Survey of Current Business
July 2018
Volume 98, Number 7

U.S. International Transactions

First Quarter 2018

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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, and secondary income—increased to $124.1 billion (preliminary) in the first quarter of 2018 from $116.1 billion (revised) in the fourth quarter of 2017 (chart 1 and table A). The deficit was 2.5 percent of current-dollar gross domestic product (GDP) in the first quarter, up from 2.4 percent in the fourth quarter.

The $8.0 billion increase in the current-account deficit reflected an $8.1 billion increase in the deficit on goods and relatively small, nearly offsetting changes in the balances on services, primary income, and secondary income.

Net U.S. borrowing measured by financial-account transactions was $180.6 billion in the first quarter, an increase from net borrowing of $31.3 billion in the fourth quarter.

Table A. U.S. International Transactions
[Millions of dollars, seasonally adjusted]
  2017 2018 Change 2017:IV
to 2018:I
II r III r IV r I p
Current account          
Exports of goods and services and income receipts (credits) 839,280 868,997 890,393 913,358 22,965
Exports of goods and services 579,743 589,107 605,916 619,243 13,327
Goods 382,492 387,814 401,939 411,416 9,477
Services 197,252 201,293 203,977 207,828 3,851
Primary income receipts 223,979 237,632 248,940 258,786 9,846
Secondary income (current transfer) receipts 35,557 42,258 35,537 35,329 −208
Imports of goods and services and income payments (debits) 961,117 972,445 1,006,541 1,037,464 30,923
Imports of goods and services 716,443 721,899 753,742 774,870 21,128
Goods 582,440 584,637 614,317 631,934 17,617
Services 134,004 137,261 139,426 142,936 3,510
Primary income payments 175,444 179,410 186,569 196,775 10,206
Secondary income (current transfer) payments 69,229 71,136 66,229 65,819 −410
Capital account          
Capital transfer receipts and other credits 0 24,788 0 0 0
Capital transfer payments and other debits 0 1 40 n.a. n.a.
Financial account          
Net U.S. acquisition of financial assets excluding financial derivatives (net increase in assets / financial outflow (+)) 315,922 373,591 127,135 254,728 127,593
Direct investment assets 49,976 102,936 91,256 −119,662 −210,918
Portfolio investment assets 180,700 175,910 88,301 365,467 277,166
Other investment assets 85,095 94,804 −50,883 8,930 59,813
Reserve assets 150 −61 −1,539 −7 1,532
Net U.S. incurrence of liabilities excluding financial derivatives (net increase in liabilities / financial inflow (+)) 445,338 504,082 159,164 464,054 304,890
Direct investment liabilities 97,118 107,107 38,250 97,344 59,094
Portfolio investment liabilities 263,170 294,275 81,626 292,084 210,458
Other investment liabilities 85,050 102,701 39,288 74,626 35,338
Financial derivatives other than reserves, net transactions 9,306 18,600 777 28,678 27,901
Statistical discrepancy          
Statistical discrepancy1 1,727 −33,231 84,936 −56,544 −141,480
Balances          
Balance on current account −121,837 −103,447 −116,148 −124,105 −7,957
Balance on goods and services −136,700 −132,791 −147,826 −155,626 −7,800
Balance on goods −199,948 −196,823 −212,378 −220,518 −8,140
Balance on services 63,248 64,032 64,551 64,892 341
Balance on primary income 48,535 58,222 62,371 62,012 −359
Balance on secondary income −33,672 −28,878 −30,692 −30,491 201
Balance on capital account 0 24,787 −40 0 40
Net lending (+) or net borrowing (−) from current- and capital-account transactions 2 −121,837 −78,660 −116,188 −124,105 −7,917
Net lending (+) or net borrowing (−) from financial-account transactions 3 −120,111 −111,891 −31,252 −180,649 −149,397
p
Preliminary
r
Revised
n.a.
Not available

Note. The statistics are presented in table 1.2 on BEA’s website.

