News Release: U.S. International Transactions

NOTE: See the navigation bar at the right side of the news release text for links to data tables, contact personnel and their telephone numbers, and supplementary materials.

EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, Tuesday, June 20, 2017
BEA 17—27
Christopher Steiner: (301) 278-9492 (Technical) Christopher.Steiner@bea.gov
Jeannine Aversa: (301) 278-9003 (Media) Jeannine.Aversa@bea.gov

ERRATA Tables 1 and 7 and relevant text in the "U.S. International Transactions: First Quarter 2017 and Annual Update" news release and corresponding statistics in the Interactive Tables were corrected on July 5, 2017. The corrections affect statistics for net U.S. incurrence of portfolio investment long-term debt liabilities and related aggregate statistics for the first quarter of 2017; related statistics for U.S. portfolio investment interest payments were not updated at this time because they were not significantly affected. Related position statistics were also corrected; see the "U.S. Net International Investment Position: First Quarter 2017, Year 2016, and Annual Update" news release.

U.S. International Transactions: First Quarter 2017 and Annual Update
                                    Current-Account Balance

The U.S. current-account deficit increased to $116.8 billion (preliminary) in the first quarter
of 2017 from $114.0 billion (revised) in the fourth quarter of 2016, according to statistics
released by the Bureau of Economic Analysis (BEA). The deficit increased to 2.5 percent of current-
dollar gross domestic product (GDP) from 2.4 percent in the fourth quarter.

The $2.8 billion increase in the current-account deficit reflected a $5.3 billion increase in the
deficit on goods and a $3.6 billion decrease in the surplus on primary income that were partly
offset by a $5.8 billion decrease in the deficit on secondary income and a $0.3 billion increase
in the surplus on services.

The remainder of this release highlights changes in major aggregates of the U.S. international
transactions accounts and selected component contributions to those changes from the fourth
quarter of 2016 to the first quarter of 2017, and highlights updates to previously published
statistics.

                           Current-Account Transactions (tables 1-5)

Exports of goods and services and income receipts

Exports of goods and services and income receipts increased $22.5 billion in the first quarter
to $830.3 billion.

   * Goods exports increased $13.2 billion to $383.7 billion, mostly reflecting increases in
     exports of industrial supplies and materials, largely petroleum and products, and in exports
     of automotive vehicles, parts, and engines.

   * Secondary income receipts increased $4.3 billion to $39.2 billion, largely reflecting an
     increase in U.S. government transfers, mostly fines and penalties.

   * Primary income receipts increased $3.5 billion to $216.5 billion, reflecting increases in
     other investment income and in direct investment income.

Imports of goods and services and income payments

Imports of goods and services and income payments increased $25.2 billion to $947.1 billion.

   * Goods imports increased $18.4 billion to $584.0 billion, mostly reflecting increases in
     industrial supplies and materials, mostly crude oil, in capital goods except automotive,
     and in automotive vehicles, parts, and engines.

   * Primary income payments increased $7.1 billion to $168.8 billion, mostly reflecting increases
     in direct investment income and in other investment income, primarily interest on loans and
     deposits.

                           Financial Account (tables 1, 6, 7, and 8)

Net U.S. borrowing measured by financial-account transactions was $115.3 billion in the first
quarter of 2017, an increase from net borrowing of $74.8 billion in the fourth quarter of 2016.
A shift to net U.S. incurrence of liabilities excluding financial derivatives from fourth-quarter
net U.S. repayment was partly offset by a shift to net U.S. acquisition of financial assets
excluding financial derivatives from net U.S. liquidation.

Financial assets

Transactions in financial assets excluding financial derivatives shifted to net U.S. acquisition
of $282.7 billion in the first quarter from net U.S. liquidation of $84.5 billion in the fourth
quarter.

