FOR WIRE TRANSMISSION: 10:00 A.M. EST, WEDNESDAY, DECEMBER 10, 1997 Harlan W. King: (202) 606-9571 BEA 97-37 Christopher L. Bach: 606-9545 Recorded Message: 606-5362 U.S. International Transactions: Third Quarter 1997 Current account The U.S. current-account deficit increased to $42.2 billion in the third quarter from $37.9 billion (revised) in the second, according to preliminary estimates of the Commerce Department's Bureau of Economic Analysis. An increase in the merchandise trade deficit more than accounted for the increase. Only small, and nearly offsetting, changes occurred in the services, income, and net unilateral transfers components of the current account. Goods and services The deficit on goods and services increased to $29.6 billion in the third quarter from $25.6 billion in the second. Goods The deficit on goods increased to $51.5 billion in the third quarter from $47.1 billion in the second. Goods exports decreased to $170.6 billion from $171.4 billion. The decrease was more than accounted for by nonagricultural exports. Goods imports increased to $222.1 billion from $218.5 billion. The increase was more than accounted for by nonpetroleum imports. Services The surplus on services increased to $21.9 billion in the third quarter from $21.5 billion in the second. Service receipts increased to $64.4 billion from $63.3 billion. Most of the increase was accounted for by "other" private services (which includes receipts from affiliated services and unaffiliated services such as business and professional services, financial services, education, and other unaffiliated services) and by travel. Service payments increased to $42.5 billion from $41.8 billion. Most of the increase was accounted for by "other" private services, by royalties and license fees, and by travel. Investment income The deficit on investment income increased to $3.3 billion in the third quarter from $3.2 billion in the second. Income receipts on U.S. assets abroad increased to $60.6 billion from $59.1 billion. Most of the increase was accounted for by "other" private receipts. Income payments on foreign assets in the United States increased to $63.9 billion from $62.4 billion. All major components increased. Unilateral transfers Net unilateral transfers were $9.2 billion in the third quarter, compared with $9.0 billion in the second. Capital transactions Net recorded capital inflows were $68.0 billion in the third quarter, compared with $52.1 billion in the second. The step-up in net inflows from the second to the third quarter reflects a larger step-up in foreign assets in the United States than in U.S. assets abroad. U.S. assets abroad U.S. assets abroad increased $101.6 billion in the third quarter, compared with an increase of $90.9 billion in the second. U.S. claims on foreigners reported by U.S. banks increased $22.8 billion in the third quarter, following an increase of $27.9 billion in the second. Banks' own claims on banking offices abroad shifted to large inflows, while claims on other foreigners increased sharply, largely from lending to finance securities transactions. Banks' domestic customers' claims rose sharply as a result of increased deposits abroad and purchases of foreign commercial paper. Net U.S. purchases of foreign securities were $38.0 billion in the third quarter, up from $21.8 billion in the second. Net U.S. purchases of foreign stocks strengthened as a result of stepped-up investment in Western Europe, while net purchases from Japan declined. Net U.S. purchases of foreign bonds rose sharply as a result of record new issues placed in the U.S. market and a resumption of strong net purchases from the United Kingdom. Net capital outflows for U.S. direct investment abroad were $24.7 billion in the third quarter, compared with $36.7 billion in the second. A large shift to net intercompany debt inflows and a small decrease in reinvested earnings were partly offset by an increase in net equity capital outflows. U.S. official reserve assets increased $0.7 billion in the third quarter, following a $0.2 billion increase in the second. Foreign assets in the United States Foreign assets in the United States increased $169.5 billion in the third quarter, compared with an increase of $143.0 billion in the second. U.S. liabilities to foreigners reported by U.S. banks, excluding U.S. Treasury securities, increased $14.1 billion in the third quarter, following an increase of $28.1 billion in the second. Banks' own liabilities to foreign banks and other foreigners