Current-account highlights

  • The deficit on goods increased $8.1 billion in the first quarter to $220.5 billion.
  • The surplus on primary income decreased $0.4 billion to $62.0 billion.
  • The surplus on services increased $0.3 billion to $64.9 billion.
  • The deficit on secondary income decreased $0.2 billion to $30.5 billion.

Financial-account highlights

  • Net U.S. acquisition of financial assets excluding financial derivatives increased $127.6 billion to $254.7 billion (chart 2).
  • Net U.S. incurrence of liabilities excluding financial derivatives increased $304.9 billion to $464.1 billion.
  • Transactions in financial derivatives other than reserves reflected first-quarter net lending of $28.7 billion, a $27.9 billion increase from the fourth quarter.

Statistical discrepancy

The statistical discrepancy was −$56.5 billion in the first quarter following a statistical discrepancy of $84.9 billion in the fourth quarter.

Exports of goods and services and income receipts increased $23.0 billion, or 2.6 percent, in the first quarter to $913.4 billion (charts 3 and 4 and table B).

  • Primary income receipts increased $9.8 billion, or 4.0 percent, to $258.8 billion, reflecting increases in direct investment income, portfolio investment income, and other investment income. For more information on direct investment income, see ”Effects of the 2017 Tax Cuts and Jobs Act on Components of Direct Investment.“
  • Goods exports increased $9.5 billion, or 2.4 percent, to $411.4 billion, mostly reflecting increases in automotive vehicles, parts, and engines, in consumer goods, primarily jewelry and collectibles, and in nonmonetary gold.
Table B. Exports of Goods and Services and Income Receipts
[Millions of dollars, seasonally adjusted]
  2017 2018 Change 2017:IV
to 2018:I
II r III r IV r I p
Exports of goods and services and income receipts 839,280 868,997 890,393 913,358 22,965
Exports of goods 382,492 387,814 401,939 411,416 9,477
General merchandise 376,756 382,828 397,143 404,919 7,776
Foods, feeds, and beverages 33,752 34,209 32,099 33,338 1,239
Industrial supplies and materials 110,346 111,819 124,271 125,403 1,132
Energy products 38,318 38,716 46,234 46,945 711
Of which: Petroleum and products 32,441 33,122 40,384 40,071 −313
Nonenergy products 72,028 73,103 78,037 78,458 421
Capital goods except automotive 130,882 134,985 137,341 138,209 868
Automotive vehicles, parts, and engines 39,047 39,078 39,761 42,207 2,446
Consumer goods except food and automotive 49,198 48,879 49,807 51,598 1,791
Other general merchandise 13,531 13,858 13,866 14,163 297
Net exports of goods under merchanting 47 47 56 47 −9
Nonmonetary gold 5,689 4,940 4,740 6,450 1,710
           
Exports of services1 197,252 201,293 203,977 207,828 3,851
Maintenance and repair services n.i.e. 6,574 6,213 6,740 7,171 431
Transport 21,756 22,483 22,696 23,116 420
Travel (for all purposes including education) 52,391 52,980 53,429 53,800 371
Business 9,931 9,906 9,956 9,918 −38
Personal 42,460 43,074 43,473 43,882 409
Insurance services 4,392 4,708 4,755 4,862 107
Financial services 26,854 27,927 28,751 29,443 692
Charges for the use of intellectual property n.i.e. 32,214 32,273 32,762 33,359 597
Telecommunications, computer, and information services 10,341 10,735 10,902 11,184 282
Other business services 37,886 38,936 39,326 40,144 818
Government goods and services n.i.e. 4,844 5,037 4,617 4,748 131
           
