FOR WIRE TRANSMISSION: 10:00 A.M. EST, THURSDAY, MARCH 11, 1999 Christopher L. Bach: (202) 606-9545 BEA 99-07 Recorded message: (202) 606-5362 U.S. International Transactions: Fourth Quarter and Year 1998 Fourth Quarter Current Account The U.S. current-account deficit -- the combined balances on trade in goods and services, investment income, and net unilateral transfers -- decreased to $63.8 billion in the fourth quarter from $65.7 billion (revised) in the third, according to preliminary estimates of the Commerce Department's Bureau of Economic Analysis. The deficits on goods and services and on investment income decreased, while net unilateral transfers increased. Goods and services The deficit on goods and services decreased to $43.0 billion in the fourth quarter from $46.5 billion in the third. Annual Revision of the U.S. International Transactions Accounts In June 1999, BEA will publish an annual revision of the U.S. international transactions accounts. As usual, a number of methodological and statistical revisions will be incorporated. Of particular note is a change in the treatment of unilateral transfers to bring the accounts into closer alignment with international guidelines. This change will also result in an expansion of the table shown at the end of this release. For additional details, see the February 1999 Survey of Current Business. Goods The deficit on goods decreased to $62.3 billion in the fourth quarter from $64.9 billion in the third. Goods exports increased to $171.9 billion from $163.4 billion; nonagricultural products accounted for much of the increase, but agricultural products also increased. Goods imports increased to $234.2 billion from $228.3 billion; nonpetroleum products more than accounted for the increase, and petroleum products decreased. Services The surplus on services increased to $19.3 billion in the fourth quarter from $18.4 billion in the third. Services exports increased to $65.7 billion from $63.9 billion. Travel increased the most. Services imports increased to $46.5 billion from $45.5 billion. The largest increases were in travel and "other" transportation. Investment income The deficit on investment income decreased to $7.8 billion in the fourth quarter from $9.2 billion in the third. Income receipts increased to $59.7 billion from $58.5 billion. An increase in direct investment receipts was partly offset by a decrease in "other" private receipts. Income payments decreased to $67.4 billion from $67.6 billion. An increase in direct investment payments was more than offset by decreases in "other" private payments and in U.S. Government payments. Unilateral transfers Net unilateral transfers increased to $13.0 billion in the fourth quarter from $10.0 billion in the third. The increase was nearly all attributable to an increase in U.S. Government grants to Israel. Capital transactions Net recorded capital inflows -- the difference between changes in U.S. assets abroad and changes in foreign assets in the United States -- were $94.3 billion in the fourth quarter, compared with $38.3 billion (revised) in the third. Capital inflows for foreign assets in the United States accelerated more than capital outflows for U.S. assets abroad. Two exceptionally large acquisitions, described below, of U.S. corporations by foreign firms increased both inflows and outflows. In the accounts, these transactions are recorded as changes in both U.S. assets abroad (foreign securities) and foreign assets in the United States (direct investment), and hence have no effect on net capital flows. U.S. assets abroad Capital outflows for U.S. assets abroad increased $88.8 billion in the fourth quarter, compared with an increase of $60.4 billion in the third. Excluding the two acquisitions mentioned above, U.S. assets abroad decreased. U.S. claims on foreigners reported by U.S. banks decreased $22.5 billion in the fourth quarter, in contrast to an increase of $32.0 billion in the third. In the fourth quarter, U.S. banks and securities dealers sharply curtailed their lending and risk exposure in response to financial problems encountered by Russia, by Brazil, and by other developing countries in Asia and Latin America. Net U.S. purchases of foreign securities were $71.6 billion in the fourth quarter, compared with net sales of $17.1 billion in the third. Net U.S. purchases of foreign stocks were $79.8 billion, compared with net sales of $8.2 billion in the third. Included in fourth-quarter transactions are