News Release: U.S. International Transactions

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EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, THURSDAY, JUNE 18, 2015
BEA 15-26


William Zeile: (202) 606-9893 (Data)
Paul W. Farello: (202) 606-9561 (Revisions)
U.S. International Transactions: First Quarter 2015 and Annual Revisions


                                       Current Account

The U.S. current-account deficit—a net measure of transactions between the United States and the
rest of the world in goods, services, primary income (investment income and compensation), and
secondary income (current transfers)—increased to $113.3 billion (preliminary) in the first quarter
of 2015 from $103.1 billion (revised) in the fourth quarter of 2014. The deficit increased to 2.6
percent of current-dollar gross domestic product (GDP) from 2.3 percent in the fourth quarter.
The increase in the current-account deficit was largely accounted for by a decrease in the surplus
on primary income. In addition, the deficit on goods increased. These changes were partly offset
by an increase in the surplus on services and a decrease in the deficit on secondary income.

Goods and services

      The deficit on goods and services increased to $130.3 billion in the first quarter from
$128.3 billion in the fourth quarter.

      Goods

      The deficit on goods increased to $189.0 billion in the first quarter from $186.0 billion
in the fourth quarter.

      Goods exports decreased to $382.7 billion from $409.1 billion. Exports decreased in five
of the six major general-merchandise end-use categories and in nonmonetary gold. The largest
decreases were in industrial supplies and materials and in capital goods except automotive. The
decrease in industrial supplies and materials was primarily due to a decrease in petroleum and
products; it also reflected decreases in chemicals except medicinals and in metals and nonmetallic
products. The decrease in capital goods except automotive largely reflected a decrease in machinery
and equipment except consumer-type (ITA Table 2.1).

      Goods imports decreased to $571.7 billion from $595.1 billion. Imports decreased in three
of the six major general-merchandise end-use categories and in nonmonetary gold. The largest
decrease—which more than accounted for the total decrease in goods imports—was in industrial
supplies and materials, largely reflecting a decrease in petroleum and products. The largest
increase was in consumer goods except food and automotive, mostly due to increased imports of
nondurable goods (ITA Table 2.1).

      Services

      The surplus on services increased to $58.7 billion in the first quarter from $57.6 billion
in the fourth quarter.

      Services exports increased to $181.5 billion from $179.8 billion. Exports increased in
seven of the nine major services categories. The largest increases were in travel (for all purposes
including education)—mainly personal travel—and in other business services. The largest decrease
was in transport, mostly due to a decrease in air transport (ITA Table 3.1).

      Services imports increased to $122.8 billion from $122.2 billion. Imports increased in
five of the nine major services categories. The largest increase was in transport, primarily due
to an increase in air transport. (ITA Table 3.1).

Primary income

      The surplus on primary income decreased to $50.8 billion in the first quarter from $60.0
billion in the fourth quarter.

      Investment income

      Income receipts from foreigners on U.S. holdings of financial assets abroad decreased to
$194.8 billion from $204.8 billion (ITA Table 4.1). The decrease mostly
reflected a decrease in direct investment income on equity from foreign affiliates, which was
accounted for by decreases spread over several industries that were in part associated with the
continued appreciation of the U.S. dollar against most currencies. Decreases for affiliates of
U.S. oil and gas companies were particularly notable (ITA Table 4.2). Income on portfolio
investment also decreased (ITA Table 4.3).

      Income payments to foreigners on U.S. liabilities decreased to $141.6 billion from $142.4
billion (ITA Table 4.1). The decrease was more than accounted for by a decrease in payments on direct
investment equity, including decreases at foreign-owned U.S. affiliates in oil and gas extraction and
in finance and insurance (ITA Table 4.2). The decrease in direct investment income payments was
partly offset by an increase in portfolio investment income payments, mainly income payments on equity
and investment fund shares in nonfinancial institutions (ITA Table 4.3).

      Compensation of employees

      Receipts for compensation of U.S. residents paid by nonresidents were nearly unchanged at
$1.7 billion. Payments for compensation of foreign residents paid by U.S. residents were nearly
unchanged at $4.2 billion.

Secondary income (current transfers)

      The deficit on secondary income decreased to $33.8 billion in the first quarter from $34.8
billion in the fourth quarter. 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.

      Secondary income receipts increased to $33.3 billion from $31.9 billion, mostly due to an
increase in U.S. government transfers (ITA Table 5.1).

      Secondary income payments increased to $67.2 billion from $66.7 billion, reflecting an
increase in U.S. government grants to foreigners (ITA Table 5.1).

                                       Capital Account

      Capital-account receipts for the first quarter were zero; capital-account payments for the
first quarter are not available because source data are not yet available. Source data on first-
quarter capital-account payments will be incorporated with the release of the 2015 second-quarter
U.S. International Transactions on September 17, 2015. In the fourth quarter, capital-account
receipts were zero and capital-account payments were near zero.

