News Release: U.S. International Transactions

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EMBARGOED UNTIL RELEASE AT 8:30 A.M. EDT, WEDNESDAY, SEPTEMBER 17, 2014
BEA 14-45


Sarah P. Scott: (202) 606-9286 (Data)
U.S. International Transactions: Second Quarter 2014


                                       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)—decreased to $98.5 billion
(preliminary) in the second quarter of 2014 from $102.1 billion (revised) in the first
quarter. The deficit decreased to 2.3 percent of current-dollar gross domestic product (GDP)
from 2.4 percent in the first quarter. The decrease in the current-account deficit was largely
due to a decrease in the deficit on secondary income. In addition, the surpluses on services
and primary income increased. These changes were partly offset by an increase in the deficit
on goods.

Goods and services

      The deficit on goods and services increased to $130.3 billion in the second quarter from
$124.5 billion in the first quarter.

      Goods

      The deficit on goods increased to $189.2 billion in the second quarter from $182.3
billion in the first quarter.

      Goods exports increased to $408.8 billion from $399.5 billion. Exports increased in five
of the six major general-merchandise end-use categories. The largest increases were in
industrial supplies and materials; capital goods except automotive; and automotive vehicles,
parts, and engines. Most of the increase in industrial supplies and materials reflected an
increase in exports of petroleum and products, much of that in fuel oil. The increase in
capital goods except automotive reflected an increase in civilian aircraft exports. The
increase in automotive vehicles, parts, and engines was largely due to an increase in exports
of passenger cars. Nonmonetary gold decreased (ITA Table 2.1).

      Goods imports increased to $598.0 billion from $581.9 billion. Imports increased in five
of the six major general-merchandise end-use categories. The largest increases were in
automotive vehicles, parts, and engines; capital goods except automotive; and consumer goods
except food and automotive. The increase in automotive vehicles, parts, and engines was largely
due to an increase in passenger car imports. Much of the increase in capital goods except
automotive was due to increases in imports of other industrial machinery and computers. The
increase in consumer goods except food and automotive largely reflected an increase in imports
of durable goods, most of which was in cell phones (ITA Table 2.1).

      Services  The surplus on services increased to $58.9 billion in the second quarter from
$57.8 billion in the first quarter.

      Services exports increased to $177.4 billion from $174.7 billion. Eight of the nine major
services categories increased. The largest increases were in travel (for all purposes including
education)—much of that in “other personal travel”—and in transport, which includes freight and
port services and passenger fares (ITA Table 3.1).

      Services imports increased to $118.5 billion from $116.8 billion. Six of the nine major
services categories increased. The largest increase was in travel (for all purposes including
education) (ITA Table 3.1).

Primary income

      The surplus on primary income increased to $53.1 billion in the second quarter from $52.4
billion in the first quarter.

      Investment income  Income receipts from foreigners on U.S. holdings of financial assets
abroad increased to $200.0 billion from $198.5 billion. The increase was more than accounted
for by an increase in portfolio investment income receipts. Much of the increase was in
dividends on equity, which reflected increased U.S. holdings of foreign equity shares. The
increase in portfolio investment receipts was partly offset by a decrease in direct investment
income receipts, particularly receipts from foreign affiliates (of U.S. parents) in wholesale
trade and manufacturing (ITA Table 4.1; or direct investment income see ITA Table 4.2.

      Income payments to foreigners on U.S. liabilities increased to $144.6 billion from $144.0
billion. The increase reflected increases in direct investment income payments and other
investment income payments. The increase in direct investment income was mostly accounted for
by income payments of U.S. affiliates (to foreign parents) in manufacturing and petroleum-
related industries (ITA Table 4.1; for direct investment income see ITA Table 4.2).

      Compensation of employees

      Receipts for compensation of U.S. residents paid by nonresidents remained at $1.7 billion
in the second quarter. Payments for compensation of foreign residents paid by U.S. residents
increased to $4.0 billion from $3.8 billion.

Secondary income (current transfers)

      The deficit on secondary income decreased to $21.4 billion in the second quarter from
$30.0 billion in the first 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 $39.9 billion from $31.7 billion, reflecting an
increase in fines and penalties paid to the U.S. government (a component of U.S. government
transfers) (ITA Table 5.1).

      Secondary income payments decreased to $61.3 billion from $61.7 billion, reflecting a
decrease in U.S. government grants (ITA Table 5.1).


                                       Capital Account

      Capital-account transactions are not available for the second quarter because source data
are not yet available. Second-quarter capital-account transactions will be published with the
release of the third-quarter U.S. International Transactions on December 17, 2014.  In the
first quarter, the capital-account deficit was $0.04 billion.

                                      Financial Account

      Net U.S. borrowing measured by financial-account transactions was $17.6 billion in the
second quarter, down from $91.2 billion in the first quarter. Both net U.S. acquisition of
financial assets excluding financial derivatives and net U.S. incurrence of liabilities
excluding financial derivatives were higher than in the first quarter, but the acquisition of
financial assets excluding financial derivatives increased more. A shift to a negative value in
net transactions of financial derivatives other than reserves moderated the drop in net
borrowing.