two exceptionally large acquisitions of U.S. companies by foreign firms. (These acquisitions are also recorded as foreign direct investment in the United States in line 57). These transactions involve exchanges of stock in U.S. firms for stock in newly established foreign parent firms. Excluding these offsets, U.S. transactions in foreign stocks in the fourth quarter recorded net sales roughly two-thirds as large as those of the preceding quarter. Net U.S. sales of foreign bonds were $8.2 billion in the fourth quarter, compared with net sales of $8.8 billion in the third. Net capital outflows for U.S. direct investment abroad were $33.0 billion in the fourth quarter, compared with $23.3 billion in the third. Reinvested earnings were sharply higher, net intercompany debt shifted to outflows, and net equity capital outflows increased slightly. U.S. official reserve assets increased $2.4 billion in the fourth quarter, compared with an increase of $2.0 billion in the third. Foreign assets in the United States Capital inflows for foreign assets in the United States increased $183.1 billion in the fourth quarter, compared with an increase of $98.7 billion in the third. U.S. liabilities to foreigners reported by U.S. banks decreased $21.6 billion in the fourth quarter, in contrast to an increase of $77.0 billion in the third. In the fourth quarter, foreigners withdrew funds partly to invest in short-term U.S. Treasury securities, and banks located in the United States borrowed little from abroad, with the exception of Japanese-owned banks, which borrowed heavily from their parents in Japan. Net foreign purchases of U.S. Treasury securities were $24.3 billion in the fourth quarter, in contrast to net sales of $1.4 billion in the third. In the fourth quarter, foreigners sought the safety and liquidity of U.S. Treasury securities. Net foreign purchases of U.S. securities other than U.S. Treasury securities were $49.2 billion in the fourth quarter, compared with $20.0 billion in the third. Net foreign purchases of U.S. stocks were $8.3 billion, in contrast to net sales of $5.5 billion. Net foreign purchases of U.S. bonds were $40.9 billion, up from $25.5 billion. Net capital inflows for foreign direct investment in the United States were $120.6 billion in the fourth quarter, compared with $30.3 billion in the third. The fourth-quarter inflows were dominated by two exceptionally large foreign acquisitions of U.S. companies by exchanges of stock in U.S. firms for stock in the newly established foreign parent firms. These transactions also appear in line 45, Foreign securities. Excluding these transactions, net equity capital inflows were slightly lower than in the third quarter. Both net intercompany debt inflows and reinvested earnings were higher. Net U.S. currency shipments were $6.3 billion in the fourth quarter, compared with $7.3 billion in the third. Foreign official assets in the United States increased $23.2 billion in the fourth quarter, in contrast to a decrease of $46.3 billion in the third. Assets of both developing and industrial countries increased in the fourth quarter. The statistical discrepancy -- errors and omissions in recorded transactions -- was a negative $30.6 billion in the fourth quarter, compared with a positive $27.3 billion in the third. The large shift from the third to the fourth quarter is believed to reflect the imperfect recording of short-term capital flows during a period of heightened financial uncertainty and rapidly changing perceptions of risk exposure, particularly to debt instruments of emerging market countries. In the fourth quarter, the U.S. dollar depreciated 5 percent on a trade-weighted quarterly average basis against the currencies of 10 industrial countries. Revisions The third-quarter current-account balance and its components were revised from previously published estimates. The current-account deficit for the third quarter was revised to $65.7 billion from $61.3 billion. The goods deficit was revised to $64.9 billion from $64.4 billion; the services surplus was revised to $18.4 billion from $18.6 billion; the deficit on investment income was revised to $9.2 billion from $5.5 billion; and net unilateral transfers was revised to $10.0 billion from $10.1 billion. The Year 1998 Current Account The U.S. current-account deficit -- the combined balances on trade in goods and services, investment income, and net unilateral transfers -- increased to a record $233.4 billion in 1998 