U.S. International Transactions

Third Quarter 2018

By Erin (Yiran) Xin  |  Volume 99, Number 2  |  February 13, 2019

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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 $124.8 billion (preliminary) in the third quarter of 2018 from $101.2 billion (revised) in the second quarter of 2018 (chart 1 and table A). The deficit was 2.4 percent of current-dollar gross domestic product (GDP) in the third quarter, up from 2.0 percent in the second quarter.

The $23.6 billion increase in the current-account deficit mainly reflected a $24.0 billion increase in the deficit on goods.

Net U.S. borrowing measured by financial-account transactions was $31.3 billion in the third quarter, a decrease from net borrowing of $153.7 billion in the second quarter.

Chart 1. U.S. Current-Account Balance and Its Components. Line Chart.

[Click chart to expand]

Table A. U.S. International Transactions
[Millions of dollars, seasonally adjusted]
  2017 2018 Change
2018:II to 2018:III
IV I II r III p
Current account          
Exports of goods and services and income receipts (credits) 890,393 905,298 936,517 930,276 −6,241
Exports of goods and services 605,916 617,437 635,248 629,398 −5,850
Goods 401,939 411,442 429,431 421,762 −7,669
Services 203,977 205,994 205,817 207,635 1,818
Primary income receipts 248,940 256,029 266,274 264,523 −1,751
Secondary income (current transfer) receipts 35,537 31,833 34,995 36,355 1,360
Imports of goods and services and income payments (debits) 1,006,541 1,027,008 1,037,741 1,055,093 17,352
Imports of goods and services 753,742 771,426 769,854 788,054 18,200
Goods 614,317 632,244 632,489 648,775 16,286
Services 139,426 139,182 137,365 139,279 1,914
Primary income payments 186,569 194,854 203,926 205,098 1,172
Secondary income (current transfer) payments 66,229 60,728 63,961 61,942 −2,019
Capital account          
Capital transfer receipts and other credits 0 0 0 562 562
Capital transfer payments and other debits 40 2 5 n.a. n.a.
Financial account          
Net U.S. acquisition of financial assets excluding financial derivatives (net increase in assets / financial outflow (+)) 127,135 251,126 −199,943 132,689 332,632
Direct investment assets 91,256 −139,326 −68,060 76,846 144,906
Portfolio investment assets 88,301 304,094 −14,272 72,598 86,870
Other investment assets −50,883 86,365 −120,679 −16,577 104,102
Reserve assets −1,539 −7 3,068 −177 −3,245
Net U.S. incurrence of liabilities excluding financial derivatives (net increase in liabilities / financial inflow (+)) 159,164 441,080 −63,262 151,723 214,985
Direct investment liabilities 38,250 57,949 16,499 122,336 105,837
Portfolio investment liabilities 81,626 301,503 20,596 12,469 −8,127
Other investment liabilities 39,288 81,628 −100,358 16,918 117,276
Financial derivatives other than reserves, net transactions 777 29,024 −16,969 −12,255 4,714
Statistical discrepancy          
Statistical discrepancy1 84,936 −39,218 −52,421 92,966 145,387
Balances          
Balance on current account −116,148 −121,710 −101,224 −124,817 −23,593
Balance on goods and services −147,826 −153,989 −134,606 −158,656 −24,050
Balance on goods −212,378 −220,802 −203,058 −227,012 −23,954
Balance on services 64,551 66,812 68,452 68,356 −96
Balance on primary income 62,371 61,175 62,348 59,425 −2,923
Balance on secondary income −30,692 −28,896 −28,966 −25,586 3,380
Balance on capital account −40 −2 −5 562 567
Net lending (+) or net borrowing (–) from current- and capital-account transactions 2 −116,188 −121,712 −101,229 −124,254 −23,025
Net lending (+) or net borrowing (–) from financial-account transactions 3 −31,252 −160,930 −153,650 −31,289 122,361
p
Preliminary
r
Revised
n.a.
Not available

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

  1. The statistical discrepancy is the difference between net acquisition of financial 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.
  2. Sum of current- and capital-account balances.
  3. Sum of net U.S. acquisition of financial assets and net transactions in financial derivatives less net U.S. incurrence of liabilities

Current-account highlights

  • The deficit on goods increased $24.0 billion in the third quarter to $227.0 billion.
  • The surplus on services decreased $0.1 billion to $68.4 billion.
  • The surplus on primary income decreased $2.9 billion to $59.4 billion.
  • The deficit on secondary income decreased $3.4 billion to $25.6 billion.

