News Release: U.S. International Transactions

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EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, Tuesday, March 21, 2017
BEA 17—11
Christopher Steiner: (301) 278-9492 (Technical) Christopher.Steiner@bea.gov
Jeannine Aversa: (301) 278-9003 (Media) Jeannine.Aversa@bea.gov
U.S. International Transactions: Fourth Quarter and Year 2016
                           Current-Account Balance, Fourth Quarter

The U.S. current-account deficit decreased to $112.4 billion (preliminary) in the fourth
quarter of 2016 from $116.0 billion (revised) in the third quarter of 2016, according to
statistics released by the Bureau of Economic Analysis (BEA).  The deficit decreased to 2.4
percent of current-dollar gross domestic product (GDP) from 2.5 percent in the third quarter.

The $3.6 billion decrease in the current-account deficit mostly reflected a $19.9 billion
increase in the surplus on primary income that was largely offset by a $17.5 billion increase
in the deficit on goods.  The changes in the surplus on services and the deficit on secondary
income were relatively small.

                   Current-Account Transactions, Fourth Quarter (tables 1-5)

Exports of goods and services and income receipts

Exports of goods and services and income receipts increased $4.0 billion in the fourth quarter
to $804.0 billion.

    * Primary income receipts increased $4.4 billion to $207.9 billion, reflecting increases in
      direct investment income, largely income on equity, and in portfolio investment income,
      largely reflecting interest on long-term debt securities.

    * Goods exports decreased $3.4 billion to $371.7 billion, partly offsetting the increase in
      primary income receipts.  The decrease reflected an $8.4 billion decrease in exports of
      foods, feeds, and beverages, largely soybeans, that was partly offset by a net increase
      in other major categories.

Imports of goods and services and income payments

Imports of goods and services and income payments increased $0.4 billion to $916.4 billion.

    * Goods imports increased $14.1 billion to $567.9 billion.  Increases were largest in
      industrial supplies and materials and in consumer goods except food and automotive.

    * Primary income payments decreased $15.4 billion to $146.5 billion, mostly offsetting the
      increase in goods imports and small increases in secondary income payments and services
      imports.  The decrease reflected a $19.9 billion decrease in direct investment income
      that was concentrated in earnings of U.S. affiliates in wholesale trade and mostly
      resulted from charges against earnings related to legal settlements.  The decrease in
      direct investment income was partly offset by an increase in portfolio investment income,
      primarily interest on long-term debt securities.

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

Net U.S. borrowing measured by financial-account transactions was $92.0 billion in the fourth
quarter, a decrease from net borrowing of $224.4 billion in the third quarter.  A decrease in
net U.S. incurrence of liabilities excluding financial derivatives was partly offset by a shift
to net U.S. liquidation of financial assets excluding financial derivatives and a shift to net
borrowing in financial derivatives other than reserves.

Financial assets

Transactions in financial assets excluding financial derivatives shifted to net U.S.
liquidation of $79.1 billion in the fourth quarter from net U.S. acquisition of $28.3 billion
in the third quarter.

    * Net U.S. liquidation of other investment assets increased $95.5 billion, reflecting a
      shift to net foreign repayment of loans from net U.S. provision in the third quarter.

    * Net U.S. acquisition of direct investment assets decreased $13.9 billion to $80.7 billion,
      reflecting a shift to net repayment of debt by foreign affiliates to their U.S. parents.

Liabilities

Net U.S. incurrence of liabilities excluding financial derivatives decreased $246.8 billion to
$12.4 billion.

    * Net U.S. incurrence of portfolio investment liabilities decreased $157.0 billion to $61.6
      billion, reflecting a shift to net foreign sales of U.S. equity and investment fund
      shares that was partly offset by an increase in net foreign purchases of U.S. long-term
      debt securities.

    * Net U.S. incurrence of direct investment liabilities decreased $91.7 billion to $33.0
      billion, reflecting a decrease in net incurrence of equity liabilities and a shift to net
      U.S. repayment of debt instrument liabilities.

Financial derivatives

Transactions in financial derivatives other than reserves reflected fourth-quarter net
borrowing of $0.4 billion, a shift from net lending of $6.5 billion in the third quarter.

                       Statistical Discrepancy, Fourth Quarter (table 1)

The statistical discrepancy shifted to $20.4 billion in the fourth quarter from -$108.4 billion
in the third quarter.

