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U.S. International Transactions, 3rd quarter 2017

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NOTE: See the navigation bar at the right side of the news release text for links to data tables, contact personnel and their telephone numbers, and supplementary materials. U.S. International Transactions: Third Quarter 2017 Current-Account Balance The U.S. current-account deficit decreased to 0.6 billion (preliminary) in the third quarter of 2017 from 4.4 billion (revised) in the second quarter of 2017, according to statistics released by the Bureau of Economic Analysis (BEA). The deficit decreased to 2.1 percent of current- dollar gross domestic product (GDP) from 2.6 percent in the second quarter. The .8 billion decrease in the current-account deficit reflected decreases in the deficits on secondary income and

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NOTE: See the navigation bar at the right side of the news release text for links to data tables, contact personnel and their telephone numbers, and supplementary materials.

U.S. International Transactions: Third Quarter 2017


                                    Current-Account Balance

The U.S. current-account deficit decreased to $100.6 billion (preliminary) in the third quarter
of 2017 from $124.4 billion (revised) in the second quarter of 2017, according to statistics
released by the Bureau of Economic Analysis (BEA). The deficit decreased to 2.1 percent of current-
dollar gross domestic product (GDP) from 2.6 percent in the second quarter.

The $23.8 billion decrease in the current-account deficit reflected decreases in the deficits on
secondary income and goods and increases in the surpluses on primary income and services.

BOX.__________________
                             Third Quarter 2017 Atlantic Hurricanes

During the third quarter, major hurricanes caused severe damage and flooding in several states
along the Gulf Coast and in Puerto Rico and the U.S. Virgin Islands. See the section
“Impact of Hurricanes on Third Quarter 2017 Estimates” for more information.
______________________

The remainder of this release highlights changes from the second quarter to the third quarter in
major aggregates of the U.S. international transactions accounts, selected component contributions
to those changes, and updates to previously published statistics for the second quarter.

                            Current-Account Transactions (tables 1-5)

Exports of goods and services and income receipts

Exports of goods and services and income receipts increased $23.4 billion in the third quarter
to $858.7 billion.

   * Primary income receipts increased $9.4 billion to $234.5 billion, mostly reflecting increases
     in portfolio investment income and in direct investment income.

   * Secondary income receipts increased $6.9 billion to $41.1 billion, mostly reflecting an
     increase in U.S. government transfers, primarily fines and penalties.

   * Goods exports increased $5.2 billion to $388.1 billion, mostly reflecting an increase in
     capital goods except automotive, primarily civilian aircraft, engines, and parts and
     telecommunications equipment.

Imports of goods and services and income payments

Imports of goods and services and income payments decreased $0.4 billion to $959.2 billion.

   * Secondary income payments decreased $3.0 billion to $64.3 billion, mostly reflecting a
     decrease in private transfers, primarily fines and penalties.

   * Primary income payments increased $2.8 billion to $177.5 billion, reflecting increases in
     portfolio investment income and in other investment income.

                                    Capital Account (table 1)

Capital transfer receipts were $24.9 billion in the third quarter. The transactions reflected
receipts from foreign insurance companies for losses resulting from hurricanes Harvey, Irma, and
Maria.

                           Financial Account (tables 1, 6, 7, and 8)

Net U.S. borrowing measured by financial-account transactions was $105.6 billion in the third
quarter of 2017, a decrease from net borrowing of $114.4 billion in the second quarter.

Financial assets

Net U.S. acquisition of financial assets excluding financial derivatives decreased $7.0 billion
in the third quarter to $337.9 billion.

   * Net U.S. acquisition of direct investment assets decreased $13.9 billion to $76.7 billion,
     reflecting a decrease in net acquisition of equity assets.

   * Net U.S. acquisition of portfolio investment assets decreased $10.9 billion to $175.6
     billion, reflecting a decrease in net U.S. purchases of equity and investment fund shares.