from $155.2 billion in 1997. Increases in the deficits on goods and services and on investment income accounted for most of the rise in the current-account deficit; net unilateral transfers also increased. Goods and services The deficit on goods and services increased to $169.1 billion in 1998 from $110.2 billion in 1997. Goods The deficit on goods increased to $248.0 billion in 1998 from $198.0 billion in 1997. Goods exports decreased to $671.1 billion from $679.3 billion. Agricultural exports accounted for two- thirds of the decrease and nonagricultural exports for one-third. Goods imports increased to $919.0 billion from $877.3 billion. Nonpetroleum products more than accounted for the increase, and petroleum products decreased. Services The surplus on services decreased to $78.9 billion in 1998 from $87.7 billion in 1997. Service exports increased to $260.4 billion from $258.3 billion in 1997. "Other" private services, which include services such as business, professional, and technical services, as well as financial services, increased the most. There were decreases in travel, passenger fares, and "other" transportation. Services imports increased to $181.5 billion from $170.5 billion. "Other" private services, travel, and "other" transportation increased the most. Investment income The deficit on investment income increased to $22.5 billion in 1998 from $5.3 billion in 1997. Income receipts on U.S. assets abroad increased to $242.6 billion from $241.8 billion. An increase in "other" private receipts was mostly offset by a decrease in direct investment income receipts. Income payments on foreign assets in the United States increased to $265.1 billion from $247.1 billion. Increases in "other" private payments and U.S. Government payments accounted for nearly all of the increase. Payments on direct investment changed little. Unilateral transfers Net unilateral transfers were $41.9 billion in 1998, compared with $39.7 billion in 1997. An increase in private remittances and other transfers accounted for much of the increase. Capital transactions Net recorded capital inflows -- the difference between changes in U.S. assets abroad and changes in foreign assets in the United States -- were $237.1 billion in 1998, compared with $254.9 billion in 1997. Capital inflows for foreign assets in the United States slowed more than capital outflows for U.S. assets abroad. U.S. assets abroad Capital outflows for U.S. assets abroad increased $305.4 billion in 1998, following a $478.5 billion increase in 1997. U.S. claims on foreigners reported by U.S. banks increased $31.0 billion in 1998, following a $147.4 billion increase in 1997, as U.S. banks and securities dealers supplied far fewer funds to foreigners in 1998 than during the record expansion in the previous year. Net U.S. purchases of foreign securities were $89.4 billion in 1998, compared with $88.0 billion in 1997. Net U.S. purchases of foreign stocks were $75.9 billion, following net purchases of $41.3 billion. Excluding the effects of the two exceptionally large acquisitions of U.S. companies by foreigners in the fourth quarter, there were small net U.S. sales of foreign stocks in 1998. Net U.S. purchases of foreign bonds were $13.4 billion, compared with $46.7 billion. Net capital outflows for U.S. direct investment abroad were $131.9 billion in 1998, compared with $121.8 billion in 1997. Net equity capital outflows increased strongly, net intercompany debt outflows increased slightly, and reinvested earnings decreased. U.S. official reserve assets increased $6.8 billion in 1998, compared with a $1.0 billion increase in 1997. Foreign assets in the United States Capital inflows for foreign assets in the United States increased $542.5 billion in 1998, following a $733.4 billion increase in 1997. U.S. liabilities to foreigners reported by U.S. banks increased $42.6 billion in 1998, following a record increase of $148.1 billion in 1997. In 1998, heavy overseas borrowing and the receipt of funds by U.S. banks in the second and third quarters were partly offset by large repayments and withdrawals in the first and fourth. Net foreign purchases of U.S. Treasury securities were $48.1 billion in 1998, compared with net purchases of $146.7 billion in 1997. In 1998, net purchases by Western Europe slowed sharply throughout the year, and highly leveraged international bond mutual funds were large net sellers in the second half. Net foreign purchases of U.S. securities other than