Primary income receipts 223,979 237,632 248,940 258,786 9,846
Investment income 222,406 236,058 247,367 257,193 9,826
Direct investment income 120,486 127,799 135,929 137,995 2,066
Portfolio investment income 86,627 91,154 93,614 98,978 5,364
Income on equity and investment fund shares 57,597 61,241 62,535 65,997 3,462
Interest on debt securities 29,031 29,913 31,078 32,981 1,903
Other investment income 15,158 16,996 17,741 20,051 2,310
Reserve asset income 135 109 82 169 87
Compensation of employees 1,573 1,573 1,573 1,593 20
Secondary income (current transfer) receipts2 35,557 42,258 35,537 35,329 −208
p
Preliminary
r
Revised
n.i.e.
Not included elsewhere

Note. The statistics are presented in table 1.2, table 2.1, table 3.1, table 4.1, and table 5.1 on BEA’s website.

Imports of goods and services and income payments increased $30.9 billion, or 3.1 percent, in the first quarter to $1,037.5 billion (charts 3 and 5 and table C).

  • Goods imports increased $17.6 billion, or 2.9 percent, to $631.9 billion, mostly reflecting increases in industrial supplies and materials, primarily petroleum and products, and in consumer goods, primarily medicinal, dental, and pharmaceutical products.
  • Primary income payments increased $10.2 billion, or 5.5 percent, to $196.8 billion, reflecting increases in direct investment income, portfolio investment income, and other investment income.
Table C. Imports of Goods and Services and Income Payments
[Millions of dollars, seasonally adjusted]
  2017 2018 Change 2017:IV
to 2018:I
II r III r IV r I p
Imports of goods and services and income payments 961,117 972,445 1,006,541 1,037,464 30,923
Imports of goods 582,440 584,637 614,317 631,934 17,617
General merchandise 579,845 581,849 610,844 629,125 18,281
Foods, feeds, and beverages 34,470 35,069 35,551 37,014 1,463
Industrial supplies and materials 125,834 123,450 133,707 142,001 8,294
Energy products 52,427 49,448 55,863 61,760 5,897
Of which: Petroleum and products 48,025 45,444 51,926 58,352 6,426
Nonenergy products 73,407 74,002 77,844 80,241 2,397
Capital goods except automotive 157,945 163,218 169,186 170,589 1,403
Automotive vehicles, parts, and engines 89,551 89,455 90,589 92,885 2,296
Consumer goods except food and automotive 149,365 148,197 157,597 164,007 6,410
Other general merchandise 22,679 22,460 24,214 22,630 −1,584
Nonmonetary gold 2,594 2,789 3,473 2,809 −664
           
Imports of services1 134,004 137,261 139,426 142,936 3,510
Maintenance and repair services n.i.e. 2,136 2,004 2,059 2,016 −43
Transport 25,319 25,352 25,872 26,284 412
Travel (for all purposes including education) 33,525 33,813 34,906 35,615 709
Business 4,220 4,147 4,140 4,189 49
Personal 29,306 29,666 30,766 31,426 660
Insurance services 12,820 13,094 12,434 12,095 −339
Financial services 7,076 7,478 7,628 7,965 337
Charges for the use of intellectual property n.i.e. 12,298 13,136 13,808 15,318 1,510
Telecommunications, computer, and information services 9,805 10,068 10,280 10,465 185
Other business services 25,549 26,774 26,929 27,607 678
Government goods and services n.i.e. 5,477 5,541 5,510 5,572 62
           
Primary income payments 175,444 179,410 186,569 196,775 10,206
Investment income 170,545 174,430 181,601 191,803 10,202
Direct investment income 52,298 51,342 55,978 58,914 2,936
Portfolio investment income 106,870 109,845 111,305 115,353 4,048
Income on equity and investment fund shares 36,032 36,670 36,625 38,841 2,216
Interest on debt securities 70,838 73,175 74,680 76,512 1,832
Other investment income 11,377 13,243 14,317 17,536 3,219
Compensation of employees 4,899 4,980 4,969 4,972 3
Secondary income (current transfer) payments2 69,229 71,136 66,229 65,819 −410
p
Preliminary
r
Revised
n.i.e.
Not included elsewhere

Note. The statistics are presented in table 1.2, table 2.1, table 3.1, table 4.1, and table 5.1 on BEA’s website.

