International Financial Law Prof Blog

IMF's State of the Global Economy as of July 2, 2020

Last week we released our World Economic Outlook Update for June, which downgraded the April forecast—pegging global growth at -4.9 percent this year, down from -3 percent in April. Next year’s growth is forecast to be 5.4 percent.  Discussing these figures and more, Managing Director Kristalina Georgieva spoke to Financial Times Africa Editor David Pilling in a new 23-min video interview about the economic uncertainty caused by the coronavirus crisis, how Africa is in danger after a period of growth, and how the IMF is supporting countries through this crisis. For a look at the global outlook for the business community, take some time and watch MD Georgieva's recent 45-min conversation with the Harvard Business Review. And for a more detailed discussion on how COVID-19 has upended the global economy across the board, watch a new 50-min interview with Chief Economist Gita Gopinath—hosted earlier this week—by the Center for Strategic & International Studies. OUTLOOK FOR LATIN AMERICA AND THE CARIBBEAN Latin America and the Caribbean have become the new COVID-19 global epicenter. The human cost has been tragic, with over 100,000 lives lost. The economic toll has also been steep. Our World Economic Outlook Update now estimates the region to shrink by 9.4 percent in 2020, four percentage points worse than the April projection and the worst recession on record. A mild recovery to +3.7 percent is projected in 2021.  The rates of COVID-19 infections and deaths per capita are approaching those in Europe and the United States, with the total number of cases accounting for about 25 percent of the worldwide total. Against this backdrop, countries should be very cautious when considering reopening their economies and allow science and data to guide the process. Indeed, many countries in the region have high levels of informality and low preparedness to handle new outbreaks, like a high occupancy of intensive care unit beds and low testing and tracing capacity. Click here to read the full blog by Director of the Western Hemisphere Department Alejandro Werner, which includes several charts visualizing the impact of COVID-19 on the region and three policy priorities for how best to proceed. There are also specific insights with respect to Argentina, Brazil, Chile, Colombia, Mexico, Peru, Central America, Panama & the Dominican Republic, as well as the Caribbean. ASIA'S REOPENING AND RECOVERY For the first time in living memory, Asia’s growth is expected to contract by 1.6 percent—a downgrade to the April projection of zero growth. While Asia’s economic growth in the first quarter of 2020 was better than projected in the April World Economic Outlook—partly owing to early stabilization of the virus in some—projections for 2020 have been revised down for most of the countries in the region due to weaker global conditions and more protracted containment measures in several emerging economies. In the absence of a second wave of infections and with unprecedented policy stimulus to support the recovery, growth in Asia is projected to rebound strongly to 6.6 percent in 2021. But even with this fast pickup in economic activity, output losses due to COVID-19 are likely to persist. We project Asia’s economic output in 2022 to be about 5 percent lower compared with the level predicted before the crisis; and this gap will be much larger if we exclude China, where economic activity has already started to rebound. Our projections for 2021 and beyond assume a strong rebound in private demand; however, this may be optimistic for several reasons: slower growth in trade, longer than expected lockdowns, rising inequality, and both weak balance sheets and geopolitical tensions. Click here to read the full blog by Director of the Asia and Pacific Department Chang Yong Rhee, which also details key policies that would support the region's recovery. LESSONS FROM VIETNAM ON CONTAINING COVID-19 At the outset, it was expected to be an uphill battle. Vietnam was regarded as highly vulnerable, given its long border and extensive trade with China, densely populated urban areas, and limited healthcare infrastructure. But Vietnam’s cost-effective containment strategy resulted in only 352 confirmed cases and no deaths in a population of almost 100 million people. The country was among the first to lift virtually all domestic containment measures. Vietnam’s successful strategy was informed by its experience with previous outbreaks, like the Severe Acute Respiratory Syndrome, or SARS, in 2003. Early on, the Prime Minister prioritized health above economic concerns. The strategy was swiftly deployed with the help of the military, public security services, and grass-root organizations, which speaks to some features unique to Vietnam. Effective and transparent communications won the population’s buy-in, and contains broader lessons for developing countries. Click here to read more in IMF Country Focus. Have your headphones? Listen to a new 14-minute podcast with IMF economists Era Dabla-Norris and Anne-Marie Gulde of the Asia Pacific Department on why Vietnam's approach should allow for a quicker rebound. SUB-SAHARAN AFRICA’S SHARPEST ECONOMIC DECLINE SINCE THE 1970'S In our latest Regional Economic Outlook for sub-Saharan Africa, Real GDP is now forecast to contract by 3.2 percent, double the contraction predicted in April. On average, per capita incomes across the region will fall by 5.5 percent in 2020, back to levels last seen nearly a decade ago. This will likely lead to more poverty and widen income inequality as lockdowns disproportionally affect informal sector workers and small- and medium-sized companies in the services sectors. Regional policies should remain focused on safeguarding public health, supporting people and businesses hardest hit by the crisis, and facilitating the recovery. For example, shortly after the region’s 100th case on March 15, many country authorities proactively implemented strict containment measures to control the COVID-19 outbreak. These measures led to more people staying home and reducing daily movements to areas with services and recreational facilities, including the informal economy. The growth of new cases has slowed somewhat since, and a number of countries have cautiously eased some of their containment measures. But region-wide, the pandemic is still in its exponential phase with more than a quarter of a million confirmed cases, and infection cases doubling every 2-3 weeks. Click here to view six charts that tell a visual story of how COVID-19 has impacted sub-Saharan Africa. For more, you can download the report, read the press release and watch the 30-min Q&A press conference. If you're wondering what impact COVID-19 has had specifically