Capital-account highlights

Capital transfer receipts were $0.6 billion in the third quarter. The transactions reflected receipts from foreign insurance companies for losses resulting from Hurricane Florence. For information on transactions associated with hurricanes and other disasters, see “How do losses recovered from foreign insurance companies following natural or man-made disasters affect foreign transactions, the current account balance, and net lending or net borrowing?”

Financial-account highlights

  • Net U.S. acquisition of financial assets excluding financial derivatives was $132.7 billion in the third quarter, following net U.S. liquidation of $199.9 billion in the second quarter (chart 2).
  • Net U.S. incurrence of liabilities excluding financial derivatives was $151.7 billion in the third quarter, following net U.S. repayment of $63.3 billion in the second quarter.
  • Transactions in financial derivatives other than reserves reflected third-quarter net borrowing of $12.3 billion, a $4.7 billion decrease in net borrowing from the second quarter.
Chart 2. Acquisition of Financial Assets and Incurrence of Liabilities Excluding Financial Derivatives. Line Chart.

[Click chart to expand]

Statistical discrepancy

The statistical discrepancy was $93.0 billion in the third quarter following a statistical discrepancy of −$52.4 billion in the second quarter.

Exports of goods and services and income receipts decreased $6.2 billion, or 0.7 percent, in the third quarter to $930.3 billion (charts 3 and 4 and table B).

  • Goods exports decreased $7.7 billion, or 1.8 percent, to $421.8 billion, mostly reflecting a decrease in foods, feeds, and beverages, primarily soybeans.
  • Primary income receipts decreased $1.8 billion, or 0.7 percent, to $264.5 billion, primarily reflecting a decrease in direct investment income. An increase in portfolio investment income partly offset the decrease. For more information on direct investment income, see “Effects of the 2017 Tax Cuts and Jobs Act on Components of the International Transactions Accounts.”
  • Services exports increased $1.8 billion, or 0.9 percent, to $207.6 billion, mostly reflecting increases in charges for the use of intellectual property, in financial services, and in other business services, primarily professional and management services.
Chart 3. Current-Account Transactions. Line Chart.

[Click chart to expand]

Chart 4. Percent Change in Exports of Goods and Services and Income Receipts. Line Chart.

[Click chart to expand]

Table B. Exports of Goods and Services and Income Receipts
[Millions of dollars, seasonally adjusted]
  2017 2018 Change
2018:II to 2018:III
IV I II r III p
Exports of goods and services and income receipts 890,393 905,298 936,517 930,276 −6,241
Exports of goods 401,939 411,442 429,431 421,762 −7,669
General merchandise 397,143 404,927 424,104 415,653 −8,451
Foods, feeds, and beverages 32,099 33,338 40,521 36,223 −4,298
Industrial supplies and materials 124,271 125,430 134,743 135,101 358
Energy products 46,234 46,972 54,205 55,382 1,177
Of which: Petroleum and products 40,384 40,109 47,078 48,698 1,620
Nonenergy products 78,037 78,458 80,538 79,719 −819
Capital goods except automotive 137,341 138,209 141,647 140,283 −1,364
Automotive vehicles, parts, and engines 39,761 42,207 40,334 38,806 −1,528
Consumer goods except food and automotive 49,807 51,598 51,282 51,203 −79
Other general merchandise 13,866 14,144 15,578 14,038 −1,540
Net exports of goods under merchanting 56 66 77 75 −2
Nonmonetary gold 4,740 6,450 5,249 6,034 785
           
Exports of services1 203,977 205,994 205,817 207,635 1,818
Maintenance and repair services n.i.e. 6,740 7,286 7,469 7,516 47
Transport 22,696 22,949 23,453 23,104 −349
Travel (for all purposes including education) 53,429 53,504 53,651 53,836 185
Business 9,956 9,877 9,732 9,595 −137
Personal 43,473 43,627 43,920 44,240 320
Insurance services 4,755 4,555 4,557 4,552 −5
Financial services 28,751 27,907 28,224 28,846 622
Charges for the use of intellectual property n.i.e. 32,762 33,577 32,398 33,025 627
Telecommunications, computer, and information services 10,902 10,913 10,630 10,808 178
Other business services 39,326 40,556 40,132 40,752 620
Government goods and services n.i.e. 4,617 4,748 5,303 5,196 −107
           
