*EPF320 09/12/01
U.S. Current Account Deficit Declines Further in Second Quarter
(Improvements in trade accounts helped reduce gap) (730)
By Warner Rose
Washington File Staff Writer

Washington -- The deficit in the U.S. current account -- the broadest measure of U.S. international transactions -- narrowed in the second quarter, led by a decline in the trade deficit, according to U.S. Department of Commerce preliminary figures.

The current account deficit declined to $106,498 million, down from the $111,778 million in the first quarter, according to the department's publication "U.S. International Transactions: Second Quarter 2001," released September 12. In the fourth quarter of 2000 the current account deficit reached its all-time peak of $116,324 million.

The current account measures the combined balances on trade in goods and services, investment income flows and net unilateral current transfers.

In trade, the chronic deficit in goods decreased in the second quarter to $107,801 million, down from $112,520 million in the first quarter, as imports continued to drop. Imports fell to $293,639 million, about $14,000 million lower than the previous quarter, the publication said. Both petroleum and other imports declined, it said. There was a sharp decline in capital goods imports, and industrial supplies and consumer goods also decreased.

U.S. exports of goods also declined in the second quarter, falling to $185,838 million, about $9 million lower than the previous quarter. There were declines in exports of agricultural goods, capital goods and industrial supplies and materials.

In services trade, the usual U.S. surplus increased in the second quarter, rising to $18,863 million.

The deficit on investment income increased slightly in the second quarter to $5,493 million. Investment income receipts on U.S. assets abroad decreased to $77,209 million, a decline of about $7,700 million from the previous quarter.

Income payments on foreign-owned assets in the United States decreased to $81,365 million.

Unilateral current transfers amounted to net outflows of $12,067 million in the second quarter, a slight increase over the first quarter, largely due to an increase in private remittances and other private transfers, the publication said.

In the financial account, net in-flows were around $200 million, about the same as the first quarter.

U.S.-owned assets abroad increased $63,322 million in the second quarter, following a $243,120 million increase in the first. U.S. claims on foreigners, reported by U.S. banks, decreased by about $9,200 million in the second quarter, compared to an increase of $109,789 million in the first. The decline was partly attributed to a reduction in U.S. bank lending to foreign banks, following especially strong lending in the previous two quarters, the publication said.

Net U.S. purchases of foreign securities were $48,240 million, up from the first quarter. U.S. purchases of foreign stocks also increased, rising to $52,200 million, almost double the amount in the first quarter. This increase was attributed to a rise in exchanges of stock related to the purchases of U.S. companies by foreign firms.

Meanwhile, foreign-owned assets in the United States rose $188,002 million, little more than half the amount of the first quarter. Net foreign purchases of U.S. stocks amounted to $34,000 million, down somewhat from the first quarter, a decline attributed to lower net purchases by Western European investors, according to the report. Net foreign purchases of U.S. corporate and other bonds amounted to about $98,700 million, down from the record $106,100 million in the first quarter. Transactions in U.S. Treasury securities shifted to net sales of $8,300 million in the second quarter from net foreign purchases of $700 million in the first.

Following are some key figures:

U.S. CURRENT ACCOUNT
Millions of dollars, seasonally adjusted

year 4th qtr 1st qtr 2nd qtr
2000 2000 2001 2001
BALANCE ON:
Merchandise trade -452,207 -118,520 -112,520 -107,801
Services 76,468 18,227 17,497 18,863
Income -14,792 642 -5,021 -5,493
Unilateral transfers -54,136 -16,673 -11,734 -12,067
-------- ------- ------- -------
Current account -444,667 -116,324 -111,778 -106,498

U.S. CAPITAL AND FINANCIAL ACCOUNT
Millions of dollars, seasonally adjusted

year 4th qtr 1st qtr 2nd qtr
2000 2000 2001 2001

Capital Account
705 184 173 177
Financial Account
NET CHANGE IN:
U.S. assets abroad
(an increase in
capital outflow
is -) -580,952 -181,548 -243,120 -63,322
Foreign assets in U.S.
(an increase in
capital inflow
is +) 1,024,218 295,321 346,660 188,002

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Website: usinfo.state.gov)
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