   * Transactions in other investment assets shifted to net U.S. acquisition of $50.9 billion
     in the first quarter from net liquidation of $115.9 billion in the fourth quarter, mostly
     reflecting a shift to net U.S. placement of deposits abroad from fourth-quarter net U.S.
     withdrawal and a shift to net U.S. provision of loans to foreigners from net foreign repayment.

   * Transactions in portfolio investment assets shifted to net U.S. purchases of $120.3 billion
     in the first quarter from net sales of $13.4 billion in the fourth quarter, mostly reflecting
     a shift to net purchases from net sales of equity and investment fund shares.

   * Net U.S. acquisition of direct investment assets increased $68.4 billion to $111.7 billion
     in the first quarter, mostly reflecting a shift to net acquisition by U.S. parents of debt
     instrument claims on their foreign affiliates.

Liabilities

Transactions in liabilities excluding financial derivatives shifted to net U.S. incurrence of
$395.0 billion in the first quarter from net U.S. repayment of $16.7 billion in the fourth quarter.

   * Transactions in other investment liabilities shifted to net U.S. incurrence of $149.6 billion
     in the first quarter from net U.S. repayment of $96.8 billion in the fourth quarter, mostly
     reflecting a shift to net incurrence of loan liabilities from fourth-quarter repayment.

   * Net U.S. incurrence of portfolio investment liabilities increased $92.9 billion to $155.3
     billion, reflecting a shift to net foreign purchases of equity and investment fund shares
     from net foreign sales in the fourth quarter.

   * Net U.S. incurrence of direct investment liabilities increased $72.5 billion to $90.1 billion,
     mostly reflecting a decrease in net repayment of U.S. parents' debt instrument liabilities
     and an increase in net incurrence of equity liabilities.

Financial derivatives

Transactions in financial derivatives other than reserves reflected first-quarter net borrowing
of $3.0 billion, a $4.0 billion decrease from the fourth quarter.

                               Statistical Discrepancy (table 1)

The statistical discrepancy decreased $37.8 billion in the first quarter to $1.5 billion.

         Updates to Fourth Quarter 2016 International Transactions Accounts Aggregates
                           Billions of dollars, seasonally adjusted

                                                       Preliminary estimate    Revised estimate
Current-account balance                                       -112.4               -114.0
   Goods balance                                              -196.1               -195.1
   Services balance                                             63.8                 61.0
   Primary-income balance                                       61.5                 51.3
   Secondary-income balance                                    -41.5                -31.3
Net lending (+)/borrowing (-) from
   financial-account transactions                              -92.0                -74.8
Statistical discrepancy                                         20.4                 39.3


               Annual Update of the International Transactions Accounts (table 9)

The statistics in this release reflect the annual update of the U.S. international transactions
accounts. With this update, BEA has incorporated a new data source, an improved estimation
methodology, newly available and revised source data, and updated seasonal adjustments. Key
changes to the statistics are summarized below and in table 9.

   * Revised statistics on secondary income reflect new data sources for estimating taxes withheld
     by the U.S. government and by foreign governments on exports and imports of services and
     receipts and payments of primary income beginning with statistics for 1999. For 1999 to 2005,
     revised statistics on direct investment interest income, a component of primary income, also
     reflect the new data source for taxes. These statistics are derived by adding an estimate
     of taxes to BEA's survey data on direct investment interest income, which were reported net
     of taxes. The new tax estimates do not affect direct investment interest income beginning
     with statistics for 2006 because taxes are included indistinguishably in the survey data.

   * Revised statistics on direct investment income and direct investment financial transactions
     reflect a new method for estimating current-cost adjustments to direct investment income
     beginning with statistics for 1999.

   * Revised statistics on primary income and financial-account transactions reflect data reported
     on BEA's annual direct investment surveys and Treasury International Capital (TIC) annual
     surveys. The annual surveys provide more comprehensive data than were available previously.
     The statistical periods affected by the incorporation of newly available and revised data
     from these and other key sources are identified in the following table.