Primary income receipts 248,940 256,029 266,274 264,523 −1,751
Investment income 247,367 254,435 264,669 262,907 −1,762
Direct investment income 135,929 135,062 140,184 136,950 −3,234
Income on equity 128,884 128,094 132,891 129,815 −3,076
Dividends and withdrawals 26,874 294,856 183,703 92,720 −90,983
Reinvested earnings 102,009 −166,762 −50,812 37,095 87,907
Interest 7,046 6,969 7,293 7,135 −158
Portfolio investment income 93,614 99,244 102,199 103,335 1,136
Income on equity and investment fund shares 62,535 65,937 67,344 68,016 672
Interest on debt securities 31,078 33,307 34,856 35,319 463
Other investment income 17,741 19,959 22,239 22,393 154
Reserve asset income 82 169 47 230 183
Compensation of employees 1,573 1,594 1,605 1,616 11
Secondary income (current transfer) receipts2 35,537 31,833 34,995 36,355 1,360
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.

  1. See also Shari A. Allen, Alexis N. Grimm, and Christopher P. Steiner, “U.S. International Services: Trade in Services in 2017 and Services Supplied Through Affiliates in 2016,” Survey of Current Business 98 (October 2018).
  2. Secondary income receipts include U.S. government and private transfers, such as fines and penalties, withholding taxes, insurance-related transfers, and other current transfers.

Imports of goods and services and income payments increased $17.4 billion, or 1.7 percent, in the third quarter to $1,055.1 billion (charts 3 and 5 and table C).

  • Goods imports increased $16.3 billion, or 2.6 percent, to $648.8 billion, mostly reflecting increases in consumer goods, primarily cell phones, in industrial supplies and materials, primarily petroleum and products, and in automotive vehicles, parts, and engines.
Chart 5. Percent Change in Imports of Goods and Services and Income Payments. Line Chart.

[Click chart to expand]

Table C. Imports of Goods and Services and Income Payments
[Millions of dollars, seasonally adjusted]
  2017 2018 Change
2018:II to 2018:III
IV I II r III p
Imports of goods and services and income payments 1,006,541 1,027,008 1,037,741 1,055,093 17,352
Imports of goods 614,317 632,244 632,489 648,775 16,286
General merchandise 610,844 629,436 629,811 646,303 16,492
Foods, feeds, and beverages 35,551 37,014 37,089 37,096 7
Industrial supplies and materials 133,707 142,210 146,323 150,418 4,095
Energy products 55,863 61,969 64,499 67,979 3,480
Of which: Petroleum and products 51,926 58,558 61,135 64,531 3,396
Nonenergy products 77,844 80,241 81,824 82,439 615
Capital goods except automotive 169,186 170,639 174,210 176,723 2,513
Automotive vehicles, parts, and engines 90,589 92,885 90,150 93,773 3,623
Consumer goods except food and automotive 157,597 164,007 157,413 162,101 4,688
Other general merchandise 24,214 22,681 24,626 26,192 1,566
Nonmonetary gold 3,473 2,809 2,678 2,472 −206
           
Imports of services1 139,426 139,182 137,365 139,279 1,914
Maintenance and repair services n.i.e. 2,059 2,093 2,062 2,001 −61
Transport 25,872 26,253 26,755 26,982 227
Travel (for all purposes including education) 34,906 35,553 35,620 36,146 526
Business 4,140 4,009 4,185 4,245 60
Personal 30,766 31,544 31,435 31,902 467
Insurance services 12,434 9,754 9,554 9,500 −54
Financial services 7,628 7,532 7,717 7,864 147
Charges for the use of intellectual property n.i.e. 13,808 13,925 13,051 13,282 231
Telecommunications, computer, and information services 10,280 10,174 9,831 9,875 44
Other business services 26,929 28,246 27,044 27,853 809
Government goods and services n.i.e. 5,510 5,653 5,731 5,775 44
           
Primary income payments 186,569 194,854 203,926 205,098 1,172
Investment income 181,601 189,875 198,866 200,021 1,155
Direct investment income 55,978 57,458 61,096 59,302 −1,794
Portfolio investment income 111,305 114,968 116,895 116,659 −236
Income on equity and investment fund shares 36,625 38,844 40,216 39,369 −847
Interest on debt securities 74,680 76,124 76,678 77,290 612
Other investment income 14,317 17,448 20,875 24,059 3,184
Compensation of employees 4,969 4,979 5,060 5,077 17
Secondary income (current transfer) payments2 66,229 60,728 63,961 61,942 −2,019
           
Supplemental detail on insurance transactions:          
Premiums paid 31,429 23,986 24,557 25,380 823
Losses recovered 21,603 18,689 18,935 19,573 638
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.

