the problem is not inflation now, its inflation in the future.

U.S. International Transactions: First Quarter 2009
Current Account


The U.S. current-account deficit—the combined balances on trade in goods
and services, income, and net unilateral current transfers—decreased to $101.5
billion (preliminary) in the first quarter of 2009, the smallest deficit since
the fourth quarter of 2001, from $154.9 billion (revised) in the fourth quarter
of 2008. The decrease was more than accounted for by a decrease in the deficit
on goods. A decrease in net unilateral current transfers to foreigners also
contributed to the decrease in the current-account deficit. Decreases in the
surpluses on income and on services were partly offsetting.

Goods and services

The deficit on goods and services decreased to $91.2 billion in the
first quarter from $144.5 billion in the fourth.

Goods

The deficit on goods decreased to $124.0 billion in the first quarter
from $178.8 billion in the fourth.

Goods exports decreased to $249.4 billion from $290.6 billion. All major
and most sub-major commodity categories decreased. The largest decrease was in
industrial supplies and materials, partly reflecting declines in chemicals, in
metals and nonmetallic products, and in petroleum and products. The next largest
decrease was in capital goods, particularly in “other” industrial, agricultural,
and service industry machinery, in oil drilling, mining, and construction
machinery, and in semiconductors. Automotive products also decreased
substantially, mostly reflecting a drop in passenger cars.

Goods imports decreased to $373.4 billion from $469.4 billion. All major
and most sub-major commodity categories decreased. More than one-third of the
decrease in total imports was accounted for by petroleum and products. The next
largest decrease was in nonpetroleum industrial supplies and materials,
particularly in metals and nonmetallic products and in chemicals. Automotive
products decreased substantially, largely reflecting a drop in passenger cars.
Among capital goods, the largest decreases were in “other” industrial,
agricultural, and service industry machinery, in electric generating machinery,
electric apparatus, and parts, in oil drilling, mining, and construction
machinery, in computers, peripherals, and parts, and in telecommunications
equipment.

Services

The surplus on services decreased to $32.8 billion in the first quarter
from $34.3 billion in the fourth.

Services receipts decreased to $125.9 billion from $133.6 billion. The
decrease was mostly accounted for by decreases in “other” transportation (such
as freight and port services), in travel, in “other” private services (such as
business, professional, and technical services, insurance services, and financial
services), in passenger fares, and in royalties and license fees.

Services payments decreased to $93.1 billion from $99.3 billion. The
decrease was largely accounted for by decreases in “other” transportation, in
passenger fares, and in travel. All other major services categories also
decreased.

Income

The surplus on income decreased to $19.3 billion in the first quarter from
$21.1 billion in the fourth.

Investment income

Income receipts on U.S.-owned assets abroad decreased to $133.5 billion
from $166.8 billion. The decrease was more than accounted for by decreases in
“other” private receipts (which consists of interest and dividends) and in direct
investment receipts.

Income payments on foreign-owned assets in the United States decreased to
$112.4 billion from $143.8 billion. The decrease was mostly accounted for by
decreases in direct investment payments and in “other” private payments (which
consists of interest and dividends). U.S. government payments also decreased.

Compensation of employees

Receipts for compensation of U.S. workers abroad were virtually unchanged
at $0.7 billion, and payments for compensation of foreign workers in the United
States were virtually unchanged at $2.6 billion.

Unilateral current transfers

Net unilateral current transfers to foreigners were $29.6 billion in the
first quarter, down from $31.5 billion in the fourth. The decrease was mostly
accounted for by a decrease in U.S. government grants.

Capital Account

Net capital account payments (outflows) were virtually unchanged at $0.7
billion in the first quarter.


Financial Account

Net financial inflows were $47.1 billion in the first quarter, down from
$88.3 billion in the fourth. The slowdown resulted from a pickup in financial
outflows for foreign-owned assets in the United States (a larger decrease in
foreign-owned assets) that was only partly offset by a pickup in financial
inflows for U.S.-owned assets abroad (a larger decrease in U.S.-owned assets).

U.S.-owned assets abroad

U.S.-owned assets abroad decreased $125.2 billion in the first quarter,
following a decrease of $114.7 billion in the fourth.

U.S. claims on foreigners reported by U.S. banks increased $90.9 billion
in the first quarter, following a decrease of $293.9 billion in the fourth.
(Examples of these claims are U.S. banks’ deposits at foreign banks and U.S.
banks’ loans to foreigners.)

Transactions in foreign securities shifted to net U.S. purchases of $35.3
billion in the first quarter from net U.S. sales of $70.0 billion in the fourth.
Net U.S. purchases of foreign stocks were $1.5 billion, a shift from net U.S.
sales of $35.1 billion. Net U.S. purchases of foreign bonds were $33.8 billion,
a shift from net U.S. sales of $34.9 billion.

U.S. direct investment abroad increased $24.0 billion in the first quarter,
following an increase of $84.5 billion in the fourth. The slowdown resulted from
slowdowns in net equity capital investment abroad and in reinvested earnings and
from a larger decrease in net intercompany debt investment abroad in the first
quarter than in the fourth quarter.

U.S. official reserve assets increased $1.0 billion in the first quarter,
following an increase of $3.1 billion in the fourth.