changed little, while banks' custody liabilities increased sharply. Net foreign private purchases of U.S. Treasury securities and U.S. currency flows were $43.5 billion in the third quarter, down from $49.9 billion in the second. Net U.S. currency flows were $6.6 billion, compared with $4.8 billion. Net foreign purchases of U.S. Treasury securities were $36.9 billion, down from $45.1 billion. A sharp reversal to net sales of U.S. Treasury bonds by Japan was mostly offset by a substantial step-up to record net purchases from Western Europe. Net foreign purchases of U.S. securities other than U.S. Treasury securities were a record $60.8 billion in the third quarter, up from the previous record of $51.7 billion in the second. Net foreign purchases of U.S. stocks rose to a second consecutive quarterly record, and net foreign purchases of U.S. bonds also reached a record, largely as a result of record new issues abroad by U.S. corporations. Net capital inflows for foreign direct investment in the United States were $21.1 billion in the third quarter, down from $26.6 billion in the second. The slow-down was more than accounted for by a decrease in net intercompany debt inflows, which were partly offset by increases in net equity capital inflows and reinvested earnings. Foreign official assets in the United States increased $22.5 billion in the third quarter, following a $5.4 billion decrease in the second. Much of the increase was accounted for by a few non-OPEC developing countries. The statistical discrepancy -- errors and omissions in recorded transactions -- was an outflow of $25.8 billion in the third quarter, compared with an outflow of $14.2 billion in the second. In the third quarter, the U.S. dollar appreciated 3 percent on a trade-weighted quarterly average basis against the currencies of 10 industrial countries. Revisions The preliminary estimate for the current account deficit for the second quarter was $39.0 billion; the revised estimate is $37.9 billion. The deficit on goods is revised upward $0.2 billion; the surplus on services is revised upward $1.0 billion; the deficit on investment income is revised downward $0.3 billion; and net unilateral transfers are revised downward $0.1 billion. Estimates for both the current and capital accounts are based on updated source data and statistical reports for the second quarter and preliminary source data and statistical reports for the third quarter. * * * Release dates for 1998: Fourth quarter and Year, 1997................March 12 (Thursday) First quarter 1998............................June 18 (Thursday) Second quarter 1998......................September 10 (Thursday) Third quarter 1998........................December 9 (Wednesday) * * * BEA's major national, regional, and international estimates, selected articles from 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. The information available through STAT-USA is often more detailed and more timely than that available from other sources. 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U.S. International Transactions December 10, 1997 [Millions of dollars, seasonally adjusted] 1996 1997 Change: (Credits +, debits -) 1996 1997 I II III IV I IIr IIIp II-III 1 Exports of goods, services, and income ....................................... 1,055,233 256,382 262,335 261,979 274,545 279,521 293,868 295,597 1,729 2 Goods, adjusted, excluding military 1/...................................... 612,069 150,048 153,411 150,764 157,846 162,527 171,411 170,579 -832 3 Services 2/................................................................. 236,764 57,057 58,736 59,322 61,656 61,725 63,328 64,410 1,082 4 Transfers under U.S. military agency sales contracts ..................... 14,647 3,092 3,961 3,572 4,022 3,190 3,727 3,740 13 5 Travel.................................................................... 69,908 16,712 17,356 17,659 18,183 18,556 18,605 18,977 372 6 Passenger fares........................................................... 20,557 5,087 4,952 5,237 5,282 5,319 5,511 5,571 60 7 Other transportation...................................................... 27,216 6,555 6,805 6,716 7,142 6,999 7,043 7,140 97 8 Royalties and license fees ............................................... 29,974 7,432 7,345 7,495 7,703 7,699 7,622 7,604 -18 9 Other private services ................................................... 73,569 17,890 18,130 18,433 19,117 19,759 20,629 21,189 560 10 U.S. Government miscellaneous services..................................... 