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U.S. international transactions, first quarter 1993.

The estimates in this article incorporate a number of major improvements, including changes in estimating methodologies and new source data. For a discussion of these changes, see "U.S. International Transactions, Revised Estimates for 1983--92" in this issue.

The U.S. current-account deficit decreased to $22.2 billion in the first quarter of 1993 from $23.7 billion (revised) in the fourth quarter of 1992 (table A).(1) An increase in the deficit on goods and services was more than offset by a shift to a surplus from a deficit in investment income and a decrease in net unilateral transfers.

In the capital account, net recorded capital inflows were $16.3 billion in the first quarter, compared with inflows of $8.4 billion in the fourth. Purchases of foreign securities by U.S. residents were at record levels, and purchases of U.S. securities by foreigners remained strong. The ability of borrowers to raise funds in the securities markets dampened the need for bank credit and Japanese banks retrenched further; these two factors resulted in sharp swings in bank claims and liabilities.

U.S. dollar in exchange markets

In the first quarter, the U.S. dollar appreciated 5 percent on a trade-weighted quarterly average basis against the currencies of the 10 industrial countries and 1 percent against the currencies of the 22 OECD countries plus the 4 newly industrialized countries in Asia (table B, chart 1). [Table A-B Omitted]

The appreciation of the dollar was entirely due to increases against European currencies, especially in january and February. For the quarter, the dollar appreciated 13 percent against the Italian lira, 8 percent against the Swiss franc, 7 percent against the British pound, and 5 percent each against the currencies of Germany, France, Belgium, and the Netherlands. In contrast, the dollar depreciated 1 percent against the Japanese yen and was unchanged against the Canadian dollar. The dollar's movement for the quarter masked pronounced weakness against the Japanese yen and the Canadian dollar in February and March.

The dollar's appreciation against major European currencies came as markets anticipated that economic growth would be stronger in the United States than in Europe. Information available in the first quarter--a sharp fourthquarter increase in U.S. gross domestic product and a sharp boost in consumer confidence--suggested continued strong economic growth in the United States. In contrast, market participants viewed developments in Europe, particularly in Germany, as showing little prospect for any significant pickup in growth.

The dollar's depreciation against the Japanese yen occurred in February and March, when it became clear that the continued rise in Japan's current-account surplus would require a sharply lower dollar-yen exchange rate before a significant improvement could be expected.

The U.S. dollar's depreciation against the Canadian dollar occurred in February and March, when the U.S. dollar retreated from record highs reached against the Canadian dollar in the fourth quarter of 1992.

Against the currencies of the newly industrialized countries in Asia, the U.S. dollar depreciated 2 percent against the Taiwan dollar and less than 1 percent each against the South Korean won and the Singapore dollar. The U.S. dollar was unchanged against the Hong Kong dollar.

Current Account

The $1.5 billion decrease in the balance on current account in the first quarter reflected a $2.3 billion increase in the deficit on goods and services, a $1.1 billion shift to a surplus from a deficit in investment income, and a $2.3 billion decrease in net unilateral transfers (chart 2).

Goods and services

The deficit on goods and services increased to $14.4 billion in the first quarter from $12.5 billion in the fourth, as a $3.1 billion increase in the deficit on merchandise was partly offset by a $1.2 billion increase in the surplus on services.

Merchandise trade.--the merchandise trade deficit increased to $29.1 billion in the first quarter from $26.0 billion in the fourth. The increase in the deficit was due to a decrease in exports and an increase in imports.

Exports.--Exports decreased $2.4 billion, or 2 percent, to $111.6 billion in the first quarter; volume also decreased 2 percent (table C). The constant (1987) dollar share of total goods produced accounted for by exports has been nearly flat since the second quarter of 1991, partly reflecting weak economic activity in the economies of major trading partners, especially among industrial countries (chart 3).

Nonagricultural exports decreased $1.8 billion, or 2 percent, to $100.8 billion in the first quarter from a record $102.6 billion in the fourth; volume decreased i percent. The decrease in value was widespread by commodity, but it was largest in the following categories: Capital goods (mainly in civilian aircraft and parts), industrial supplies and materials (mainly in nonmonetary gold and petroleum and products), and consumer goods (mainly in manufactured consumer nondurable goods). In contrast, exports of automotive products--mainly parts to U.S. plants in Canada and Mexico--increased sharply, reflecting the strength of U.S. auto sales in recent months. [Table C Omitted]

Agricultural exports decreased $0.5 billion, or 5 percent, to $10.9 billion in the first quarter; volume increased 6 percent. The decrease was concentrated in corn, in agricultural industrial supplies and materials, and in meat products and poultry. The decrease in corn was due mostly to reduced shipments to the Commonwealth of Independent States (comprising, most republics of the former Soviet Union), following the termination in December of shipments under credit guarantee programs.

