145 -3,045 -3,050 -5 19 Travel.............................................................................. -51,220 -12,736 -12,764 -12,897 -12,823 -13,309 -13,465 -13,008 457 20 Passenger fares..................................................................... -18,235 -4,311 -4,663 -4,704 -4,557 -4,650 -4,757 -4,568 189 21 Other transportation................................................................ -28,949 -7,034 -7,317 -7,200 -7,397 -7,250 -7,430 -7,623 -193 22 Royalties and license fees ......................................................... -9,411 -2,106 -2,168 -2,559 -2,578 -2,850 -2,759 -2,670 89 23 Other private services ............................................................. -48,421 -11,423 -11,905 -12,409 -12,684 -12,471 -13,028 -13,523 -495 24 U.S. Government miscellaneous services.............................................. -2,796 -686 -679 -730 -701 -704 -706 -710 -4 25 Income payments on foreign assets in the United States................................ -247,105 -57,567 -60,811 -64,095 -64,631 -64,770 -65,277 -65,894 -617 26 Direct investment payments.......................................................... -45,674 -10,664 -10,887 -12,548 -11,574 -10,802 -10,673 -11,051 -378 27 Other private payments.............................................................. -113,959 -26,705 -28,023 -28,849 -30,382 -31,285 -31,644 -32,066 -422 28 U.S. Government payments............................................................ -87,472 -20,198 -21,901 -22,698 -22,675 -22,683 -22,960 -22,777 183 29 Unilateral transfers, net............................................................... -39,691 -8,874 -9,035 -9,445 -12,337 -9,480 -9,442 -10,084 -642 30 U.S. Government grants ............................................................... -12,090 -2,241 -2,274 -2,362 -5,213 -2,266 -2,063 -2,582 -519 31 U.S. Government pensions and other transfers.......................................... -4,193 -1,013 -1,055 -1,056 -1,069 -1,126 -1,126 -1,132 -6 32 Private remittances and other transfers .............................................. -23,408 -5,620 -5,706 -6,027 -6,055 -6,088 -6,253 -6,370 -117 U.S. International Transactions (Continued) December 9, 1998 [Millions of dollars, quarters seasonally adjusted] 1997 1998 Change: (Credits +, debits -) 1997 1998 I II III IV I IIr IIIp II-III 33 U.S. assets abroad, net (increase/capital outflow (-)).................................... -478,502 -145,139 -86,606 -123,317 -123,441 -45,648 -109,787 -48,052 61,735 34 U.S. official reserve assets, net ...................................................... -1,010 4,480 -236 -730 -4,524 -444 -1,945 -2,026 -81 35 Gold.................................................................................. .... .... .... .... .... .... .... .... .... 36 Special drawing rights................................................................ -350 72 -133 -139 -150 -182 72 188 116 37 Reserve position in the International Monetary Fund................................... -3,575 1,055 54 -463 -4,221 -85 -1,031 -2,078 -1,047 38 Foreign currencies.................................................................... 2,915 3,353 -157 -128 -153 -177 -986 -136 850 39 U.S. Government assets, other than official reserve assets, net......................... 174 -22 -269 436 29 -388 -433 194 627 40 U.S. credits and other long-term assets............................................... -5,302 -1,168 -1,616 -1,421 -1,097 -1,189 -1,159 -1,266 -107 41 Repayments on U.S. credits and other long-term assets ................................ 5,504 1,171 1,358 1,878 1,097 1,177 722 1,344 622 42 U.S. foreign currency holdings and U.S. short-term assets, net.................. -28 -25 -11 -21 29 -376 4 116 112 43 U.S. private assets, net................................................................ -477,666 -149,597 -86,101 -123,023 -118,946 -44,816 -107,409 -46,220 61,189 44 Direct investment..................................................................... -121,843 -32,498 -26,388 -27,488 -35,470 -34,321 -40,589 -21,243 19,346 45 Foreign securities.................................................................... -87,981 -15,521 -23,263 -41,167 -8,030 -6,973 -27,878 16,970 44,848 46 U.S. claims on unaffiliated foreigners reported by U.S. nonbanking concerns........................................................ -120,403 -37,880 -9,825 -24,791 -47,907 -6,596 -14,327 -13,612 715 47 U.S. claims reported by U.S. banks, not included elsewhere............................ -147,439 -63,698 -26,625 -29,577 -27,539 3,074 -24,615 -28,335 -3,720 48 Foreign assets in the United States, net (increase/capital inflow(+))............. 733,441 181,735 149,773 181,438 220,491 95,529 164,859 112,862 -51,997 49 Foreign official assets in the United States, net....................................... 15,817 26,949 -5,411 21,258 -26,979 11,324 -10,274 -46,370 -36,096 50 U.S. Government securities............................................................ -2,936 23,065 -10,862 9,353 -24,492 13,946 -20,064 -30,905 -10,841 51 U.S. Treasury securities ........................................................... -7,270 22,311 -11,689 6,686 -24,578 11,336 -20,318 -32,811 -12,493 52 Other............................................................................... 4,334 754 827 2,667 86 2,610 254 1,906 1,652 53 Other U.S. Government liabilities .................................................... -2,521 -587 -523 -1,167 -244 -1,059 -422 -414 8 54 U.S. liabilities reported by U.S. banks, not included elsewhere....................... 21,928 7,696 5,043 12,439 -3,250 -607 9,380 -12,607 -21,987 55 Other foreign official assets ........................................................ -654 -3,225 931 633 1,007 -956 832 -2,444 -3,276 56 Other foreign assets in the United States, net.......................................... 717,624 154,786 155,184 160,180 247,470 84,205 175,133 159,232 -15,901 57 Direct investment..................................................................... 93,449 25,879 20,149 18,964 28,453 25,931 19,141 27,065 7,924 58 U.S. Treasury securities.............................................................. 146,710 33,363 42,614 35,432 35,301 -1,701 26,916 -257 -27,173 59 U.S. currency......................................................................... 24,782 3,484 4,822 6,576 9,900 746 2,349 7,277 4,928 60 U.S. securities other than U.S. Treasury securities................................... 196,845 45,477 54,258 60,327 36,783 77,019 71,017 22,938 -48,079 61 U.S. liabilities to unaffiliated foreigners reported by U.S. nonbanking concerns............................................................. 107,779 28,840 5,274 26,275 47,390 32,707 18,040 19,529 1,489 62 U.S. liabilities reported by U.S. banks, not included elsewhere....................... 148,059 17,743 28,067 12,606 89,643 -50,497 37,670 82,680 45,010 63 Allocations of special drawing rights..................................................... .... .... .... .... .... .... .... .... .... 64 Statistical discrepancy (sum of above items with sign reversed)........................... -99,724 394 -28,077 -20,027 -52,007 -3,146 1,618 -3,511 -5,129 Of which seasonal adjustment discrepancy................................................ .... 5,812 685 -10,018 3,528 6,217 1,474 -10,760 -12,234 Memoranda: 65 Balance on goods (lines 2 and 16)......................................................... -197,954 -49,723 -49,096 -49,296 -49,839 -55,698 -64,443 -64,360 83 66 Balance on services (lines 3 and 17)...................................................... 87,748 21,593 22,581 22,191 21,380 20,691 20,572 18,605 -1,967 67 Balance on goods and services (lines 65 and 66)..................................... -110,206 -28,130 -26,515 -27,105 -28,459 -35,007 -43,871 -45,755 -1,884 68 Balance on investment income (lines 11 and 25)............................................ -5,318 14 460 -1,544 -4,247 -2,248 -3,377 -5,460 -2,083 69 Balance on goods, services, and income (lines 1 and 15 or lines 67 and 68) ................................................................................ -115,524 -28,116 -26,055 -28,649 -32,706 -37,255 -47,248 -51,215 -3,967 70 Unilateral transfers, net (line 29)....................................................... -39,691 -8,874 -9,035 -9,445 -12,337 -9,480 -9,442 -10,084 -642 71 Balance on current account (lines 1, 15, and 29 or lines 69 and 70) ...................... -155,215 -36,990 -35,090 -38,094 -45,043 -46,735 -56,690 -61,299 -4,609 r Revised. p Preliminary. 1. Adjusted for timing, valuation, and coverage to balance of payments basis; excludes exports under U. S. military agency sales contracts and imports of U. S. military agencies. 2. Includes some goods that cannot be separately identified from services. NOTE:--Details may not add to totals because of rounding. Source: U. S. Department of Commerce, Bureau of Economic Analysis