893 289 187 210 207 203 191 189 -2 11 Income receipts on U.S. assets abroad....................................... 206,400 49,277 50,188 51,893 55,043 55,269 59,129 60,608 1,479 12 Direct investment receipts................................................ 98,890 23,389 23,929 24,675 26,898 25,872 27,970 28,088 118 13 Other private receipts.................................................... 102,866 24,643 25,053 25,938 27,232 28,544 30,151 31,643 1,492 14 U.S. Government receipts.................................................. 4,644 1,245 1,206 1,280 913 853 1,008 877 -131 15 Imports of goods, services, and income........................................ -1,163,450 -278,860 -289,231 -295,865 -299,493 -310,811 -322,760 -328,549 -5,789 16 Goods, adjusted, excluding military 1/...................................... -803,239 -192,973 -200,973 -203,257 -206,036 -212,314 -218,545 -222,128 -3,583 17 Services 2/................................................................. -156,634 -38,671 -38,953 -39,345 -39,664 -41,238 -41,839 -42,492 -653 18 Direct defense expenditures............................................... -10,861 -2,607 -2,747 -2,780 -2,727 -2,753 -2,679 -2,700 -21 19 Travel.................................................................... -48,739 -12,484 -12,099 -11,915 -12,241 -13,018 -13,003 -13,101 -98 20 Passenger fares........................................................... -15,776 -3,860 -3,943 -3,920 -4,053 -4,283 -4,201 -4,281 -80 21 Other transportation...................................................... -28,453 -6,816 -7,253 -7,218 -7,166 -7,378 -7,542 -7,518 24 22 Royalties and license fees ............................................... -7,322 -1,724 -1,684 -2,144 -1,770 -1,799 -1,847 -1,951 -104 23 Other private services ................................................... -42,796 -10,522 -10,570 -10,676 -11,027 -11,321 -11,888 -12,259 -371 24 U.S. Government miscellaneous services.................................... -2,687 -658 -657 -692 -680 -686 -679 -682 -3 25 Income payments on foreign assets in the United States...................... -203,577 -47,216 -49,305 -53,263 -53,793 -57,259 -62,376 -63,929 -1,553 26 Direct investment payments................................................ -32,132 -6,842 -7,873 -9,612 -7,805 -8,539 -10,241 -10,701 -460 27 Other private payments.................................................... -100,103 -24,210 -24,600 -25,158 -26,135 -27,581 -29,341 -29,759 -418 28 U.S. Government payments.................................................. -71,342 -16,164 -16,832 -18,493 -19,853 -21,139 -22,794 -23,469 -675 29 Unilateral transfers, net..................................................... -39,968 -10,406 -8,689 -8,947 -11,926 -8,682 -8,960 -9,204 -244 30 U.S. Government grants ..................................................... -14,933 -4,321 -2,423 -2,690 -5,499 -2,109 -2,245 -2,252 -7 31 U.S. Government pensions and other transfers................................ -4,331 -1,136 -1,081 -1,064 -1,050 -1,083 -1,128 -1,099 29 32 Private remittances and other transfers .................................... -20,704 -4,949 -5,185 -5,193 -5,377 -5,490 -5,587 -5,853 -266 U.S. International Transactions (Continued) December 10, 1997 [Millions of dollars, seasonally adjusted] 1996 1997 Change: (Credits +, debits -) 1996 1997 I II III IV I IIr IIIp II-III 33 U.S. assets abroad, net (increase/capital outflow (-))......................... -352,444 -70,768 -49,698 -77,542 -154,436 -127,969 -90,935 -101,564 -10,629 34 U.S. official reserve assets, net ........................................... 6,668 17 -523 7,489 -315 4,480 -236 -730 -494 35 Gold....................................................................... .... .... .... .... .... .... .... .... .... 36 Special drawing rights..................................................... 370 -199 -133 848 -146 72 -133 -139 -6 37 Reserve position in the International Monetary Fund........................ -1,280 -849 -220 -183 -28 1,055 54 -463 -517 38 Foreign currencies......................................................... 7,578 1,065 -170 6,824 -141 3,353 -157 -128 29 39 U.S. Government assets, other than official reserve assets, net.............. -690 -210 -358 162 -284 -21 -268 482 750 40 U.S. credits and other long-term assets.................................... -4,930 -1,076 -1,489 -1,127 -1,238 -1,107 -1,613 -1,382 231 41 Repayments on U.S. credits and other long-term assets ..................... 