Imports.--Imports increased $0.7 billion, or 1 percent, to a record $140.7 billion in the first quarter; volume increased 3 percent (table C). The constant (1987) dollar share of domestic purchases of goods accounted for by imports has increased since the second quarter of 1991; an increase in the import share is typical during a business cycle expansion.

Nonpetroleum imports increased $1.7 billion, or 1 percent, to $127.9 billion in the first quarter; volume increased 3 percent. Nearly three-fourths of the increase was in automotive products--mostly in passenger cars and in trucks, buses, and special-purpose vehicles from Canada--reflecting strong U.S. sales of both passenger cars and light trucks by U.S. auto manufacturers. Sales of Japanese transplant cars and of Japanese imported cars decreased for the third consecutive quarter. The remainder of the increase in nonpetroleum imports was in consumer goods (mainly artwork, antiques, and collectibles and jewelry) and in capital goods (mainly computers, peripherals, and parts).

Petroleum imports decreased $1.0 billion, or 7 percent, to $12.8 billion in the first quarter. The decrease was more than accounted for by a sharp drop--to $16.43 from $17.89--in the average price per barrel; the average number of barrels imported daily increased to 8.50 million from 8.39 million. The drop in prices reflected weak demand due to mild winter weather and weak economic conditions in the industrial countries. OPEC production continued at a high level; OPEC's share of world crude oil production reached a record 43 percent in the first quarter of 1993, compared with 41 percent in the first quarter of 1992.

Balances by area--The deficit with the industrial countries decreased to $16.3 billion in the first quarter from $16.5 billion in the fourth. A shift to a surplus with Western Europe was partly offset by increases in the deficits with Canada and Japan.

The deficit with members of OPEC was unchanged at $3.8 billion. The deficit with all other countries increased to $9.0 billion from $5.7 billion. The surpluses with Latin America and Other Western Hemisphere and with Eastern Europe decreased, and the deficit with the developing countries in Asia increased.

Services.--The surplus on services increased to $14.6 billion in the first quarter from $13.4 billion in the fourth. Receipts increased $1.3 billion, to 46.3 billion, and payments increased $0.1 billion, to $31.7 billion.

Travel receipts increased to $13.8 billion from $13.5 billion; an increase in overseas receipts was partly offset by decreases in receipts from Canada and Mexico. Travel payments increased to $10.4 billion from $10.0 billion; increases in U.S. overseas payments and in Canadian payments were partly offset by a decrease in payments to Mexico.

Passenger fare receipts increased to $4.7 billion from $4.4 billion, and passenger fare payments were unchanged at $2.8 billion.

Other transportation receipts were unchanged at $5.7 billion. Port expenditures increased 2 percent as a result of increased passenger traffic on foreign-flag airlines arriving at U.S. ports. Ocean freight receipts decreased, mainly because of lower export tonnage carried by U.S.-flag vessels. Air freight receipts were unchanged. Other transportation payments decreased to $5.8 billion from $5.9 billion. Most of the decrease was in air freight payments, reflecting a decline in air freight import tonnage carried by foreign-flag airlines.

Receipts from foreigners for other private services increased to $14.1 billion from $13.8 billion. Payments to foreigners for other private services were unchanged at $7.7 billion. Transfers under U.S. military agency sales contracts increased to $2.9 billion from $2.5 billion. U.S. direct defense expenditures abroad decreased to $3.3 billion from $3.4 billion.

Investment income

The balance on investment income shifted to a surplus of $0.3 billion in the first quarter from a deficit of $0.8 billion in the fourth. Receipts of income on U.S. assets abroad increased more than payments of income on foreign assets in the United States.

Direct investment income.--Receipts of income on U.S. direct investment abroad increased to $13.6 billion in the first quarter from $11.2 billion in the fourth, reflecting an increase in operating earnings to $13.3 billion from $10.9 billion. The increase in operating earnings did not reflect a pickup in economic activity abroad, but rather a recovery in the earnings of manufacturing affiliates, which had been depressed in the fourth quarter by restructuring charges. An increase in operating earnings of finance affiliates also contributed to the rise in earnings.

Payments of income on foreign direct investment in the United States increased to $2.0 billion from $1.0 billion, reflecting higher earnings of European manufacturing affiliates; these higher earnings were partly offset by increased losses of Japanese banking and wholesale trade affiliates.

