*EPF310 12/12/2001
U.S. Current Account Deficit Down Third Consecutive Quarter
(Numbers reflect recession, terrorist attacks) (460)

By Bruce Odessey
Washington File Staff Writer

Washington -- The deficit in the U.S. current account, the broadest measure of U.S. transactions with the rest of the world, narrowed in the July-September quarter to its lowest level in nearly two years, the U.S. Department of Commerce reports.

In a December 12 press release, the department calculated the third-quarter deficit at $94,980 million, down for the third consecutive quarter to its lowest level since the fourth quarter of 1999.

The decrease in the current-account deficit reflects mostly the decrease in the trade deficit as U.S. imports slow down as a result of recession.

Effects of the September 11 terrorist attacks are also reflected in the numbers. The U.S. trade services surplus went up in part from a surge in insurance payments from foreign companies after the attacks. The numbers also reflect the sharp drop in international air travel.

Both exports and imports of goods decreased in the third quarter, with especially large drops in capital goods.

In the financial account, which reflects changes in the current account, the increase in U.S.-owned assets abroad decelerated sharply to $15,383 million in the third quarter from $72,175 million in the second quarter and $243,120 million in the first.

As foreign economic activity slowed, U.S. bank loans to foreigners decreased as did net U.S. purchases of foreign stocks.

The increase in foreign-owned assets in the United States also decelerated to $52,111 million in the third quarter from $226,581 million in the second.

Net foreign purchases of U.S. securities except Treasury securities went down sharply in the third quarter as "the U.S. recession and uncertain financial conditions significantly reduced the attractiveness of U.S. stocks," the department said.

Net financial inflows for foreign direct investment in the United States also dropped sharply, reflecting the slowdown in foreign acquisitions of U.S. companies.

Following are some key figures:

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

year 1st qtr 2nd qtr 3rd qtr
2000 2001 2001 2001
BALANCE ON:
Merchandise trade -452,207 -112,250 -107,658 -105,828
Services 76,468 17,497 17,115 28,241
Income -14,792 -5,021 -4,995 -5,038
Unilateral transfers -54,136 -11,734 12,038 12,355
-------- ------- ------- -------
Current account -444,667 -111,778 -107,576 -94,980


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

year 1st qtr 2nd qtr 3rd qtr
2000 2001 2001 2001
NET CHANGE IN:
Capital account
transactions 705 173 177 182
U.S. assets abroad
(an increase in
capital outflow
is -) -580,952 -243,120 -72,175 -15,383
Foreign assets in U.S.
(an increase in
capital inflow
is +) 1,024,218 346,660 226,581 52,111

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

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

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