  1. See also Shari A. Allen, Alexis N. Grimm, and Christopher P. Steiner, “U.S. International Services: Trade in Services in 2017 and Services Supplied Through Affiliates in 2016,” Survey of Current Business 98 (October 2018).
  2. Secondary income 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.

Acquisition of financial assets

  • Net U.S. acquisition of direct investment assets was $76.8 billion, following net U.S. withdrawal of $68.1 billion in the second quarter (chart 6 and table D). The net withdrawal of direct investment assets in the first half of 2018 reflected U.S. parent repatriation of previously reinvested earnings in response to the 2017 Tax Cuts and Jobs Act (TCJA). For more information, see “Effects of the 2017 Tax Cuts and Jobs Act on Components of the International Transactions Accounts.”
  • Net U.S. liquidation of other investment assets decreased $104.1 billion to $16.6 billion. The decrease in the net liquidation mostly reflected a decrease in the net foreign repayment of loans.
  • Net U.S. purchases of portfolio investment assets were $72.6 billion, following net U.S. sales of $14.3 billion in the second quarter. This change mostly reflected net U.S. purchases of foreign equity and investment fund shares following net sales in the second quarter.

Incurrence of liabilities

  • Net U.S. incurrence of other investment liabilities was $16.9 billion, following net U.S. repayment of $100.4 billion in the second quarter. This change primarily reflected net foreign provision of loans following net U.S. repayment in the second quarter.
  • Net U.S. incurrence of direct investment liabilities increased $105.8 billion to $122.3 billion, mostly reflecting an increase in equity liabilities.
  • Net U.S. incurrence of portfolio investment liabilities decreased $8.1 billion to $12.5 billion. This decrease reflected largely offsetting transactions in U.S. equity and debt liabilities.
Chart 6. Transactions in Financial Assets and Liabilities Excluding Financial Derivatives. Line Chart.

[Click chart to expand]

Table D. Net U.S. Acquisition of Financial Assets and Net U.S. Incurrence of Liabilities
[Millions of dollars, seasonally adjusted]
  2017 2018 Change
2018:II to 2018:III
IV I II r III p
Net U.S. acquisition of financial assets excluding financial derivatives (net increase in assets / financial outflow (+)) 127,135 251,126 −199,943 132,689 332,632
Direct investment assets 91,256 −139,326 −68,060 76,846 144,906
Equity 101,537 −167,731 −52,808 71,558 124,366
Equity other than reinvestment of earnings −472 −969 −1,996 34,463 36,459
Reinvestment of earnings 102,009 −166,762 −50,812 37,095 87,907
Debt instruments −10,281 28,406 −15,252 5,288 20,540
Portfolio investment assets 88,301 304,094 −14,272 72,598 86,870
Equity and investment fund shares −39,233 200,871 −70,830 35,027 105,857
Debt securities 127,534 103,223 56,559 37,571 −18,988
Short-term securities 40,467 27,771 2,469 21,559 19,090
Long-term corporate securities 62,231 53,741 37,717 11,243 −26,474
Other long-term securities 24,836 21,711 16,373 4,769 −11,604
Other investment assets −50,883 86,365 −120,679 −16,577 104,102
Currency and deposits 4,850 53,816 −22,388 12,765 35,153
Loans −55,760 33,356 −99,576 −27,166 72,410
Trade credit and advances 26 −807 1,285 −2,176 −3,461
Reserve assets −1,539 −7 3,068 −177 −3,245
Monetary gold 0 0 0 0 0
Special drawing rights 26 33 33 43 10
Reserve position in the International Monetary Fund −1,535 −73 3,136 −288 −3,424
Other reserve assets −29 34 −101 68 169
           