U.S. Treasury securities were $217.3 billion in 1998, compared with $196.8 billion in 1997. Net foreign purchases of U.S. stocks were $46.2 billion, down from $66.0 billion. Net foreign purchases of U.S. bonds were $171.1 billion, up from $130.9 billion. Net capital inflows for foreign direct investment in the United States were $196.2 billion in 1998, compared with $93.4 billion in 1997. Net equity capital inflows for the year were dominated by the two exceptionally large acquisitions in the fourth quarter mentioned above. Net intercompany debt inflows were lower, as were reinvested earnings. Net U.S. currency shipments were $16.6 billion in 1998, compared with $24.8 billion in 1997. Foreign official assets in the United States decreased $22.1 billion in 1998, following an increase of $15.8 billion in 1997. In 1998, assets of both industrial and developing countries decreased. The statistical discrepancy -- errors and omissions in recorded transactions -- was a negative $3.6 billion in 1998, compared with a negative $99.7 billion in 1997. In 1998, the dollar depreciated 3 percent on a trade-weighted basis against the currencies of 10 industrial countries. * * * Release dates for 1999: Fourth quarter and year, 1998.....................March 11 (Thursday) First quarter 1999.................................June 17 (Thursday) Second quarter 1999............................September 14 (Tuesday) Third quarter 1999..............................December 14 (Tuesday) * * * BEA's major national, regional, international, and industry estimates; 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. The information available through STAT-USA is often more detailed and more timely than that available from other sources. To subscribe to STAT-USA's World Wide Web system, go to http://www.stat-usa.gov. Subscriptions for single-user unlimited access to STAT-USA's Internet information are $50.00 for 3 months or $150.00 for 1 year. For further information, call (202) 482-1986. Summary BEA estimates are available on recorded messages at the time of public release at the following telephone numbers: (202) 606-5362 U.S. international transactions 606-5306 Gross domestic product 606-5303 Personal income and outlays Most of BEA's estimates and analyses appear in the Survey of Current Business, BEA's monthly journal. The printed Survey of Current Business is available from the Superintendent of Documents, U.S. Government Printing Office, Washington D.C. 20402. First class mail: Annual subscription $88.00 domestic. Second class mail: Annual subscription $39.00 domestic, $48.75 foreign; single issue $14.00 domestic, $17.50 foreign. U.S. International Transactions March 11, 1999 [Millions of dollars, quarters seasonally adjusted] 1997 1998 Change: (Credits +, debits -) 1997 1998p Change: 1998 1997-1998 IV Ir IIr IIIr IVp III-IV 1 Exports of goods, services, and income ....................................... 1,179,380 1,174,055 -5,325 299,843 298,740 292,165 285,837 297,312 11,475 2 Goods, adjusted, excluding military 1/...................................... 679,325 671,055 -8,270 174,284 171,190 164,543 163,414 171,908 8,494 3 Services 2/................................................................. 258,268 260,385 2,117 65,175 65,004 65,697 63,943 65,741 1,798 4 Transfers under U.S. military agency sales contracts ..................... 18,269 16,765 -1,504 4,158 4,672 4,088 3,982 4,023 41 5 Travel.................................................................... 73,268 71,116 -2,152 18,204 17,935 18,109 16,930 18,142 1,212 6 Passenger fares........................................................... 20,895 20,137 -758 5,364 5,176 5,202 4,790 4,969 179 7 Other transportation...................................................... 26,911 25,787 -1,124 6,809 6,459 6,291 6,333 6,703 370 8 Royalties and license fees ............................................... 33,676 35,063 1,387 8,381 8,660 8,893 8,569 8,940 371 9 Other private services ................................................... 84,465 90,729 6,264 22,069 21,907 22,917 23,142 22,765 -377 10 U.S. Government miscellaneous services..................................... 784 788 4 190 195 197 197 199 2 11 Income receipts on U.S. assets abroad....................................... 241,787 242,615 828 60,384 62,546 61,925 58,480 59,663 1,183 12 Direct investment receipts................................................ 109,407 100,447 -8,960 25,470 26,426 25,883 22,808 25,329 2,521 13 Other private receipts.................................................... 