   * Net U.S. acquisition of other investment assets increased $18.0 billion to $85.6 billion,
     partly offsetting the decreases in net acquisition of direct investment assets and in net
     acquisition of portfolio investment assets. The increase in net acquisition of other
     investment assets reflected an increase in net acquisition of currency and deposits.

Liabilities

Net U.S. incurrence of liabilities excluding financial derivatives decreased $6.5 billion to
$462.1 billion.

   * Net U.S. incurrence of portfolio investment liabilities decreased $7.2 billion to $284.0
     billion, reflecting a decrease in net foreign purchases of U.S. debt securities.

   * Net U.S. incurrence of other investment liabilities decreased $4.0 billion to $82.3 billion,
     reflecting largely offsetting changes in transactions in deposit and loan liabilities. In
     deposits, transactions shifted to net foreign withdrawal of deposits in the United States
     in the third quarter from net foreign placement in the second quarter. In loans, transactions
     shifted to net U.S. incurrence from net U.S. repayment.

   * Net U.S. incurrence of direct investment liabilities increased $4.7 billion to $95.8 billion,
     partly offsetting the decreases in net incurrence of portfolio investment liabilities and
     in net incurrence of other investment liabilities. The increase in net incurrence of direct
     investment liabilities reflected an increase in net incurrence of equity liabilities.

Financial derivatives

Transactions in financial derivatives other than reserves reflected third-quarter net lending of
$18.6 billion, an increase of $9.3 billion from the second quarter.

                               Statistical Discrepancy (table 1)

The statistical discrepancy was -$29.9 billion in the third quarter, after a
statistical discrepancy of $10.0 billion in the second quarter.

         Updates to Second Quarter 2017 International Transactions Accounts Aggregates
                           Billions of dollars, seasonally adjusted

                                                      Preliminary estimate    Revised estimate
Current-account balance                                       -123.1               -124.4
Goods balance                                                 -201.4               -201.4
   Services balance                                             64.1                 59.7
   Primary-income balance                                       47.2                 50.5
   Secondary-income balance                                    -33.0                -33.2
Net lending (+)/borrowing (-) from
   financial-account transactions                             -112.5               -114.4
Statistical discrepancy                                         10.6                 10.0


                        Next release:  March 21, 2018 at 8:30 A.M. EDT
                 U.S. International Transactions, Fourth Quarter and Year 2017

                                       *       *       *

                    U.S. International Transactions Release Dates in 2018

                    Fourth Quarter and Year 2017                 March 21
                    First Quarter 2018 and Annual Update          June 20
                    Second Quarter 2018                      September 19
                    Third Quarter 2018                        December 19


                     Impact of Hurricanes on Third Quarter 2017 Estimates

During the third quarter, two major hurricanes caused severe damage and flooding in several states
along the Gulf Coast. Hurricane Harvey made its initial landfall on August 25 in Texas, and made
a second landfall in Louisiana on August 30 as a tropical storm. On September 10, Hurricane Irma
hit the lower Florida Keys and the southern mainland of Florida. A third hurricane, Maria, made
its initial landfall on the U.S. Virgin Islands and Puerto Rico on September 20, causing catastrophic
damage to these island areas.

In the U.S. international transactions accounts, Puerto Rico and other U.S. territories and
possessions are included as part of the domestic economy. Note that this differs from the geographic
coverage of the United States in the national income and product accounts. For more information,
see the FAQ “Are Puerto Rico and the U.S. Territories included in the estimates of U.S. GDP?"

The effects of disasters—such as hurricanes, terrorist attacks, and other major catastrophes—on
the international economic accounts are embedded in the source data that BEA uses to produce the
statistics. Source data providers generally cannot isolate those effects, and thus, BEA cannot
separately quantify the impacts of the disasters. Nevertheless, there are several possible impacts
of the disasters on the international accounts as discussed below.

Goods

Trade in goods may be impacted if the disaster results in port closures, which could affect the
flow of traded goods. During port closures, shipments of goods may be diverted, amended, or canceled.
Diverted import shipments may enter through another U.S. port or be transshipped through Mexico
or Canada. Disasters such as hurricanes and earthquakes may cause power outages or inaccessibility
to facilities, resulting in disruptions to the production of traded goods. For example, a hurricane
occurring in the United States may cause a temporary loss of petroleum production and refining
activity in the affected area, thus impacting exports of petroleum and products.

