FOR WIRE TRANSMISSION: 10:00 A.M. EST, THURSDAY, MARCH 12, 1998 Christopher L.Bach: (202) 606-9545 BEA 98-06 Recorded Message: 606-5362 U.S. International Transactions: Fourth Quarter and Year 1997 Fourth Quarter Current Account The U.S. current-account deficit increased to $45.6 billion in the fourth quarter from $43.1 billion (revised) in the third, according to preliminary estimates of the Commerce Department's Bureau of Economic Analysis. A decrease in the deficit on goods was more than offset by an increase in net unilateral transfers, a decrease in the surplus on services, and an increase in the deficit on investment income. Goods and services The deficit on goods and services decreased to $28.7 billion in the fourth quarter from $29.9 billion in the third. Goods The deficit on goods decreased to $49.9 billion in the fourth quarter from $52.0 billion in the third. Goods exports increased to $174.5 billion from $170.3 billion; both nonagricultural and agricultural goods increased. Goods imports increased to $224.4 billion from $222.3 billion; nonpetroleum products increased and petroleum products were virtually unchanged. Services The surplus on services decreased to $21.2 billion in the fourth quarter from $22.1 billion in the third. Service receipts decreased to $63.8 billion from $64.4 billion. Most major categories decreased, more than offsetting the increase in "other" transportation. Service payments increased to $42.6 billion from $42.3 billion. Travel, passenger fares, "other" transportation, and direct defense expenditures abroad increased, more than offsetting the decrease in "other" private services and royalties and license fees. Investment income The deficit on investment income increased to $4.9 billion in the fourth quarter from $4.1 billion in the third. Income receipts on U.S. assets abroad decreased to $60.8 billion from $60.9 billion. A decrease in direct investment receipts was almost completely offset by an increase in "other" private receipts. Income payments on foreign assets in the United States increased to $65.7 billion from $65.0 billion. Increases in "other" private payments and in U.S. Government payments more than offset a decrease in direct investment payments. Unilateral transfers Net unilateral transfers increased to $12.0 billion in the fourth quarter from $9.1 billion in the third; the increase was more than accounted for by an increase in U.S. Government grants to Israel. Capital transactions Net recorded capital inflows--that is, the difference between changes in net U.S. assets abroad and changes in net foreign assets in the United States--were $85.2 billion in the fourth quarter, compared with net inflows of $72.6 billion in the third. The step-up in net inflows from the third to the fourth quarter reflected a larger slowdown in the increase in U.S. assets abroad than in the increase in foreign assets in the United States. U.S. assets abroad U.S. assets abroad increased $96.7 billion in the fourth quarter, compared with an increase of $110.7 billion in the third. The fourth-quarter increase was held down by low net outflows for securities purchases. Direct investment outflows increased sharply. U.S. claims on foreigners reported by U.S. banks increased $30.5 billion in the fourth quarter, compared with an increase of $30.6 billion in the third. In the fourth quarter, banks' own claims increased in response to a step-up in demand for interbank credit abroad, and banks' customers' claims decreased sharply as U.S. residents withdrew funds from banks abroad. Net U.S. purchases of foreign securities slowed to $3.7 billion in the fourth quarter from $39.2 billion in the third as U.S. residents reacted to economic and financial problems in Asia. Transactions in foreign stocks shifted to net U.S. sales of $2.6 billion from net U.S. purchases of $15.6 billion. Net U.S. purchases of foreign bonds slowed to $6.3 billion from $23.7 billion. Net capital outflows for U.S. direct investment abroad were $32.9 billion in the fourth quarter, compared with $22.8 billion in the third. Equity capital outflows increased particularly sharply. An increase in reinvested earnings was partly offset by an increase in net intercompany debt inflows. U.S. official reserve assets increased $4.5 billion in the fourth quarter, compared with an increase of $0.7 billion in the third. In the fourth quarter, the U.S. reserve position with the International Monetary Fund (IMF) increased $4.2 billion, mainly reflecting IMF loans to Indonesia and Korea. (The U.S. reserve position in the IMF increases with the Fund's net use of U.S. dollars). Foreign assets in the United States Foreign assets in the United States increased $181.9 billion in the fourth quarter, compared with an increase of $183.3 billion in the third. U.S. banks received an exceptionally