4,134 1,013 870 1,206 1,045 1,111 1,358 1,872 514 42 U.S. foreign currency holdings and U.S. short-term assets, net............. 106 -147 261 83 -91 -25 -13 -8 5 43 U.S. private assets, net..................................................... -358,422 -70,575 -48,817 -85,193 -153,837 -132,428 -90,431 -101,316 -10,885 44 Direct investment.......................................................... -87,813 -22,210 -23,634 -11,104 -30,865 -26,426 -36,659 -24,661 11,998 45 Foreign securities......................................................... -108,189 -34,455 -20,328 -23,206 -30,200 -14,510 -21,841 -37,995 -16,154 46 U.S. claims on unaffiliated foreigners reported by U.S. nonbanking concerns............................................. -64,234 -15,778 -5,047 -17,294 -26,115 -29,466 -3,984 -15,900 -11,916 47 U.S. claims reported by U.S. banks, not included elsewhere................. -98,186 1,868 192 -33,589 -66,657 -62,026 -27,947 -22,760 5,187 48 Foreign assets in the United States, net (increase/capital inflow(+)).......... 547,555 88,233 106,114 158,629 194,579 182,238 143,015 169,540 26,525 49 Foreign official assets in the United States, net............................ 122,354 52,014 13,154 24,089 33,097 28,891 -5,374 22,498 27,872 50 U.S. Government securities................................................. 115,634 55,652 -2,125 26,689 35,418 23,940 -11,464 9,148 20,612 51 U.S. Treasury securities ................................................ 111,253 55,600 -3,383 25,472 33,564 23,289 -12,108 6,485 18,593 52 Other.................................................................... 4,381 52 1,258 1,217 1,854 651 644 2,663 2,019 53 Other U.S. Government liabilities ......................................... 720 -143 -204 907 160 478 654 16 -638 54 U.S. liabilities reported by U.S. banks, not included elsewhere............ 4,722 -3,284 14,198 -1,922 -4,270 7,698 4,536 12,705 8,169 55 Other foreign official assets ............................................. 1,278 -211 1,285 -1,585 1,789 -3,225 900 629 -271 56 Other foreign assets in the United States, net............................... 425,201 36,219 92,960 134,540 161,482 153,347 148,389 147,042 -1,347 57 Direct investment.......................................................... 76,955 15,877 17,440 25,977 17,661 30,641 26,608 21,076 -5,532 58 U.S. Treasury securities and U.S. currency flows........................... 172,878 10,602 36,152 50,798 75,326 51,289 49,915 43,494 -6,421 59 U.S. securities other than U.S. Treasury securities........................ 133,798 36,475 29,761 35,115 32,447 38,820 51,682 60,770 9,088 60 U.S. liabilities to unaffiliated foreigners reported by U.S. nonbanking concerns.................................................. 31,786 6,800 7,288 20,610 -2,912 15,210 -7,916 7,600 15,516 61 U.S. liabilities reported by U.S. banks, not included elsewhere............ 9,784 -33,535 2,319 2,040 38,960 17,387 28,100 14,102 -13,998 62 Allocations of special drawing rights.......................................... .... .... .... .... .... .... .... .... .... 63 Statistical discrepancy (sum of above items with sign reversed)................ -46,927 15,419 -20,831 -38,254 -3,269 -14,297 -14,228 -25,820 -11,592 Of which seasonal adjustment discrepancy..................................... .... 6,228 -1,076 -7,830 2,669 7,059 -1,713 -8,560 -6,847 Memoranda: 64 Balance on goods (lines 2 and 16).............................................. -191,170 -42,925 -47,562 -52,493 -48,190 -49,787 -47,134 -51,549 -4,415 65 Balance on services (lines 3 and 17)........................................... 80,130 18,386 19,783 19,977 21,992 20,487 21,489 21,918 429 66 Balance on goods and services (lines 64 and 65)................................ -111,040 -24,539 -27,779 -32,516 -26,198 -29,300 -25,645 -29,631 -3,986 67 Balance on investment income (lines 11 and 25)................................. 2,824 2,061 883 -1,370 1,250 -1,990 -3,247 -3,321 -74 68 Balance on goods, services, and income (lines 1 and 15 or lines 66 and 67) ..................................................................... -108,216 -22,478 -26,896 -33,886 -24,948 -31,290 -28,892 -32,952 -4,060 69 Unilateral transfers, net (line 29)............................................ -39,968 -10,406 -8,689 -8,947 -11,926 -8,682 -8,960 -9,204 -244 70 Balance on current account (lines 1, 15, and 29 or lines 68 and 69) ........... -148,184 -32,884 -35,585 -42,833 -36,874 -39,972 -37,852 -42,156 -4,304 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