128,845 138,600 9,755 34,069 35,302 35,105 34,783 33,410 -1,373 14 U.S. Government receipts.................................................. 3,535 3,568 33 845 818 937 889 924 35 15 Imports of goods, services, and income........................................ -1,294,904 -1,365,648 -70,744 -332,549 -336,330 -339,746 -341,499 -348,076 -6,577 16 Goods, adjusted, excluding military 1/...................................... -877,279 -919,040 -41,761 -224,123 -227,223 -229,321 -228,313 -234,183 -5,870 17 Services 2/................................................................. -170,520 -181,514 -10,994 -43,795 -44,343 -45,154 -45,541 -46,476 -935 18 Direct defense expenditures............................................... -11,488 -12,693 -1,205 -3,055 -3,145 -3,045 -3,153 -3,350 -197 19 Travel.................................................................... -51,220 -53,728 -2,508 -12,823 -13,282 -13,438 -13,324 -13,684 -360 20 Passenger fares........................................................... -18,235 -18,851 -616 -4,557 -4,638 -4,745 -4,688 -4,780 -92 21 Other transportation...................................................... -28,949 -30,285 -1,336 -7,397 -7,249 -7,429 -7,635 -7,971 -336 22 Royalties and license fees ............................................... -9,411 -10,654 -1,243 -2,578 -2,847 -2,756 -2,517 -2,535 -18 23 Other private services ................................................... -48,421 -52,470 -4,049 -12,684 -12,478 -13,035 -13,514 -13,443 71 24 U.S. Government miscellaneous services.................................... -2,796 -2,833 -37 -701 -704 -706 -710 -713 -3 25 Income payments on foreign assets in the United States...................... -247,105 -265,094 -17,989 -64,631 -64,764 -65,271 -67,645 -67,417 228 26 Direct investment payments................................................ -45,674 -45,796 -122 -11,574 -10,796 -10,667 -11,694 -12,642 -948 27 Other private payments.................................................... -113,959 -128,560 -14,601 -30,382 -31,285 -31,644 -33,174 -32,457 717 28 U.S. Government payments.................................................. -87,472 -90,738 -3,266 -22,675 -22,683 -22,960 -22,777 -22,318 459 29 Unilateral transfers, net..................................................... -39,691 -41,855 -2,164 -12,337 -9,428 -9,390 -10,032 -13,001 -2,969 30 U.S. Government grants ..................................................... -12,090 -12,492 -402 -5,213 -2,266 -2,063 -2,663 -5,500 -2,837 31 U.S. Government pensions and other transfers................................ -4,193 -4,304 -111 -1,069 -1,073 -1,073 -1,080 -1,078 2 32 Private remittances and other transfers .................................... -23,408 -25,059 -1,651 -6,055 -6,089 -6,254 -6,289 -6,423 -134 U.S. International Transactions (Continued) March 11, 1999 [Millions of dollars, quarters seasonally adjusted] 1997 1998 Change: (Credits +, debits -) 1997 1998p Change: 1998 1997-1998 IV Ir IIr IIIr IVp III-IV 33 U.S. assets abroad, net (increase/capital outflow (-)).......................... -478,502 -305,385 173,117 -123,441 -46,025 -110,164 -60,395 -88,798 -28,403 34 U.S. official reserve assets, net ............................................ -1,010 -6,784 -5,774 -4,524 -444 -1,945 -2,026 -2,369 -343 35 Gold........................................................................ .... .... .... .... .... .... .... .... .... 36 Special drawing rights...................................................... -350 -149 201 -150 -182 72 188 -227 -415 37 Reserve position in the International Monetary Fund......................... -3,575 -5,118 -1,543 -4,221 -85 -1,031 -2,078 -1,924 154 38 Foreign currencies.......................................................... 2,915 -1,517 -4,432 -153 -177 -986 -136 -218 -82 39 U.S. Government assets, other than official reserve assets, net............... 174 -836 -1,010 29 -388 -433 174 -189 -363 40 U.S. credits and other long-term assets..................................... -5,302 -4,761 541 -1,097 -1,189 -1,159 -1,285 -1,128 157 41 Repayments on U.S. credits and other long-term assets ...................... 