            Newly Available and Revised Source Data: Key Providers and Years Affected

BEA:
 * Quarterly international services surveys (20142016)
 * Quarterly direct investment surveys (20142016)
 * Annual direct investment surveys (20142016)

U.S. Census Bureau:
 * Data on goods exports and imports (20142016)

U.S. Customs and Border Protection:
 * Number of foreign residents traveling in the United States (2015-2016)
 * Number of U.S. citizens traveling abroad (2016)

U.S. Department of the Treasury:
 * Aggregate Holdings of Long-Term Securities by U.S. and Foreign Residents (2014-2016)
 * Foreign-Residents' Holdings of U.S. Securities, including Selected Money Market
   Instruments (2015-2016)
 * U.S. Ownership of Foreign Securities, including Selected Money Market Instruments (2015-2016)
 * Reports by Financial Institutions of Liabilities to, and Claims on, Foreign Residents
   by U.S. Residents (2014-2016)
 * Reports of Liabilities to, and Claims on, Unaffiliated Foreign Residents by U.S. Resident
   Non-Financial Institutions (2014-2016)
 * Reports of Holdings of, and Transactions in, Financial Derivatives Contracts with
   Foreign Residents (2014-2016)

A more detailed discussion of the new data sources for estimating withholding taxes and the new
methodology for estimating current-cost adjustments appears in "Preview of the 2017 Annual Update
of the International Economic Accounts," in the May issue of the Survey of Current Business.
Additional information on the updates to the U.S. international transactions accounts and the
U.S. international investment position accounts will be provided in the July issue of the
Survey of Current Business.


                         Next release:  September 19, 2017 at 8:30 A.M. EDT
                        U.S. International Transactions, Second Quarter 2017


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                                   Additional Information

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   * Historical time series for these estimates can be accessed in BEA?s Interactive Data Application.

   * Access BEA data by registering for BEA?s Data Application Programming Interface (API).

   * For more on BEA?s statistics, see our monthly online journal, the Survey of Current Business.

   * BEA's news release schedule.

   * More information on these international transactions statistics will be provided next month
     in the Survey of Current Business.

   * More information on the international transactions accounts (ITAs) and a description of the estimation
     methods used to compile them is provided in U.S. International Economic Accounts: Concepts
     and Methods.


Definitions

The current account consists of transactions between U.S. residents and nonresidents in goods,
services, primary income, and secondary income.

Goods are physical items with ownership rights that can be exchanged among institutional units
through transactions.

Services transactions consist of transactions arising from productive activities that change
the condition of the consumer or that facilitate the exchange of products and financial assets.

Primary income transactions include investment income and compensation of employees. Investment
income is the return on holdings of financial assets and includes direct investment income,
portfolio investment income, other investment income, and income on reserve assets. Compensation
of employees is income for the contribution of labor inputs to the production process.

Secondary income consists of current transfers between residents and nonresidents. Unlike an
exchange, a transfer is a transaction in which a good, service, or asset is provided without a
corresponding return of economic value. Secondary income receipts and payments include U.S.
government and private transfers, such as U.S. government grants and pensions, fines and penalties,
withholding taxes, personal transfers (remittances), insurance-related transfers, and other
current transfers.

The capital account consists of capital transfers between residents and nonresidents and the
cross-border acquisition and disposal of nonproduced nonfinancial assets. Capital transfers
include debt forgiveness and certain disaster-related nonlife insurance claims. Nonproduced
nonfinancial assets include natural resources and contracts, leases, and licenses. Capital-
account transactions are distinguished from current-account transactions in that capital-account
transactions result in a change in the assets of one or both parties to the transaction without
affecting the income or savings of either party.

The financial account consists of transactions between U.S. residents and nonresidents for direct
investment, portfolio investment, other investment, reserves, and financial derivatives other
than reserves.