Net U.S. incurrence of liabilities excluding financial derivatives (net increase in liabilities / financial inflow (+)) 159,164 441,080 −63,262 151,723 214,985
Direct investment liabilities 38,250 57,949 16,499 122,336 105,837
Equity 64,320 72,661 45,453 117,403 71,950
Equity other than reinvestment of earnings 36,488 37,499 10,591 79,102 68,511
Reinvestment of earnings 27,832 35,163 34,862 38,302 3,440
Debt instruments −26,070 −14,712 −28,954 4,933 33,887
Portfolio investment liabilities 81,626 301,503 20,596 12,469 −8,127
Equity and investment fund shares −3,377 154,313 291 −95,589 −95,880
Debt securities 85,003 147,190 20,305 108,059 87,754
Short term 25,215 31,355 37,436 −52,528 −89,964
Treasury bills and certificates 20,270 13,560 33,709 −35,354 −69,063
Federally sponsored agency securities 2,160 2,214 −680 −6,121 −5,441
Other short-term securities 2,785 15,581 4,407 −11,053 −15,460
Long term 59,788 115,835 −17,131 160,587 177,718
Treasury bonds and notes 546 73,078 −12,004 97,884 109,888
Federally sponsored agency securities 8,523 37,775 6,518 35,815 29,297
Corporate bonds and notes 51,058 4,731 −13,257 27,393 40,650
Other −339 251 1,612 −505 −2,117
Other investment liabilities 39,288 81,628 −100,358 16,918 117,276
Currency (short term) 17,262 16,970 19,391 19,606 215
Deposits 44,161 −27,004 −77,318 −26,309 51,009
Loans −23,436 82,566 −47,064 21,292 68,356
Trade credit and advances 1,302 9,096 4,634 2,328 −2,306
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.

In the international transactions accounts, income on equity, or earnings, of foreign affiliates of U.S. multinational enterprises consists of a portion that is repatriated to the parent company in the United States in the form of dividends and a portion that is reinvested in foreign affiliates. At times, repatriation of dividends exceeds earnings, resulting in negative values being recorded for reinvested earnings. For the first half of 2018, dividends exceeded earnings, reflecting the repatriation of accumulated prior earnings of foreign affiliates of U.S. multinational enterprises by their parent companies in the United States in response to the TCJA, which generally eliminates taxes on repatriated earnings. The negative reinvested earnings in the first half of 2018 reflect the fact that U.S. parent companies withdrew accumulated prior earnings from their foreign affiliates. Preliminary statistics for the third quarter show positive reinvested earnings and lower dividends (chart 7 and tables B and E). The reinvested earnings are also reflected in the net acquisition of direct investment assets in the financial account, which was $76.8 billion in the third quarter and −$207.4 billion in the first half 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?”

Chart 7. Direct Investment Income Receipts and Components. Line Chart.

[Click chart to expand]

Table E. Direct Investment Earnings
[Billions of dollars, seasonally adjusted]
  2017 2018 Sum of first three quarters
I II III IV I II r III p 2017 2018
Direct investment earnings 114.1 114.4 120.3 128.9 128.1 132.9 129.8 348.8 390.8
Dividends 38.2 34.9 55.1 26.9 294.9 183.7 92.7 128.2 571.3
Reinvested earnings 75.9 79.5 65.2 102.0 −166.8 −50.8 37.1 220.6 −180.5
p
Preliminary
r
Revised

In addition to the repatriation of accumulated earnings, some companies made other changes to their business practices in reaction to the TCJA. For example, some insurance companies changed how they operate in response to the base erosion and anti-abuse tax (BEAT) provision of the TCJA. BEAT is a tax on certain payments from a U.S. company to a related foreign party, which can include premium payments for reinsurance. In response to the new tax, many U.S. insurance companies terminated these intracompany reinsurance contracts. As a result, premiums paid by U.S. insurers to foreign insurers in the first three quarters of 2018 were $73.9 billion, down from $98.4 billion for the same period in 2017 (table C). Similarly, insurance services imports in the first three quarters of 2018 were $28.8 billion, down from $38.2 billion for the same period in 2017.

For more information on the estimation methods used to compile insurance services, see the insurance section in “U.S. International Economic Accounts: Concepts and Methods.”

The U.S. international transactions statistics for the second quarter of 2018 have been updated to incorporate newly available and revised source data (table F).

Table F. Updates to the Second Quarter 2018 International Transactions Aggregates
[Millions of dollars, seasonally adjusted]
  Preliminary estimates Revised estimates
Balance on current account −101,460 −101,224
Balance on goods −203,158 −203,058
Balance on services 69,346 68,452
Balance on primary income 60,845 62,348
Balance on secondary income (current transfers) −28,493 −28,966
Net lending or borrowing from financial-account transactions −134,337 −153,650
Net U.S. acquisition of financial assets −175,112 −199,943
Net U.S. incurrence of liabilities −57,743 −63,262
Financial derivatives other than reserves, net transactions −16,969 −16,969