                                      Financial Account

      Net U.S. borrowing measured by financial-account transactions was $47.9 billion in the
first quarter, up slightly from $47.8 billion in the fourth quarter. Net U.S. acquisition of
financial assets excluding financial derivatives increased more than net U.S. incurrence of
liabilities excluding financial derivatives. However, the change in net transactions in financial
derivatives other than reserves more than offset the combined changes in net acquisition of assets
and net incurrence of liabilities excluding financial derivatives, thereby slightly increasing
net U.S. borrowing measured in the financial account.

Net U.S. acquisition of financial assets excluding financial derivatives

      Net U.S. acquisition of financial assets excluding financial derivatives was $325.1 billion
in the first quarter, up from $41.7 billion in the fourth quarter.

      Direct investment assets (equity and debt instruments)

      Net acquisition of direct investment assets was $75.6 billion in the first quarter, down
from $112.5 billion in the fourth quarter. The decrease was largely due to a decrease in net
acquisition of equity other than reinvestment of earnings. A decrease in reinvestment of earnings
and an increase in net foreign repayment on debt instruments also contributed (ITA Table 6.1).

      Portfolio investment assets (equity and investment fund shares and debt securities)

      Net U.S. acquisition of portfolio investment assets abroad was $230.2 billion in the first
quarter, up from $81.1 billion in the fourth quarter. Some of these transactions were associated
with corporate inversions of U.S. corporations as U.S. investors received shares in the new foreign
entities in exchange for their shares in the former U.S. corporations. Transactions in foreign
debt securities shifted to net U.S. purchases of $62.0 billion from net U.S. sales of $50.3 billion,
a shift accounted for by shifts to net U.S. purchases in both long- and short-term securities.
In addition, net U.S. purchases of foreign equity and investment fund shares increased to $168.1
billion from $131.5 billion (ITA Table 7.1).

      Other investment assets (currency and deposits, loans, insurance technical reserves, and
trade credit and advances)

      Net U.S. acquisition of other investment assets abroad was $23.5 billion in the first quarter,
a shift from net sales of $149.5 billion in the fourth quarter. The shift to net acquisition
reflected a decrease in net U.S. withdrawals of deposits abroad and a shift to net U.S. provision
of loans to foreign residents (ITA Table 8.1).

      Reserve assets

      Transactions in U.S. reserve assets decreased holdings by $4.2 billion in the first quarter,
after decreasing holdings by $2.5 billion in the fourth quarter. The decreases in both quarters
reflected decreases in the U.S. reserve position in the International Monetary Fund.

Net U.S. incurrence of liabilities excluding financial derivatives

      Net U.S. incurrence of liabilities to foreigners excluding financial derivatives was $332.8
billion in the first quarter, up from $57.7 billion in the fourth quarter.

      Direct investment liabilities (equity and debt instruments)

      Net incurrence of direct investment liabilities to foreigners was $186.2 billion in the
first quarter, up from $52.4 billion in the fourth quarter. The increase was mostly accounted
for by an increase in net foreign-resident investment in equity other than reinvestment of earnings.
Corporate inversions accounted for much of the net incurrence of direct investment liabilities
(ITA Table 6.1).

      Portfolio investment liabilities (equity and investment fund shares and debt securities)

      Net U.S. incurrence of portfolio investment liabilities to foreigners was $100.8 billion
in the first quarter, down from $133.0 billion in the fourth quarter. The decrease was more than
accounted for by a decrease in net foreign purchases of U.S. debt securities—primarily long-term
securities—to $68.7 billion from $167.6 billion. Partly offsetting this decrease, net foreign
purchases of U.S. equity and investment fund shares were $32.2 billion, a shift from net foreign
sales of $34.7 billion (ITA Table 7.1).

      Other investment liabilities (currency and deposits, loans, insurance technical reserves,
trade credit and advances, and special drawing rights allocations)

      Net U.S. incurrence of other investment liabilities to foreigners was $45.8 billion in the
first quarter, a shift from net repayment of $127.6 billion in the fourth quarter. The shift
reflected shifts to net incurrence of liabilities in currency and deposits and in loans (ITA Table 8.1).

Financial derivatives other than reserves

      Net transactions in financial derivatives other than reserves were –$40.1 billion in the
first quarter, representing net borrowing. This was an increase from net borrowing of $31.7
billion in the fourth quarter. The first-quarter increase reflected the appreciation of the dollar
as over-the-counter and exchange-traded contracts written to hedge currency exposures resulted
in higher net cash receipts to U.S. residents (net borrowing). 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).

                                          Statistical discrepancy

      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 was $65.5 billion in the first quarter compared with $55.4 billion
in the fourth quarter.

                                          *          *          *

      In the first quarter, the U.S. dollar appreciated 8.2 percent on a trade-weighted quarterly
average basis against a group of 7 major currencies, after appreciating 6.2 percent on the same
basis in the fourth quarter. Exchange rate data are based on Federal Reserve Statistical Release H.10.

                                          *          *          *

                                                 Revisions

      The statistics of the U.S. international transactions accounts released today have been
revised for the first quarter of 1999 to the fourth quarter of 2014 to incorporate newly available
and revised source data, updated seasonal adjustments, a change in classification, and the introduction
of a supplemental table. Key changes introduced in this annual revision are summarized below.

Newly available and revised source data

    * Goods exports and imports are revised for 2012-2014 to reflect revised Census Bureau data
      on goods exports and imports on a Census basis and revised balance of payments adjustments.