U.S. government assets other than official reserve assets decreased $244.1
billion in the first quarter, following an increase of $265.3 billion in the
fourth. The shift resulted from a shift from net drawings to net repayments on
temporary reciprocal currency arrangements between the U.S. Federal Reserve
System and foreign central banks.

Foreign-owned assets in the United States

Foreign-owned assets in the United States decreased $78.1 billion in the
first quarter, following a decrease of $11.9 billion in the fourth.

U.S. liabilities to foreigners reported by U.S. banks decreased $163.7
billion in the first quarter, following a decrease of $35.2 billion in the fourth.
(Examples of these liabilities are deposits of foreign residents at banks in the
United States and loans by banks abroad to banks in the United States.)

Net foreign purchases of U.S. Treasury securities were $56.9 billion in
the first quarter, down from $81.5 billion in the fourth.

Net foreign sales of U.S. securities other than U.S. Treasury securities
were $54.9 billion in the first quarter, up from $29.0 billion in the fourth.
Net foreign sales of U.S. federally sponsored agency bonds were $45.3 billion,
up from $21.4 billion. Net foreign sales of U.S. corporate bonds were $15.5
billion, up from $3.8 billion. Transactions in U.S. stocks shifted to net
foreign purchases of $6.0 billion from net foreign sales of $3.9 billion.

Foreign direct investment in the United States increased $35.3 billion in
the first quarter, following an increase of $96.8 billion in the fourth. The
slowdown was more than accounted for by a slowdown in net equity capital
investment in the United States and, to a much lesser extent, a shift from
positive to negative reinvested earnings. In contrast, net intercompany debt
investment in the United States increased in the first quarter after decreasing
in the fourth quarter.

Foreign official assets in the United States increased $71.2 billion in
the first quarter, following a decrease of $16.0 billion in the fourth.

Net U.S. currency shipments to foreigners were $11.8 billion in the first
quarter, down from $29.9 billion in the fourth.

The statistical discrepancy—errors and omissions in recorded transactions—
was $55.1 billion in the first quarter, compared with $67.2 billion in the fourth.

In the first quarter, the U.S. dollar appreciated 2 percent on a trade-
weighted quarterly average basis against a group of 7 major currencies.

Revisions

Statistics from the U.S. international transactions accounts have been
updated and revised to incorporate newly available source data, improved
estimating methodologies, and a change in definition that affects the current
account and the capital account. For this annual revision, the most important
change is a new treatment of certain disaster-related insurance losses that is
consistent with new international standards and with the treatment that will be
introduced in the forthcoming comprehensive revision of the National Income and
Product Accounts. Other changes introduced in this annual revision are
summarized below.

* Exports and imports of goods on a balance of payments basis are revised
for 2001-2008. Revisions to exports reflect revised Census Bureau source data
for aircraft and improved procedures for excluding goods that are included in
transfers under U.S. military agency sales contracts. Revisions to imports
incorporate new source data for improved coverage of locomotives and railcars.

* Services receipts and payments are revised for 2006-2008 to incorporate
updated and revised data from BEA’s benchmark and quarterly surveys of selected
international services transactions. In addition, transfers under U.S. military
agency sales contracts are revised to more completely reflect the use of U.S.
government grants to fund the training of local security forces in Iraq and
Afghanistan.

* Direct investment financial flows and income receipts and payments are
revised for 2006-2008 to incorporate new data from BEA’s quarterly and annual
surveys of U.S. direct investment abroad and foreign direct investment in the
United States.

* For foreign securities, financial flows and interest receipts for foreign
bonds and dividend receipts for foreign stocks are revised for 2006-2008 to
incorporate results of the U.S. Treasury Department’s annual survey of securities
claims for December 2007 and other new source data.

* For U.S. securities, financial flows and interest payments for U.S.
corporate bonds, U.S. Treasury bonds, and U.S. agency bonds and dividend payments
for U.S. stocks are revised for 2006-2008 to incorporate results of the U.S.
Treasury Department’s annual survey of securities liabilities for June 2008 and
other new source data.

Statistics of U.S. international transactions are revised for 1992 and for
2001-2008. The revisions for 1992 are entirely due to the new treatment of
certain disaster-related insurance losses. Revised statistics for the detailed
components of the U.S. international transactions accounts for 2007-2008 are
shown in table 1. Summary information on revisions for 1992 and for 2001-2008
is shown in table 2.

Preliminary statistics for 2008 and revised statistics for 2006-2007 of
the U.S. net international investment position will be released on June 26.

The fourth-quarter 2008 international transactions are revised from
previously published statistics. Revisions reflect both newly available source
data for the fourth quarter and changes from all of the above sources of
revision. The current-account deficit was revised to $154.9 billion from $132.8
billion. The goods deficit was revised to $178.8 billion from $174.1 billion;
the services surplus was revised to $34.3 billion from $33.7 billion; the income
surplus was revised to $21.1 billion from $36.5 billion; and unilateral current
transfers were revised to net outflows of $31.5 billion from $28.9 billion. Net
financial inflows were revised to $88.3 billion from $76.8 billion.

* * *

Release dates in 2009:

Fourth quarter and year 2008..................March 18, 2009 (Wednesday)
First quarter 2009.............................June 17, 2009 (Wednesday)
Second quarter 2009.......................September 16, 2009 (Wednesday)
Third quarter 2009.........................December 16, 2009 (Wednesday)