large amount of foreign funds in the fourth quarter. These were partly offset by reduced net foreign purchases of U.S. securities other than U.S. Treasury securities. U.S. liabilities to foreigners reported by U.S. banks, excluding U.S. Treasury securities, increased a record $87.0 billion in the fourth quarter, compared with an increase of $10.1 billion in the third. In the fourth quarter, U.S. banks received an exceptionally large amount of funds from Japan, Western Europe, and the Caribbean. Net foreign private purchases of U.S. Treasury securities and U.S. currency flows were $43.7 billion in the fourth quarter, compared with $42.9 billion in the third. Net purchases of U.S. Treasury securities were $33.8 billion, down from $36.3 billion. Net outflows of U.S. currency increased to $9.9 billion from $6.6 billion. Net foreign purchases of U.S. securities other than U.S. Treasury securities were $38.4 billion in the fourth quarter, compared with $60.4 billion in the third. Net foreign purchases of U.S. stocks were $11.8 billion, compared with $23.2 billion. Net foreign purchases of U.S. bonds were $26.6 billion, compared with $37.2 billion. Net capital inflows for foreign direct investment in the United States were $24.6 billion in the fourth quarter, compared with $25.9 billion in the third. Equity capital inflows increased strongly but were more than offset by decreases in intercompany debt inflows and in reinvested earnings. Foreign official assets in the United States decreased $27.2 billion in the fourth quarter, compared with an increase of $21.9 billion in the third. In the fourth quarter, both industrial and developing countries sold dollar assets. The statistical discrepancy -- errors and omissions in recorded transactions -- was a negative $39.6 billion in the fourth quarter, compared with a negative $29.5 billion in the third. In the fourth quarter, and perhaps in the third, the size of the discrepancy is believed to reflect the imperfect recording of short-term capital flows. In the fourth quarter, the U.S. dollar depreciated 1 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 third quarter was $42.2 billion: the revised estimate is $43.1 billion. The deficit on goods is revised upward $0.5 billion; the surplus on services is revised upward $0.2 billion; the deficit on investment income is revised upward $0.8 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 for the third quarter and on preliminary source data for the fourth quarter. The Year 1997 Current Account The U.S. current-account deficit increased to $166.4 billion in 1997 from $148.2 billion in 1996. A shift from a surplus to a deficit on investment income and an increase in the goods deficit more than accounted for the increase. The surplus on services increased and net unilateral transfers decreased. Goods and services The deficit on goods and services increased to $113.6 billion in 1997 from $111.0 billion in 1996. Goods The deficit on goods increased to $198.9 billion in 1997 from $191.2 billion in 1996. Goods exports increased to $678.3 billion from $612.1 billion; nonagricultural exports increased and agricultural exports decreased. Goods imports increased to $877.3 billion from $803.2 billion; nonpetroleum imports increased and petroleum imports decreased. Services The surplus on services increased to $85.3 billion in 1997 from $80.1 billion in 1996. Service receipts increased to $253.2 billion from $236.8 billion. "Other" private services and travel increased the most. Service payments increased to $167.9 billion from $156.6 billion. "Other" private services and travel increased the most. Investment income The balance on investment income shifted to a deficit of $14.3 billion in 1997 from a surplus of $2.8 billion in 1996. Income receipts on U.S. assets abroad increased to $236.0 billion from $206.4 billion as both "other" private receipts and direct investment receipts increased. Income payments on foreign assets in the United States increased to $250.3 billion from $203.6 billion as U.S. Government payments, "other" private payments, and direct investment payments all increased. Unilateral transfers Net unilateral transfers were $38.5 billion in 1997, compared with $40.0 billion in 1996. U.S. Government grants had been boosted to an unusually high level early in 1996 as a result of delays in fiscal appropriations caused by the budget deadlock and U.S. Government shutdown at the end of 1995. Capital transactions Net recorded capital inflows--that is, the difference between changes in net U.S. assets abroad and changes in net foreign assets in the United States--were $263.6 billion in 1997, compared with $195.1 billion in 1996. The step-up in net inflows from 1996 to 1997 reflected a larger step-up in the increase in foreign assets in the United States than in the