The primary source for statistics on trade in goods is U.S. Census Bureau tabulations of data
collected by U.S. Customs and Border Protection. For more information on the collection of these
statistics and possible scenarios for shipments directly impacted by the hurricanes, along with
information regarding procedures used to produce the statistics, see the notice in U.S.
International Trade in Goods and Services: October 2017.

Services

Trade in services may be impacted if service activities are interrupted by the disaster. For
example, transport services may be affected by port closures and by diverted shipments of goods.
Port closures and other disruptions to service activities may also affect travel. Similarly, if
business operations are disrupted, trade in certain business services could be impacted.

The impact of the disaster on insurance services is likely to be small because BEA uses normal
rather than actual losses to measure insurance services. For more information, see the FAQ “How are
property and casualty insurance services measured in GDP?”

Primary Income and Financial Flows

Direct investment primary income and financial flows between parents and their affiliates may
reflect the effects of the disaster on the earnings of companies located in the affected area. 
For example, affiliates affected by a hurricane may halt production temporarily, require repairs
to facilities, or face difficulties in acquiring inputs and shipping products, all of which could
affect their earnings. Any additional funding provided by parent companies to their affiliates
in the wake of a disaster would be reflected in financial flows.

Secondary Income

Disasters may affect secondary income, which includes U.S. government and private transfers, such
as U.S. government grants, personal transfers (remittances), charitable donations, and insurance
-related transfers. For example, in the case of a hurricane or an earthquake occurring in the
United States, any donations for disaster relief and remittances from nonresidents to families
and friends in the affected area would be reflected in secondary income receipts.

Capital Account

Insurance claims are typically treated as current transfers in secondary income. However, if BEA
classifies a domestic event as a disaster, then the losses recovered from foreign insurance companies
following the event are recorded as transfer receipts in the capital account for the affected
quarter. This is the case if the associated property losses or the insurance payouts exceed 0.1
percent of GDP. For more information, see the FAQ “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?"

______________________

                                   Additional Information

Resources

    * Stay informed about BEA developments by reading the BEA blog, signing up
      for BEA’s email subscription service, or following BEA on Twitter @BEA_News.

    * Historical time series for these estimates can be accessed in BEA’s Interactive Data
      Application.

    * Access BEA data by registering for BEA’s Data Application Programming Interface (API).

    * For more on BEA’s statistics, see our monthly online journal, the Survey of Current
      Business.

    * BEA's news release schedule.

    * More information on these international transactions statistics will be provided next
      month in the Survey of Current Business.

    * More information on the international transactions accounts (ITAs) and a description of
      the estimation methods used to compile them is provided in U.S. International Economic
      Accounts: Concepts and Methods.

Definitions

The current account consists of transactions between U.S. residents and nonresidents in goods,
services, primary income, and secondary income.

Goods are physical items with ownership rights that can be exchanged among institutional units
through transactions.

Services transactions consist of transactions arising from productive activities that change
the condition of the consumer or that facilitate the exchange of products and financial assets.

Primary income transactions include investment income and compensation of employees. Investment
income is the return on holdings of financial assets and includes direct investment income,
portfolio investment income, other investment income, and income on reserve assets.
Compensation of employees is income for the contribution of labor inputs to the production
process.

Secondary income consists of current transfers between residents and nonresidents. Unlike an
exchange, a transfer is a transaction in which a good, service, or asset is provided without a
corresponding return of economic value. 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.

The capital account consists of capital transfers between residents and nonresidents and the
cross-border acquisition and disposal of nonproduced nonfinancial assets. Capital transfers
include debt forgiveness and certain disaster-related nonlife insurance claims. Nonproduced
nonfinancial assets include natural resources and contracts, leases, and licenses. Capital-
account transactions are distinguished from current-account transactions in that capital-
account transactions result in a change in the assets of one or both parties to the transaction
without affecting the income or savings of either party.