Portfolio investment income.--Receipts of income on other private investment abroad decreased to $12.1 billion in the first quarter from $12.7 billion in the fourth. Most of the decrease was in receipts on foreign bond holdings, reflecting earlier declines in holdings. U.S. Government income receipts decreased to $1.3 billion from $1.8 billion.

Payments of income on other private investment in the United States decreased to $14.3 billion from $15.2 billion. The decrease was due to lower payments to foreigners on their holdings of U.S. bonds. U.S. Government income payments increased to $10.4 billion from $10.3 billion.

Unilateral transfers

Net unilaterall transfers were $8.1 billion in the first quarter, down from $10.3 billion in the fourth. U.S. Government grants more than accounted for the decrease.

Capital Account

Net recorded capital inflows were $16.3 billion in the first quarter, up from inflows of $8.4 billion in the fourth. The change in net capital flows was strongly affected by shifts in net private capital, particularly by movements in claims and liabilities reported by banks. Excluding banks' claims and liabilities, net private recorded flows shifted to outflows of $5.9 billion in the first quarter from inflows of $6.3 billion in the fourth, reflecting strong activity in securities. Net purchases of foreign securities by U.S. residents increased especially sharply, and net purchases of U.S. securities by foreigners remained strong, though reduced from the previous quarter.

The activity in securities transactions reflected broad investor interest in long-term obligations, particularly because short-term interest rates declined faster than long-term rates. Except for Germany, the differential between long-term and short-term rates favored long-term investments for major industrial countries (chart 4).

U.S. assets abroad

U.S. assets abroad increased $3.3 billion in the first quarter, compared with a $30.4 billion increase in the fourth. A shift to a decrease in U.S. claims reported by U.S. banks more than accounted for the change.

U.S. official reserve assets.--U.S. official reserve assets increased $1.0 billion in the first quarter, in contrast to a decrease of $1-5 billion in the fourth.

Claims reported by banks.--U.S. claims on foreigners reported by U.S. banks decreased $33.9 billion in the first quarter, in contrast to an increase of $3-3 billion in the fourth. The decrease, two-thirds of which was in interbank transactions, reflected both sluggish demand for bank credit and further retrenchment by banks in Japan. Persistent credit concerns by U.S. banks and further declines in already low interest rates in bond markets encouraged borrowers to seek funds in the securities markets rather than from banks.

Banks' claims payable in dollars decreased $22.6 billion, in contrast to an increase of $9.7 billion. Most of the decrease was in foreign-owned banks' claims--both on their own foreign offices and on unaffiliated foreign banks--mainly reflecting decreases in claims on Japanese, West European, and Caribbean banking centers. Partly offsetting these reductions was an increase in claims by Canadian-owned banks on their own foreign offices in Canada.

Banks' domestic customers' claims decreased $12.6 billion, in contrast to a increase of $3.0 billion. The decrease was attributable to decreases in deposits, foreign commercial paper, and Eurodollar certificates of deposit.

Banks' own claims payable in foreign currencies increased $1.3 billion, in contrast to a decrease of $9.2 billion. Banks increased their lending to Japan and Caribbean banking centers.

Foreign securities.--Net U.S. purchases of foreign securities were a record $26.6 billion in the first quarter, compared with $17.4 billion in the fourth. U.S. purchases of foreign bonds more than accounted for the increase.

Net U.S. purchases of foreign bonds were a record $18.7 billion in the first quarter, compared with $5.5 billion in the fourth. New issues in the United States increased to $10.2 billion from $7.9 billion; the increase was attributable to heavy borrowing by Canadian Provincial governments and government-owned companies. Net purchases of outstanding bonds were $9.4 billion, in contrast to a net sales of $0.8 billion. Three-fourths of the change was in increased purchases in Western Europe and Canada, which were encouraged by a more rapid rise in foreign bond prices than in U.S. bond prices.

Net U.S. purchases of foreign stocks were $7.9 billion in the first quarter, compared with a record $11.9 billion in the fourth. New issues in the United States were $1.6 billion, compared with $2.2 billion. Net purchases of outstanding stocks were $6.4 billion, compared with $9.6 billion. The slowdown in both new issues and outstanding stocks was concentrated in Western Europe; purchases of Japanese stocks increased $1.0 billion.

Direct investment.--Net outflows for U.S. direct investment abroad were $10.0 billion in the first quarter, compared with $11.5 billion in the fourth. The decrease was more than accounted for by a reduction in intercompany debt outflows, mainly in U.S. parents' payables to affiliates in the United Kingdom. Also contributing to the decrease were reduced outflows to Other Western Hemisphere and a shift to inflows from Canada. Partly offsetting the reduction in intercompany debt outflows were increased outflows for reinvested earnings and a small increase in equity capital outflows.