increase in U.S. assets abroad. U.S. assets abroad U.S. assets abroad increased $426.9 billion in 1997, compared with an increase of $352.4 billion in 1996. The increases in U.S. claims on foreigners reported by U.S. banks and in U.S. direct investment outflows were both higher in 1997 than in 1996. Net U.S. purchases of foreign securities were lower. Among U.S. assets abroad, U.S. claims on foreigners reported by U.S. banks increased $151.1 billion in 1997, compared with an increase of $98.2 billion in 1996. The step-up in credit extended by U.S. banks to their offices abroad was in response to a number of factors, including the heightened level of financial activity abroad and to the strong pace of merger and acquisition activity. Net U.S. purchases of foreign securities were $79.3 billion in 1997, compared with $108.2 billion in 1996. Net U.S. purchases of foreign stocks dropped to $38.0 billion from $58.8 billion. Net U.S. purchases of foreign bonds were $41.3 billion, down from $49.4 billion. Net capital outflows for U.S. direct investment abroad were $119.4 billion in 1997, compared with $87.8 billion in 1996. Equity capital outflows increased strongly; reinvested earnings also increased. U.S. official reserve assets increased $1.0 billion in 1997, compared with a decrease of $6.7 billion in 1996. Foreign assets in the United States Foreign assets in the United States increased $690.5 billion in 1997, compared with an increase of $547.6 billion in 1996. The increases in U.S. liabilities reported by U.S. banks, net inflows on foreign direct investment in the United States, and net foreign purchases of U.S. securities were all larger in 1997 than in 1996. The increase in foreign official assets in the United States was substantially smaller. Among foreign assets in the United States, U.S. liabilities to foreigners reported by U.S. banks, excluding U.S. Treasury securities, increased $142.5 billion in 1997, compared with a $9.8 billion increase in 1996. U.S. banks borrowed from foreign sources in the first three quarters of 1997 mainly to finance their lending to overseas banks. There were exceptional inflows in the fourth quarter. Net foreign private purchases of U.S. Treasury securities and U.S. currency flows were $187.9 billion in 1997, compared with $172.9 billion in 1996. Net foreign purchases of U.S. Treasury securities were a record $163.1 billion, up from the previous record of $155.6 billion in 1996. Net U.S. currency outflows were $24.8 billion, up from $17.3 billion. Net foreign purchases of U.S. securities other than U.S. Treasury securities were $189.3 billion in 1997, compared with $133.8 billion in 1996. Net foreign purchases of U.S. stocks increased more than five-fold to $66.9 billion from $12.6 billion. Net foreign purchases of U.S. bonds were $122.4 billion, slightly higher than $121.2 billion. Net capital inflows for foreign direct investment in the United States were $107.9 billion 1997, compared with $77.0 billion in 1996. Intercompany debt inflows increased sharply, and reinvested earnings increased strongly. Equity capital inflows slowed. Foreign official assets in the United States increased $18.2 billion in 1997, compared with an increase of $122.4 billion in 1996, as both industrial and developing countries slowed their accumulation of dollar assets in the United States. The statistical discrepancy -- errors and omissions in recorded transactions -- was a negative $97.1 billion in 1997, compared with a negative $46.9 billion in 1996: most of the increase occurred in the last half of the year. In 1997, the U.S. dollar appreciated 11 percent on a trade-weighted quarterly average basis against the currencies of 10 industrial countries. * * * 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, international, and industry 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 contain BEA estimates, BEA news releases, and the Survey of Current Business. 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Second class mail: Annual subscription $35.00 domestic, $43.75 foreign; single issue $11.00 domestic, $13.75 foreign. U.S. International Transactions March 12, 1998 [Millions of dollars, seasonally adjusted] 1996 1997 Change: (Credits +, debits -) 1996 1997p Change: 1997 1996-97 IV Ir IIr IIIr IVp III-IV 1 Exports of goods, services, and income ....................................... 1,055,233 1,167,610 112,377 274,545 279,320 293,668 295,527 299,096 3,569 2 Goods, adjusted, excluding military 1/...................................... 612,069 678,348 66,279 157,846 162,341 171,227 170,255 174,525 4,270 3 Services 2/................................................................. 236,764 253,220 16,456 61,656 61,736 63,335 64,397 63,754 -643 4 Transfers under U.S. military agency sales contracts ..................... 