    * Services exports and imports are revised for 2012-2014 to reflect newly available and revised
      data from BEA’s quarterly services surveys and the results of BEA’s 2013 Benchmark Survey
      of Insurance Transactions by U.S. Insurance Companies with Foreign Persons.

    * Private transfers in secondary income payments are revised for 2008-2014 to incorporate
      newly obtained source data from the Internal Revenue Service on cross-border charitable
      donations by U.S. private institutions.

    * Financial and primary income transactions related to direct investment are revised for
      2012-2014 to incorporate newly available and revised data from BEA’s quarterly and annual
      direct investment surveys.

    * Financial and primary income transactions related to portfolio investment are revised for
      2012-2014 to incorporate newly available and revised data from the U.S. Department of the
      Treasury from these Treasury International Capital (TIC) surveys:

        o Aggregate Holdings of Long-Term Securities by U.S. and Foreign Residents (SLT)

        o Foreign-residents’ Holdings of U.S. Securities, including Selected Money Market Instruments
          (SHL)

        o Report of U.S. Ownership of Foreign Securities, including Selected Money Market Instruments
          (SHCA)

    * Financial and primary income transactions related to other investment are revised for
      2012-2014 to incorporate revisions from several sources.

        o Revisions for 2012-2014 incorporate newly available and revised data from these TIC
          surveys:

            * Reports by Financial Institutions of Liabilities to, and Claims on, Foreign Residents
              by U.S. Residents (BC, BL-1, BL-2 BQ-1, and BQ-2), covering debt claims and liabilities,
              excluding long-term debt securities.

            * Reports of Liabilities to, and Claims on, Unaffiliated Foreign Residents by U.S.
              Resident Non-Financial Institutions (CQ-1 and CQ-2), covering debt claims and liabilities,
              excluding long-term debt securities.

        o Revisions for 2012-2013 also incorporate newly available and revised data on transactions
          of U.S. financial intermediaries with foreign financial intermediaries from BEA’s
          quarterly and annual direct investment surveys that are recorded in other investment.

        o Revisions for 2012-2014 incorporate newly available and revised U.S. government administrative
          data.

    * Financial transactions in financial derivatives are revised for 2013 and 2014 to incorporate
      newly available and revised data from the TIC survey Report of Holdings of, and Transactions
      in, Financial Derivatives Contracts with Foreign Residents (D).

Reclassifications

    * Exports of repair services related to the U.S. Foreign Military Sales program are reclassified
      within services from “government goods and services n.i.e.” to “maintenance and repair
      services n.i.e.” beginning with statistics for 1999.

Supplemental table

    * U.S. government capital subscriptions in, and contributions to, international financial
      institutions other than the International Monetary Fund are presented in a supplemental
      table as an interim step in a future reclassification of these capital subscriptions and
      contributions within “other investment” from loans to other equity, as recommended in the
      International Monetary Fund’s Balance of Payments and International Investment Position
      Manual, Sixth Edition (U.S. Government Capital Subscriptions in and Contributions to
      International Financial Institutions Excluding the International Monetary Fund).

A more detailed discussion of the change in source data for private transfers in secondary income
payments, the reclassification of exports of repair services related to the U.S. Foreign Military
Sales program, and the introduction of the supplemental table on U.S. government capital subscriptions
in, and contributions to, international financial institutions other than the International Monetary Fund
appears in “Preview of the 2015 Annual Revision of the International Economic Accounts: Changes
in Classification and New Source Data,” in the April issue of the SURVEY OF CURRENT BUSINESS.
Additional information on the revisions 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.

Revisions to fourth quarter 2014

The current-account deficit in the fourth quarter of 2014 is revised downward to $103.1 billion
from $113.5 billion. The goods deficit is revised upward to $186.0 billion from $185.2 billion.
The services surplus is revised downward to $57.6 billion from $58.2 billion. The primary income
surplus is revised upward to $60.0 billion from $50.6 billion. The secondary income deficit is
revised downward to $34.8 billion from $37.0 billion. Fourth-quarter net borrowing from financial-
account transactions is revised upward to $47.8 billion from $10.8 billion. Net U.S. acquisition
of financial assets excluding financial derivatives is revised downward to $41.7 billion from
$77.2 billion, and net U.S. incurrence of liabilities excluding financial derivatives is revised
upward to $57.7 billion from $56.2 billion.

                                          *          *          *

Release dates in 2015:

      Fourth Quarter and Year 2014....................................March 19, 2015 (Thursday)
      First Quarter 2015 and Annual Revisions..........................June 18, 2015 (Thursday)
      Second Quarter 2015.........................................September 17, 2015 (Thursday)
      Third Quarter 2015...........................................December 17, 2015 (Thursday)

                                          *          *          *

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NOTE: This news release is available on BEA's Web site  along with Highlights  related
to this release, the latest detailed statistics for U.S. international transactions, and a description
of the estimation methods used to compile them. The first-quarter statistics
in this release are preliminary and will be revised on September 17, 2015. All links in the text
of this release— including archived versions of this release—refer to the latest available statistics.