5,504 4,211 -1,293 1,097 1,177 722 1,321 991 -330 42 U.S. foreign currency holdings and U.S. short-term assets, net.............. -28 -286 -258 29 -376 4 138 -52 -190 43 U.S. private assets, net...................................................... -477,666 -297,765 179,901 -118,946 -45,193 -107,786 -58,543 -86,240 -27,697 44 Direct investment........................................................... -121,843 -131,933 -10,090 -35,470 -34,698 -40,966 -23,283 -32,983 -9,700 45 Foreign securities.......................................................... -87,981 -89,352 -1,371 -8,030 -6,973 -27,878 17,056 -71,557 -88,613 46 U.S. claims on unaffiliated foreigners reported by U.S. nonbanking concerns.............................................. -120,403 -45,440 74,963 -47,907 -6,596 -14,327 -20,320 -4,197 16,123 47 U.S. claims reported by U.S. banks, not included elsewhere.................. -147,439 -31,040 116,399 -27,539 3,074 -24,615 -31,996 22,497 54,493 48 Foreign assets in the United States, net (increase/capital inflow(+))........... 733,441 542,482 -190,959 220,491 95,637 164,967 98,742 183,136 84,394 49 Foreign official assets in the United States, net............................. 15,817 -22,112 -37,929 -26,979 11,324 -10,274 -46,347 23,185 69,532 50 U.S. Government securities.................................................. -2,936 -3,614 -678 -24,492 13,946 -20,064 -30,905 33,409 64,314 51 U.S. Treasury securities ................................................. -7,270 -9,946 -2,676 -24,578 11,336 -20,318 -32,811 31,847 64,658 52 Other..................................................................... 4,334 6,332 1,998 86 2,610 254 1,906 1,562 -344 53 Other U.S. Government liabilities .......................................... -2,521 -2,506 15 -244 -1,059 -422 -264 -761 -497 54 U.S. liabilities reported by U.S. banks, not included elsewhere............. 21,928 -12,515 -34,443 -3,250 -607 9,380 -12,684 -8,604 4,080 55 Other foreign official assets .............................................. -654 -3,477 -2,823 1,007 -956 832 -2,494 -859 1,635 56 Other foreign assets in the United States, net................................ 717,624 564,594 -153,030 247,470 84,313 175,241 145,089 159,951 14,862 57 Direct investment........................................................... 93,449 196,229 102,780 28,453 26,039 19,249 30,341 120,600 90,259 58 U.S. Treasury securities.................................................... 146,710 48,060 -98,650 35,301 -1,701 26,916 -1,438 24,283 25,721 59 U.S. currency............................................................... 24,782 16,622 -8,160 9,900 746 2,349 7,277 6,250 -1,027 60 U.S. securities other than U.S. Treasury securities......................... 196,845 217,312 20,467 36,783 77,019 71,017 20,041 49,235 29,194 61 U.S. liabilities to unaffiliated foreigners reported by U.S. nonbanking concerns................................................... 107,779 43,803 -63,976 47,390 32,707 18,040 11,875 -18,819 -30,694 62 U.S. liabilities reported by U.S. banks, not included elsewhere............. 148,059 42,568 -105,491 89,643 -50,497 37,670 76,993 -21,598 -98,591 63 Allocations of special drawing rights........................................... .... .... .... .... .... .... .... .... .... 64 Statistical discrepancy (sum of above items with sign reversed)................. -99,724 -3,649 96,075 -52,007 -2,594 2,168 27,347 -30,573 -57,920 Of which seasonal adjustment discrepancy...................................... .... .... .... 3,528 6,769 2,024 -10,195 1,399 11,594 Memoranda: 65 Balance on goods (lines 2 and 16)............................................... -197,954 -247,985 -50,031 -49,839 -56,033 -64,778 -64,899 -62,275 2,624 66 Balance on services (lines 3 and 17)............................................ 87,748 78,871 -8,877 21,380 20,661 20,543 18,402 19,265 863 67 Balance on goods and services (lines 65 and 66)................................. -110,206 -169,114 -58,908 -28,459 -35,372 -44,235 -46,497 -43,010 3,487 68 Balance on investment income (lines 11 and 25).................................. -5,318 -22,479 -17,161 -4,247 -2,218 -3,346 -9,165 -7,754 1,411 69 Balance on goods, services, and income (lines 1 and 15 or lines 67 and 68) ...................................................................... -115,524 -191,593 -76,069 -32,706 -37,590 -47,581 -55,662 -50,764 4,898 70 Unilateral transfers, net (line 29)............................................. -39,691 -41,855 -2,164 -12,337 -9,428 -9,390 -10,032 -13,001 -2,969 71 Balance on current account (lines 1, 15, and 29 or lines 69 and 70) ............ -155,215 -233,448 -78,233 -45,043 -47,018 -56,971 -65,694 -63,765 1,929 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