The financial account consists of transactions between U.S. residents and nonresidents for
direct investment, portfolio investment, other investment, reserves, and financial derivatives
other than reserves.

Direct investment is a category of cross-border investment associated with a resident in one
economy having control or a significant degree of influence on the management of an enterprise
resident in another economy. Ownership or control of 10 percent or more of the nonresident
entity’s voting securities is the threshold for separating direct investment from other types
of investment. Direct-investment transactions include transactions in equity (including
reinvestment of earnings) and debt instruments.

Portfolio investment transactions consist of cross-border transactions involving equity and
investment fund shares and debt securities, excluding those included in direct investment or
reserve assets.

Other investment is a residual category that includes cross-border financial instruments other
than those included in direct investment, portfolio investment, financial derivatives, and
reserve assets. Other-investment transactions consist of transactions in currency and deposits,
loans, insurance technical reserves, trade credit and advances, and, for liabilities, special
drawing rights allocations.

Reserve assets are those external assets that are readily available to and controlled by
monetary authorities for meeting balance of payments financing needs, for intervention in
exchange markets to affect the currency exchange rate, and for other related purposes such as
maintaining confidence in the currency and the economy and serving as a basis for foreign
borrowing. The major published components are monetary gold, International Monetary Fund (IMF)
special drawing rights (SDRs), reserve position in the IMF, and other reserve assets.

Financial derivatives other than reserves consist of financial contracts that are linked to
underlying financial instruments, commodities, or indicators. Transactions in financial
derivatives consist of U.S. cash receipts and payments arising from the sale, purchase,
periodic settlement, or final settlement of financial derivatives contracts. 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).

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 can also be calculated as the difference between net lending
(borrowing) measured from financial-account transactions and net lending (borrowing) measured
from current- and capital-account transactions.

The current-account balance is the difference between credits (exports and income receipts) and
debits (imports and income payments) in the current account. The balance is a net measure of
current-account transactions between the United States and the rest of the world. A positive
balance indicates a current-account surplus. A negative balance indicates a current-account
deficit.

Net lending (borrowing) measures the balance of funds supplied to the rest of the world. Net
lending means that, in net terms, the U.S. economy supplies funds to the rest of the world.
Net borrowing means the opposite. Net lending (borrowing) can be measured by current- and
capital-account transactions or by financial-account transactions. Conceptually, the two
measures are equal. In practice, the two measures differ by the statistical discrepancy.

Release and update cycle

Preliminary quarterly statistics for the ITAs are released in March, June, September, and
December approximately 80 days after the end of the reference quarter. These statistics are
updated the following quarter to incorporate new source data. Quarterly statistics are open for
revision for at least the prior three years in annual updates released in June. Preliminary
annual statistics are released in March along with statistics for the fourth quarter of the
previous year. These annual statistics are open for revision for at least the prior three years
in subsequent annual updates.

Related statistics

The ITAs constitute one part of a broader set of U.S. international economic accounts that,
taken together, provide a comprehensive, integrated, and detailed picture of U.S. international
economic activities.

The international investment position (IIP) accounts are released quarterly.
Financial transactions that are reported in the ITAs are one type of change in position
recorded in the IIP accounts.

Statistics on direct investment and multinational enterprises (MNEs) include annual statistics on 
the activities of MNEs, detailed annual and quarterly statistics on direct investment, and annual 
statistics on new investment in the United States.

Statistics on international services, released annually, include detailed annual information on trade 
in services and on services supplied through the channel of direct investment by affiliates of MNEs.

U.S. international trade in goods and services, released by BEA and the U.S. Census Bureau, provides 
monthly statistics on trade in goods and services.
Bureau of Economic Analysis
The BEA Advisory Committee advises the Director of BEA on matters related to the development and improvement of BEA’s national, regional, industry, and international economic accounts, especially in areas of new and rapidly growing economic activities arising from innovative and advancing technologies, and provides recommendations from the perspectives of the economics profession, business, and government.

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