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

                                                       Preliminary estimate    Revised estimate
Current-account balance                                       -113.0               -116.0
  Goods balance                                               -177.7               -178.7
  Services balance                                              61.3                 62.4
  Primary-income balance                                        43.4                 41.6
  Secondary-income balance                                     -39.9                -41.4
Net lending (+)/borrowing (-) from
  financial-account transactions                              -207.9               -224.4
Statistical discrepancy                                        -95.0               -108.4

                              Current-Account Balance, Year 2016

The current-account deficit increased to $481.2 billion (preliminary) in 2016 from $463.0
billion in 2015.  The deficit was 2.6 percent of current-dollar GDP in 2016, the same
percentage as in 2015.

The $18.2 billion increase in the deficit reflected a $16.2 billion increase in the deficit on
secondary income, a $12.8 billion decrease in the surplus on services, and a $1.8 billion
decrease in the surplus on primary income.  These changes were partly offset by a $12.6 billion
decrease in the deficit on goods.

                     Current-Account Transactions, Year 2016 (tables 1-5)

Exports of goods and services and income receipts

Exports of goods and services and income receipts decreased $30.5 billion in 2016 to $3,142.2
billion.

    * Goods exports decreased $50.6 billion to $1,459.7 billion, mostly reflecting decreases in
      industrial supplies and materials and in capital goods except automotive.

    * Primary income receipts increased $19.0 billion to $801.9 billion, partly offsetting the
      decrease in goods exports.  The increase in primary income reflected increases in
      portfolio investment income, mostly dividends on equity other than investment fund shares,
      and in other investment income, mostly interest.

Imports of goods and services and income payments

Imports of goods and services and income payments decreased $12.3 billion to $3,623.4 billion.

    * Goods imports decreased $63.3 billion to $2,209.6 billion.  The decrease in goods imports
      was largely offset by increases in primary income payments, secondary income payments, and
      services imports.  The decrease in goods imports primarily reflected a decrease in industrial
      supplies and materials, mostly petroleum and products.

                    Financial Account, Year 2016 (tables 1, 6, 7, and 8)

Net U.S. borrowing measured by financial-account transactions was $406.5 billion in 2016, an
increase from net borrowing of $195.2 billion in 2015.  An increase in net U.S. incurrence of
liabilities excluding financial derivatives 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 $105.6
billion in 2016 to $331.0 billion.

    * Net liquidation of other investment assets decreased $231.6 billion to $39.3 billion,
      reflecting a decrease in net withdrawal of U.S. residents’ foreign deposits and a shift
      to net U.S. provision of loans to foreign residents.

    * Net acquisition of portfolio investment assets decreased $133.3 billion to $20.7 billion,
      partly offsetting the decrease in net liquidation of other investment assets.  The
      decrease in net acquisition of portfolio investment assets reflected a shift to net U.S.
      sales of foreign equity and investment fund shares that was partly offset by a shift to
      net U.S. acquisition of foreign debt securities.

Liabilities

Net U.S. incurrence of liabilities excluding financial derivatives increased $364.1 billion to
$759.4 billion.

    * Transactions in other investment liabilities shifted to net incurrence of $63.2 billion
      from net repayment of $235.1 billion, primarily reflecting a shift to net incurrence of
      loans from foreigners.

    * Net incurrence of direct investment liabilities increased $45.8 billion to $425.3 billion,
      primarily reflecting an increase in net incurrence of equity liabilities.

Financial derivatives

Transactions in financial derivatives other than reserves shifted to net lending of $22.0
billion in 2016 from net borrowing of $25.4 billion in 2015.

                             Statistical Discrepancy, Year 2016

The statistical discrepancy decreased to $74.8 billion in 2016 from $267.8 billion in 2015.

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           Notice of Upcoming Update to the U.S. International Transactions Accounts

The annual update of the U.S. International Transactions Accounts will be released along with

preliminary estimates for the first quarter of 2017 on June 20, 2017.  An article previewing
the annual update will appear in the May 2017 issue of the Survey of Current Business.

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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.

   * 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 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 non-financial 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 International Transactions Accounts (ITA) statistics 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 three prior
years in subsequent annual updates.

Related statistics

The ITAs comprise 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 that include detailed annual information on trade in services
and on services supplied through the channel of direct investment by affiliates of MNEs are released
annually.

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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