News Release: U.S. International Transactions

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EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, Tuesday, September 19, 2017
BEA 17—47
Michelle Murillo: (301) 278-9133 (Technical) Michelle.Murillo@bea.gov
Jeannine Aversa: (301) 278-9003 (Media) Jeannine.Aversa@bea.gov
U.S. International Transactions: Second Quarter 2017
                                    Current-Account Balance

The U.S. current-account deficit increased to $123.1 billion (preliminary) in the second
quarter of 2017 from $113.5 billion (revised) in the first quarter of 2017, according to
statistics released by the Bureau of Economic Analysis (BEA). The deficit increased to 2.6
percent of current-dollar gross domestic product (GDP) from 2.4 percent in the first quarter.

The $9.6 billion increase in the current-account deficit reflected a $7.5 billion increase in
the deficit on secondary income, a $2.9 billion decrease in the surplus on primary income, and
a $0.8 billion increase in the deficit on goods. These changes were partly offset by a $1.6
billion increase in the surplus on services.

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

                           Current-Account Transactions (tables 1-5)

Exports of goods and services and income receipts

Exports of goods and services and income receipts increased $2.2 billion in the second quarter
to $836.8 billion.

   * Primary income receipts increased $4.8 billion to $224.1 billion, mostly reflecting
     increases in portfolio investment income and in other investment income.

   * Services exports increased $3.2 billion to $195.8 billion, mostly reflecting increases in
     travel (for all purposes including education) and in financial services.

   * Secondary income receipts decreased $5.2 billion to $33.9 billion, partly offsetting the
     increases in primary income receipts and services exports. The decrease in secondary
     income receipts mostly reflected a decrease in U.S. government transfers, primarily fines
     and penalties.

Imports of goods and services and income payments

Imports of goods and services and income payments increased $11.8 billion to $959.9 billion.

   * Primary income payments increased $7.6 billion to $176.9 billion, reflecting increases in
     direct, portfolio, and other investment income.

   * Secondary income payments increased $2.4 billion to $66.9 billion, mostly reflecting an
     increase in private transfers, primarily fines and penalties.

   * Services imports increased $1.6 billion to $131.8 billion, led by an increase in travel
     (for all purposes including education).

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

Net U.S. borrowing measured by financial-account transactions was $112.5 billion in the second
quarter of 2017, an increase from net borrowing of $93.5 billion in the first quarter. The
increase reflected an increase in net U.S. incurrence of liabilities excluding financial
derivatives that was partly offset by an increase in net U.S. acquisition of financial assets
excluding financial derivatives and a shift to net lending from net borrowing in financial
derivatives other than reserves.

Financial assets

Net U.S. acquisition of financial assets excluding financial derivatives increased $24.6
billion in the second quarter to $350.7 billion.

   * Net U.S. acquisition of portfolio investment assets increased $41.3 billion to $181.7
     billion, reflecting an increase in net U.S. purchases of equity and investment fund shares.

   * Net U.S. acquisition of direct investment assets decreased $17.9 billion to $99.5 billion,
     partly offsetting the increase in net acquisition of portfolio investment assets. The
     decrease in net acquisition of direct investment assets mostly reflected a decrease in net
     acquisition of debt instruments by U.S. parent companies from their foreign affiliates.

Liabilities

Net U.S. incurrence of liabilities excluding financial derivatives increased $55.2 billion to
$472.5 billion.

   * Net U.S. incurrence of portfolio investment liabilities increased $143.0 billion to $307.5
     billion, reflecting an increase in net foreign purchases of U.S. debt securities.

   * Net U.S. incurrence of other investment liabilities decreased $71.6 billion to $84.0
     billion, partly offsetting the increase in net incurrence of portfolio investment
     liabilities. The decrease reflected a shift to net U.S. repayment of loans from first-
     quarter net incurrence.

Financial derivatives

Transactions in financial derivatives other than reserves reflected second-quarter net lending
of $9.3 billion, a shift from first-quarter net borrowing of $2.3 billion.

                               Statistical Discrepancy (table 1)

The statistical discrepancy decreased $9.4 billion in the second quarter to $10.6 billion.

         Updates to First Quarter 2017 International Transactions Accounts Aggregates
                           Billions of dollars, seasonally adjusted

                                                      Preliminary estimate    Revised estimate
Current-account balance                                       -116.8               -113.5
Goods balance                                                 -200.3               -200.6
   Services balance                                             61.3                 62.5
   Primary-income balance                                       47.7                 50.1
   Secondary-income balance                                    -25.5                -25.5
Net lending (+)/borrowing (-) from
   financial-account transactions                             -115.3                -93.5
Statistical discrepancy                                          1.5                 20.0


                       Next release:  December 19, 2017 at 8:30 A.M. EST
                      U.S. International Transactions, Third Quarter 2017

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                                   Additional Information

Resources

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

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    * 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.

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