Foreign assets in the United States

Foreign assets in the United States increased $19.6 billion in the first quarter, compared with an increase of $38.8 billion in the fourth. A shift to a decrease in U.S. bank-reported liabilities and a slowdown in foreign purchases of U.S. securities more than accounted for the change.

Foreign official assets.--Foreign official assets in the United States increased $11.0 billion in the first quarter, compared with an increase of $5.9 billion in the fourth (table D). Assets of industrial countries increased $1.7 billion, compared with an increase of $3.7 billion. Assets of OPEC members increased of $0.6 billion, compared with an increase of $2.3 billion. Assets of non-OPEC developing countries increased $8.7 billion, in contrast to a decrease of $0.1 billion; most of the increase was by countries in Latin America and Asia. The accumulation of dollar assets by countries in Asia may have reflected these countries' desire to maintain their exchange rates against the U.S. dollar when the dollar fell against the Japanese yen.

Liabilities reported by banks.--U.S. liabilities reported by U.S. banks, excluding U.S. Treasury securities, decreased $22.0 billion in the first quarter, compared with a decrease of $1.2 billion in the fourth. The first-quarter decrease reflected reduced interbank loan demand at U.S. banks, which in turn reduced the need for funding from abroad.

Banks' liabilities payable in dollars decreased $28.4 billion in the first quarter, in contrast to an increase of $8.4 billion in the fourth. The decrease was in foreign-owned banks' liabilities to their own foreign offices and to unaffiliated foreign banks, as well as in U.S.-owned banks' liabilities to their own foreign offices. Because of reduced domestic and international loan demand, U.S. banks had excess funds for paying down positions overseas.

Banks' liabilities payable in foreign currencies increased $7.4 billion in the first quarter, in contrast to a decrease of $11.3 billion in the fourth. The increase in positions was mostly with Japan and Western Europe.

U.S. Treasury securities.--Net foreign purchases of U.S. Treasury securities were $14.2 billion in the first quarter, down from a record $21.2 billion in the fourth. The pace of purchases slowed in every major area except Canada; despite the drop-off in most areas, first-quarter purchases remained strong. The drop-off from Western Europe was particularly sharp.

Other U.S. securities.--Net foreign purchases of U.S. securities other than U.S. Treasury securities were $10.6 billion in the first quarter, compared with $12.5 billion in the fourth.

Net foreign purchases of U.S. stocks were $3.6 billion, compared with $4.0 billion. Nevertheless, activity was strong throughout the quarter as reflected in gross purchases and sales combined, which increased over 20 percent from the fourth quarter. Gross volume was strongest in February and March, when purchases by Western European investors, mainly from the United Kingdom and Switzerland, were especially heavy. The interest in U.S. stocks may have been partly related to an improved outlook for U.S. economic activity early in the year.

Net foreign purchases of U.S. bonds were $7.0 billion, compared with $8.5 billion. The decrease was more than accounted for by net purchases of U.S. federally sponsored agency bonds, which fell to $1.2 billion from $6.1 billion; the decline partly reflected the strong price appreciation in the corporate bond market and the greater risk associated with redemptions in U.S. agency bonds. New issues of bonds sold abroad by U.S. corporations increased to $5.7 billion from $4.8 billion, and transactions in outstanding bonds shifted to net purchases of $0.2 billion from net sales of $2.4 billion.

Direct investment.--Net inflows for foreign direct investment in the United States were $5.8 billion in the first quarter, compared with $3.1 billion in the fourth. Intercompany debt transactions shifted to net inflows of $3.8 billion, in contrast to net outflows of $0.1 billion. The shift reflected borrowing by manufacturing affiliates from parents in Western Europe and by finance affiliates from their Canadian parents. Net equity capital inflows were $4.1 billion compared with $5.5 billion, mostly reflecting reduced inflows from Western Europe and Japan. Reinvested earnings were unchanged at --$2.1 billion.

The estimates for the first quarter of 1993 in this article differ from those contained in the news release on June 15. The chance reflects the correction of an error in the seasonal adjustment factor for foreign direct investment income payments. (1.) Quarterly estimates of U.S. current- and capital-account components are seasonally adjusted when statistically significant seasonal patterns are present. The accompanying tables present both adjusted and unadjusted estimates.
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Title Annotation:investment and trade statistics
Author:Murad, Howard
Publication:Survey of Current Business
Date:Jun 1, 1993
Words:3438
Previous Article:U.S. international transactions, revised estimates for 1983-92.
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