Acquisition of financial assets

  • Net U.S. acquisition of portfolio investment assets increased $277.2 billion to $365.5 billion, reflecting net U.S. purchases of foreign equity and investment fund shares following net sales in the fourth quarter (chart 6 and table D).
  • Net U.S. acquisition of other investment assets was $8.9 billion, following net liquidation of $50.9 billion in the fourth quarter. This change mostly reflected net U.S. provision of loans to foreigners, following net foreign repayment in the fourth quarter.
  • Net U.S. withdrawal of direct investment assets was $119.7 billion, following net U.S. acquisition of $91.3 billion in the fourth quarter. This change partly offset the changes in portfolio investment assets and other investment assets. The net withdrawal of direct investment assets reflected U.S. parent repatriation of previously reinvested earnings. For more information, see ”Effects of the 2017 Tax Cuts and Jobs Act on Components of Direct Investment.“
Table D. Net U.S. Acquisition of Financial Assets and Net U.S. Incurrence of Liabilities
[Millions of dollars, seasonally adjusted]
  2017 2018 Change 2017:IV
to 2018:I
II r III r IV r I p
Net U.S. acquisition of financial assets excluding financial derivatives (net increase in assets / financial outflow (+)) 315,922 373,591 127,135 254,728 127,593
Direct investment assets 49,976 102,936 91,256 −119,662 −210,918
Equity 92,569 69,079 101,537 −170,162 −271,699
Equity other than reinvestment of earnings 13,047 3,850 −472 4,859 5,331
Reinvestment of earnings 79,521 65,229 102,009 −175,022 −277,031
Debt instruments −42,593 33,857 −10,281 50,500 60,781
Portfolio investment assets 180,700 175,910 88,301 365,467 277,166
Equity and investment fund shares 110,542 63,399 −39,233 242,518 281,751
Debt securities 70,158 112,512 127,534 122,949 −4,585
Short-term securities 38,799 74,149 40,467 21,945 −18,522
Long-term corporate securities 21,717 26,957 62,231 72,160 9,929
Other long-term securities 9,642 11,406 24,836 28,844 4,008
Other investment assets 85,095 94,804 −50,883 8,930 59,813
Currency and deposits 25,883 78,488 4,850 −22,575 −27,425
Loans 59,564 15,099 −55,760 33,191 88,951
Trade credit and advances −352 1,217 26 −1,686 −1,712
Reserve assets 150 −61 −1,539 −7 1,532
Monetary gold 0 0 0 0 0
Special drawing rights 15 26 26 33 7
Reserve position in the International Monetary Fund 82 −98 −1,535 −73 1,462
Other reserve assets 54 11 −29 34 63
           
Net U.S. incurrence of liabilities excluding financial derivatives (net increase in liabilities / financial inflow (+)) 445,338 504,082 159,164 464,054 304,890
Direct investment liabilities 97,118 107,107 38,250 97,344 59,094
Equity 77,022 72,927 64,320 62,395 −1,925
Equity other than reinvestment of earnings 52,806 42,799 36,488 26,165 −10,323
Reinvestment of earnings 24,215 30,127 27,832 36,229 8,397
Debt instruments 20,097 34,180 −26,070 34,949 61,019
Portfolio investment liabilities 263,170 294,275 81,626 292,084 210,458
Equity and investment fund shares 21,024 80,561 −3,377 150,345 153,722
Debt securities 242,147 213,713 85,003 141,739 56,736
Short term 15,264 −20,035 25,215 31,354 6,139
Treasury bills and certificates 3,820 9,132 20,270 13,560 −6,710
Federally sponsored agency securities −4,592 −1,927 2,160 2,214 54
Other short-term securities 16,036 −27,240 2,785 15,580 12,795
Long term 226,882 233,748 59,788 110,385 50,597
Treasury bonds and notes 51,155 150,035 546 76,491 75,945
Federally sponsored agency securities 21,605 14,153 8,523 28,912 20,389
Corporate bonds and notes 148,860 70,281 51,058 4,731 −46,327
Other 5,262 −721 −339 251 590
Other investment liabilities 85,050 102,701 39,288 74,626 35,338
Currency (short term) 15,830 15,850 17,262 16,970 −292
Deposits 94,915 −31,642 44,161 −18,689 −62,850
Loans −25,350 112,549 −23,436 67,255 90,691
Trade credit and advances −346 5,943 1,302 9,090 7,788
Special drawing rights allocations 0 0 0 0 0
p
Preliminary
r
Revised