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

      Net U.S. acquisition of financial assets excluding financial derivatives was $232.7
billion in the second quarter, up from $143.3 billion in the first quarter.

      Direct investment assets (equity and debt instruments)

      Net acquisition of direct investment assets was $89.2 billion in the second quarter, up
from $31.6 billion in the first quarter. The increase reflected higher net equity investment
than in the first quarter. Transactions in (intercompany) debt instruments shifted to net
acquisition (ITA Table 6.1).


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

      Net U.S. acquisition of portfolio investment assets abroad (acquisitions in excess of
sales) was $184.9 billion in the second quarter, up from $100.7 billion in the first quarter.
Net U.S. purchases of foreign equity and investment fund shares increased to $85.6 billion from
$81.3 billion. Net U.S. purchases of foreign debt securities increased to $99.3 billion from
$19.4 billion reflecting, in part, increases in net purchases of commercial paper and corporate
bonds and notes (ITA Table 7.1).

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

      Net U.S. sales of other investment assets abroad (sales in excess of acquisitions) were
$42.2 billion in the second quarter, a shift from net acquisitions of $12.0 billion in the
first quarter. The shift to net sales reflected a shift to net foreign repaymentof loans
(foreign repayment exceeding U.S.-resident provision of loans) (ITA Table 8.1).

      Reserve assets

      Transactions in U.S. reserve assets increased holdings by $0.8 billion in the second
quarter after decreasing holdings by $1.0 billion in the first quarter. The shift reflected an
increase in the U.S. reserve position in the International Monetary Fund as the Fund drew on
U.S. credit through the New Arrangements to Borrow. Drawing on U.S. credit exceeded net
repayments of dollars by countries that had borrowed from the IMF in previous quarters,
increasing the U.S. reserve position.

Net U.S. incurrence of liabilities excluding financial derivatives

      Net U.S. incurrence of liabilities to foreigners excluding financial derivatives was
$247.4 billion in the second quarter, up from $239.8 billion in the first quarter.

      Direct investment liabilities (equity and debt instruments) Net incurrence of direct
investment liabilities to foreigners was $72.0 billion in the second quarter, a shift from net
repayment of liabilities of $121.7 billion in the first quarter. The shift to net incurrence
primarily reflected a shift to net equity investment other than reinvestment of earnings from
first-quarter disinvestment. In addition, transactions in (intercompany) debt instruments
shifted to net incurrence from net repayment (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 $74.8 billion
in the second quarter, down from $237.9 billion in the first quarter. Net foreign purchases of
U.S. equity and investment fund shares were $0.7 billion, down from $93.6 billion. Net foreign
purchases of U.S. debt securities were $74.1 billion, down from $144.2 billion, reflecting a
shift to net foreign sales of U.S. Treasury bills and certificates and lower net foreign
purchases of U.S. Treasury bonds and notes (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 $100.7 billion in the second quarter, down from $123.6
billion in the first quarter. The second-quarter decrease resulted from combined decreases in
transactions for loans, currency, and trade credit and advances that more than offset a shift
to net increases in foreign-resident deposits (ITA Table 8.1).

Financial derivatives other than reserves

      Net borrowing in financial derivatives other than reserves was $2.8 billion in the second
quarter, a shift from net lending of $5.3 billion in the first quarter. 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 $80.9 billion in the second quarter compared with $11.0 billion
in the first quarter.

                                   *          *          *

      In the second quarter, the U.S. dollar depreciated 0.7 percent on a trade-weighted
quarterly average basis against a group of 7 major currencies, after appreciating 1.5 percent
in the first quarter. Exchange rate data are based on Federal Reserve Statistical Release H.10.

                                   *          *          *

                               Revisions to first quarter 2014

      The first-quarter 2014 international transactions are revised from previously published
statistics. The current-account deficit in the first quarter of 2014 is revised downward to
$102.1 billion from $111.2 billion. The goods deficit of $182.3 billion is nearly unrevised.
The services surplus is revised upward to $57.8 billion from $55.5 billion. The primary income
surplus is revised upward to $52.4 billion from $46.7 billion. The secondary income deficit is
revised downward to $30.0 billion from $31.0 billion. First-quarter net borrowing from
financial-account transactions is revised upward to $91.2 billion from $77.5 billion. Net U.S.
acquisition of financial assets excluding financial derivatives is revised downward to $143.3
billion from $144.9 billion, and net U.S. incurrence of liabilities excluding financial
derivatives is revised upward to $239.8 billion from $229.8 billion.


                                   *          *          *

      Release dates in 2014:

      Fourth Quarter and Year 2013...................................March 19, 2014 (Wednesday)
      First Quarter 2014 and Annual Revisions.........................June 18, 2014 (Wednesday)
      Second Quarter 2014........................................September 17, 2014 (Wednesday)
      Third Quarter 2014..........................................December 17, 2014 (Wednesday)

                                   *          *          *

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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 second-quarter
statistics in this release are preliminary and will be revised on December 17, 2014. All links
in the text of this release—including archived versions of this release—refer to the latest
available statistics.