14,647 15,175 528 4,022 3,190 3,727 4,261 3,997 -264 5 Travel.................................................................... 69,908 74,407 4,499 18,183 18,585 18,634 18,732 18,456 -276 6 Passenger fares........................................................... 20,557 21,710 1,153 5,282 5,316 5,508 5,468 5,418 -50 7 Other transportation...................................................... 27,216 28,194 978 7,142 7,001 7,045 6,939 7,210 271 8 Royalties and license fees ............................................... 29,974 30,269 295 7,703 7,688 7,608 7,520 7,452 -68 9 Other private services ................................................... 73,569 82,681 9,112 19,117 19,753 20,622 21,277 21,031 -246 10 U.S. Government miscellaneous services..................................... 893 784 -109 207 203 191 200 190 -10 11 Income receipts on U.S. assets abroad....................................... 206,400 236,043 29,643 55,043 55,243 59,106 60,875 60,817 -58 12 Direct investment receipts................................................ 98,890 109,227 10,337 26,898 25,864 27,963 28,189 27,209 -980 13 Other private receipts.................................................... 102,866 123,278 20,412 27,232 28,544 30,151 31,807 32,776 969 14 U.S. Government receipts.................................................. 4,644 3,538 -1,106 913 835 992 879 832 -47 15 Imports of goods, services, and income........................................ -1,163,450 -1,295,530 -132,080 -299,493 -310,659 -322,608 -329,571 -332,691 -3,120 16 Goods, adjusted, excluding military 1/...................................... -803,239 -877,282 -74,043 -206,036 -212,185 -218,415 -222,256 -224,426 -2,170 17 Services 2/................................................................. -156,634 -167,929 -11,295 -39,664 -41,216 -41,817 -42,303 -42,592 -289 18 Direct defense expenditures............................................... -10,861 -11,345 -484 -2,727 -2,753 -2,679 -2,863 -3,050 -187 19 Travel.................................................................... -48,739 -52,029 -3,290 -12,241 -13,004 -12,989 -12,813 -13,224 -411 20 Passenger fares........................................................... -15,776 -16,927 -1,151 -4,053 -4,272 -4,190 -4,166 -4,298 -132 21 Other transportation...................................................... -28,453 -29,771 -1,318 -7,166 -7,377 -7,541 -7,368 -7,484 -116 22 Royalties and license fees ............................................... -7,322 -7,512 -190 -1,770 -1,797 -1,846 -2,043 -1,826 217 23 Other private services ................................................... -42,796 -47,548 -4,752 -11,027 -11,327 -11,893 -12,320 -12,009 311 24 U.S. Government miscellaneous services.................................... -2,687 -2,796 -109 -680 -686 -679 -730 -701 29 25 Income payments on foreign assets in the United States...................... -203,577 -250,320 -46,743 -53,793 -57,258 -62,376 -65,012 -65,673 -661 26 Direct investment payments................................................ -32,132 -41,527 -9,395 -7,805 -8,538 -10,241 -11,666 -11,081 585 27 Other private payments.................................................... -100,103 -117,712 -17,609 -26,135 -27,581 -29,341 -29,877 -30,913 -1,036 28 U.S. Government payments.................................................. -71,342 -91,081 -19,739 -19,853 -21,139 -22,794 -23,469 -23,679 -210 29 Unilateral transfers, net..................................................... -39,968 -38,526 1,442 -11,926 -8,577 -8,855 -9,070 -12,024 -2,954 30 U.S. Government grants ..................................................... -14,933 -11,688 3,245 -5,499 -2,109 -2,245 -2,231 -5,103 -2,872 31 U.S. Government pensions and other transfers................................ -4,331 -4,075 256 -1,050 -988 -1,033 -1,031 -1,023 8 32 Private remittances and other transfers .................................... -20,704 -22,763 -2,059 -5,377 -5,480 -5,577 -5,808 -5,898 -90 33 U.S. assets abroad, net (increase/capital outflow (-))......................... -352,444 -426,938 -74,494 -154,436 -128,297 -91,264 -110,696 -96,678 14,018 34 U.S. official reserve assets, net ........................................... 6,668 -1,010 -7,678 -315 4,480 -236 -730 -4,524 -3,794 35 Gold....................................................................... .... .... .... .... .... .... .... .... .... 36 Special drawing rights..................................................... 370 -350 -720 -146 72 -133 -139 -150 -11 37 Reserve position in the International Monetary Fund........................ -1,280 -3,575 -2,295 -28 1,055 54 -463 -4,221 -3,758 38 Foreign currencies......................................................... 