Note. The statistics are presented in table 1.2, table 6.1, table 7.1, and table 8.1 on BEA’s website.

Incurrence of liabilities

  • Net U.S. incurrence of portfolio investment liabilities increased $210.5 billion to $292.1 billion, mostly reflecting net foreign purchases of U.S. equity and investment fund shares following net foreign sales in the fourth quarter.
  • Net U.S. incurrence of direct investment liabilities increased $59.1 billion to $97.3 billion, mostly reflecting net U.S. incurrence of debt liabilities following net repayment in the fourth quarter.
  • Net U.S. incurrence of other investment liabilities increased $35.3 billion to $74.6 billion, reflecting partly offsetting changes in transactions in loan and deposit liabilities. Net U.S. incurrence of loan liabilities in the first quarter followed net repayment in the fourth quarter. Net foreign withdrawal of deposits in the United States followed net incurrence in the fourth quarter.

In the international transactions accounts, income on equity, or earnings, of foreign affiliates of U.S. multinational enterprises consist of repatriated earnings to the parent company in the United States in the form of dividends and reinvested earnings in foreign affiliates. When dividends exceed earnings in a given period, there is a net withdrawal of equity assets. In the first quarter of 2018, direct investment earnings were $130.6 billion, reflecting dividends and withdrawals of $305.6 billion and reinvested earnings of −$175.0 billion (chart 7).

The large magnitudes for dividends and withdrawals and the negative reinvested earnings reflect the repatriation of accumulated earnings by foreign affiliates of U.S. multinational enterprises to their parent companies in the United States in response to the 2017 Tax Cuts and Jobs Act (TCJA). The TCJA requires U.S. parent companies to pay a one-time tax on their accumulated earnings held abroad but generally eliminates taxes on repatriated earnings. The negative reinvested earnings of −$175.0 billion reflect the fact that dividends exceeded earnings in the first quarter and U.S parent companies withdrew accumulated prior earnings from their foreign affiliates. The negative reinvested earnings are also reflected in the net acquisition of direct investment assets in the financial account, which was −$119.7 billion in the first quarter of 2018 (table D).

For more information, see “How does the 2017 Tax Cuts and Jobs Act affect BEA’s business income statistics?” and “How are the international transactions accounts affected by an increase in direct investment dividend receipts?”

The U.S. international transactions statistics for the first quarter of 2010 through the fourth quarter of 2017 have been updated to incorporate newly available and revised source data, updated seasonal factors, and improved estimation methodologies (table E).

Table E. Updates to the Fourth Quarter 2017 International Transactions Aggregates
[Millions of dollars, seasonally adjusted]
  Preliminary estimates Revised estimates
Balance on goods −214,261 −212,378
Balance on services 60,375 64,551
Balance on primary income 57,195 62,371
Balance on secondary income (current transfers) −31,467 −30,692
Balance on current account −128,158 −116,148
Net U.S. acquisition of financial assets 177,861 127,135
Net U.S. incurrence of liabilities 208,437 159,164
Net lending or borrowing from financial-account transactions −29,799 −31,252

 

For more information, see Barbara Berman and Erin (Yiran) Xin, “Annual Update of the U.S. International Transactions Accounts” in this issue of the Survey of Current Business.