Direct investment is a category of cross-border investment associated with a resident in one
economy having control or a significant degree of influence on the management of an enterprise
resident in another economy. Ownership or control of 10 percent or more of the nonresident
entity's voting securities is the threshold for separating direct investment from other types
of investment. Direct-investment transactions include transactions in equity (including
reinvestment of earnings) and debt instruments.

Portfolio investment transactions consist of cross-border transactions involving equity and
investment fund shares and debt securities, excluding those included in direct investment or
reserve assets.

Other investment is a residual category that includes cross-border financial instruments other
than those included in direct investment, portfolio investment, financial derivatives, and
reserve assets. Other-investment transactions consist of transactions in currency and deposits,
loans, insurance technical reserves, trade credit and advances, and, for liabilities, special
drawing rights allocations.

Reserve assets are those external assets that are readily available to and controlled by monetary
authorities for meeting balance of payments financing needs, for intervention in exchange markets
to affect the currency exchange rate, and for other related purposes such as maintaining confidence
in the currency and the economy and serving as a basis for foreign borrowing. The major published
components are monetary gold, International Monetary Fund (IMF) special drawing rights (SDRs),
reserve position in the IMF, and other reserve assets.

Financial derivatives other than reserves consist of financial contracts that are linked to
underlying financial instruments, commodities, or indicators. Transactions in financial derivatives
consist of U.S. cash receipts and payments arising from the sale, purchase, periodic settlement,
or final settlement of financial derivatives contracts. Transactions in financial derivatives
are only available as a net value equal to transactions for assets less transactions for liabilities.
A positive value represents net cash payments by U.S. residents to foreign residents from settlements
of derivatives contracts (net lending) and a negative value represents net U.S. cash receipts
(net borrowing).

The statistical discrepancy is the difference between net acquisition of assets and net incurrence
of liabilities in the financial account (including financial derivatives) less the difference
between total credits and total debits recorded in the current and capital accounts. The statistical
discrepancy can also be calculated as the difference between net lending (borrowing) measured
from financial-account transactions and net lending (borrowing) measured from current- and
capital-account transactions.

The current-account balance is the difference between credits (exports and income receipts) and
debits (imports and income payments) in the current account. The balance is a net measure of
current-account transactions between the United States and the rest of the world. A positive
balance indicates a current-account surplus. A negative balance indicates a current-account
deficit.

Net lending (borrowing) measures the balance of funds supplied to the rest of the world. Net
lending means that, in net terms, the U.S. economy supplies funds to the rest of the world.
Net borrowing means the opposite. Net lending (borrowing) can be measured by current- and capital-
account transactions or by financial-account transactions. Conceptually, the two measures are
equal. In practice, the two measures differ by the statistical discrepancy.

Release and update cycle

Preliminary quarterly statistics for the ITAs are released in March, June, September, and December
approximately 80 days after the end of the reference quarter. These statistics are updated the
following quarter to incorporate new source data. Quarterly statistics are open for revision
for at least the prior three years in annual updates released in June. Preliminary annual statistics
are released in March along with statistics for the fourth quarter of the previous year. These
annual statistics are open for revision for at least the prior three years in subsequent annual
updates.

Related statistics

The ITAs constitute one part of a broader set of U.S. international economic accounts that,
taken together, provide a comprehensive, integrated, and detailed picture of U.S. international
economic activities.

The international investment position (IIP) accounts are released quarterly. Financial transactions
that are reported in the ITAs are one type of change in position recorded in the IIP accounts.

Statistics on direct investment and multinational enterprises (MNEs) include annual statistics on
the activities of MNEs, detailed annual and quarterly statistics on direct investment, and annual
statistics on new investment in the United States.

Statistics on international services, released annually, include detailed annual information on
trade in services and on services supplied through the channel of direct investment by affiliates
of MNEs.

U.S. international trade in goods and services, released by BEA and the U.S. Census Bureau, provides
monthly statistics on trade in goods and services.