7,578 2,915 -4,663 -141 3,353 -157 -128 -153 -25 39 U.S. Government assets, other than official reserve assets, net.............. -690 177 867 -284 -21 -268 461 5 -456 40 U.S. credits and other long-term assets.................................... -4,930 -5,237 -307 -1,238 -1,107 -1,613 -1,415 -1,102 313 41 Repayments on U.S. credits and other long-term assets ..................... 4,134 5,439 1,305 1,045 1,111 1,358 1,876 1,094 -782 42 U.S. foreign currency holdings and U.S. short-term assets, net............. 106 -25 -131 -91 -25 -13 .... 13 13 43 U.S. private assets, net..................................................... -358,422 -426,105 -67,683 -153,837 -132,756 -90,760 -110,427 -92,159 18,268 44 Direct investment.......................................................... -87,813 -119,444 -31,631 -30,865 -26,754 -36,988 -22,763 -32,936 -10,173 45 Foreign securities......................................................... -108,189 -79,287 28,902 -30,200 -14,510 -21,841 -39,214 -3,722 35,492 46 U.S. claims on unaffiliated foreigners reported by U.S. nonbanking concerns............................................. -64,234 -76,298 -12,064 -26,115 -29,466 -3,984 -17,848 -25,000 -7,152 47 U.S. claims reported by U.S. banks, not included elsewhere................. -98,186 -151,076 -52,890 -66,657 -62,026 -27,947 -30,602 -30,501 101 48 Foreign assets in the United States, net (increase/capital inflow(+)).......... 547,555 690,497 142,942 194,579 182,282 143,059 183,292 181,863 -1,429 49 Foreign official assets in the United States, net............................ 122,354 18,157 -104,197 33,097 28,891 -5,374 21,867 -27,227 -49,094 50 U.S. Government securities................................................. 115,634 -2,971 -118,605 35,418 23,940 -11,464 9,353 -24,800 -34,153 51 U.S. Treasury securities ................................................ 111,253 -7,019 -118,272 33,564 23,289 -12,108 6,686 -24,886 -31,572 52 Other.................................................................... 4,381 4,048 -333 1,854 651 644 2,667 86 -2,581 53 Other U.S. Government liabilities ......................................... 720 539 -181 160 478 654 -510 -83 427 54 U.S. liabilities reported by U.S. banks, not included elsewhere............ 4,722 21,274 16,552 -4,270 7,698 4,536 12,391 -3,351 -15,742 55 Other foreign official assets ............................................. 1,278 -685 -1,963 1,789 -3,225 900 633 1,007 374 56 Other foreign assets in the United States, net............................... 425,201 672,340 247,139 161,482 153,391 148,433 161,425 209,090 47,665 57 Direct investment.......................................................... 76,955 107,928 30,973 17,661 30,685 26,652 25,949 24,641 -1,308 58 U.S. Treasury securities and U.S. currency flows........................... 172,878 187,854 14,976 75,326 51,289 49,915 42,919 43,731 812 59 U.S. securities other than U.S. Treasury securities........................ 133,798 189,273 55,475 32,447 38,820 51,682 60,409 38,362 -22,047 60 U.S. liabilities to unaffiliated foreigners reported by U.S. nonbanking concerns.................................................. 31,786 44,740 12,954 -2,912 15,210 -7,916 22,046 15,400 -6,646 61 U.S. liabilities reported by U.S. banks, not included elsewhere............ 9,784 142,545 132,761 38,960 17,387 28,100 10,102 86,956 76,854 62 Allocations of special drawing rights.......................................... .... .... .... .... .... .... .... .... .... 63 Statistical discrepancy (sum of above items with sign reversed)................ -46,927 -97,113 -50,186 -3,269 -14,069 -14,000 -29,482 -39,566 -10,084 Of which seasonal adjustment discrepancy..................................... .... .... .... 2,669 7,287 -1,485 -8,489 2,683 11,172 Memoranda: 64 Balance on goods (lines 2 and 16).............................................. -191,170 -198,934 -7,764 -48,190 -49,844 -47,188 -52,001 -49,901 2,100 65 Balance on services (lines 3 and 17)........................................... 80,130 85,291 5,161 21,992 20,520 21,518 22,094 21,162 -932 66 Balance on goods and services (lines 64 and 65)................................ -111,040 -113,643 -2,603 -26,198 -29,324 -25,670 -29,907 -28,739 1,168 67 Balance on investment income (lines 11 and 25)................................. 2,824 -14,277 -17,101 1,250 -2,015 -3,270 -4,137 -4,856 -719 68 Balance on goods, services, and income (lines 1 and 15 or lines 66 and 67) ..................................................................... -108,216 -127,920 -19,704 -24,948 -31,339 -28,940 -34,044 -33,595 449 69 Unilateral transfers, net (line 29)............................................ -39,968 -38,526 1,442 -11,926 -8,577 -8,855 -9,070 -12,024 -2,954 70 Balance on current account (lines 1, 15, and 29 or lines 68 and 69) ........... -148,184 -166,446 -18,262 -36,874 -39,916 -37,795 -43,114 -45,619 -2,505 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