on Africa's energy sector, I would encourage you to read this speech from earlier this week by Director of the African Department Abebe Aemro Selassie to the IEA Africa Ministerial Roundtable. OUTLOOK FOR THE MIDDLE EAST AND CENTRAL ASIA The Gulf states' economies could contract by 7.6 percent this year in their deepest decline in decades, as COVID-19 and low oil prices take their toll. The new IMF projection for the six-nation Gulf Cooperation Council (GCC) is dramatically worse than the 2.7 percent contraction we forecast just two months ago. Oil revenues in the GCC, which supply nearly a fifth of the world's crude, are also expected to decline by $200 billion in 2020, said Director of the Middle East and Central Asia Department Jihad Azour in a virtual economic forum on the prospects for recovery in the region. However, Azour predicted a faster rebound in 2021 as Gulf economies grow by 2.5 percent—a full 10 percent turnaround—but that the sharp drop in oil prices and the impact of the pandemic would lead to more debt in GCC economies. Last week, the IMF projected the Saudi economy, the largest in the region, would shrink by 6.8 percent—the lowest growth in more than three decades. A more detailed regional economic outlook will be released in the coming weeks. If you're wondering about the outlook for Central Asia given the crisis, watch this just-released 15-min interview between Jihad Azour with Lyazzat Shatayeva of Kazakh TV. A NEW INDEX OF DIGITAL FINANCIAL INCLUSION The pandemic could be a game changer for digital financial services. Low-income households and small firms can benefit greatly from advances in mobile money, fintech services, and online banking. Financial inclusion as a result of digital financial services can also boost economic growth. While the pandemic is set to increase use of these services, it has also posed challenges for the growth of the industry’s smaller players and highlighted unequal access to digital infrastructure. Many countries (for example, Liberia, Ghana, Kenya, Kuwait, Myanmar, Paraguay and Portugal) are supporting this shift with measures such as lowering fees and increasing limits on mobile money transactions. Moreover, in a new study, we introduce a new index of digital financial inclusion that measures the progress in 52 emerging market and developing economies. We found that digitalization increased financial inclusion between 2014 and 2017, even where financial inclusion through traditional banking services was declining. This is likely to have progressed more since then. For more details, click here to read the full blog by the IMF's Ulric Eriksson von Allmen, Purva Khera, Sumiko Ogawa, and Ratna Sahay.  Still, Internet usage remains a luxury: half of the world’s population does not have access to the Internet, either through a mobile device or through fixed line broadband. Countries in sub-Saharan Africa, followed by many in emerging and developing economies in Asia, are among those with the lowest access to the Internet despite being world leaders in mobile money transactions. There is also a large variation in Internet connectivity by firms in sub-Saharan Africa—only about 60 percent of businesses use email for business compared to about 85 percent in Europe and Central Asia. For more, view our latest Chart of the Week on Internet inequality. REMITTANCES TO FALL BY $100 BILLION IN 2020 COVID-19 is crippling the economies of rich and poor countries alike. Yet for many low-income and fragile states, the economic shock will be magnified by the loss of remittances, which represent a lifeline that supports households as well as provides much-needed tax revenue. In a new article for F&D, Deputy Managing Director Antoinette Sayeh and Assistant Director in the Institute for Capacity Development Ralph Chami dig deeper into how the pandemic threatens to dry up this vital source of income, and what measures can be taken to tackle this challenge. As of 2018, remittance flows to low-income and fragile states reached $350 billion, surpassing foreign direct investment, portfolio investment, and foreign aid as the single most important source of income from abroad. A drop in remittance flows is likely to heighten economic, fiscal, and social pressures on governments of these countries already struggling to cope even in normal times. And according to the World Bank, remittance flows are expected to drop by about $100 billion in 2020, which represents roughly a 20 percent drop from their 2019 level.  Read the full article here with plenty of charts. Prefer the PDF? Click here to download. And if you're in a listening mood, click here for a new 18-min podcast with author Ralph Chami. IMF AND COVID-19 We just updated our global policy tracker to help our member countries be more aware of the experiences of others in combating COVID-19, and we are regularly updating our lending tracker, which visualizes the latest emergency financial assistance and debt relief to member countries approved by the IMF’s Executive Board. To date, 72 countries will have been approved for emergency financing, totaling about US$25.3 billion. Looking for our latest Q&A about the IMF's response to COVID-19? Click here. We are also continually producing a special series of notes—around 50 to date—by IMF experts to help members address the economic effects of COVID-19 on a range of topics including fiscal, legal, statistical, tax and more. The most recent additions include a focus on food markets during COVID-19, budgeting in crisis, and digital financial services and the pandemic.  FINAL THOUGHT Thank you again very much for your interest in the Weekend Read. We really appreciate your time. If you have any questions, comments or feedback of any kind, please do write me a note. And if you're on LinkedIn, subscribe to this newsletter in a more  visual format. Have a safe weekend,

Rahim Kanani Editor, IMF Weekend Read rkanani@IMF.org / LinkedIn P.S. If you're a young person interested in learning more about the IMF, check out our new page dedicated to youth dialogue and engagement. You'll find articles, videos and other resources on climate change, fintech, gender equality and more, as well as economic explainers on issues like social spending and corruption.

U.S. International Investment Position, First Quarter 2020, Year 2019, and Annual Update

First Quarter 2020

The U.S. net international investment position, the difference between U.S. residents’ foreign financial assets and liabilities, was –$12.06 trillion at the end of the first quarter of 2020, according to statistics released by the U.S. Bureau of Economic Analysis (BEA). Assets totaled $26.77 trillion and liabilities were $38.82 trillion.

At the end of the fourth quarter of 2019, the net investment position was –$11.05 trillion (Table 1).

The –$1.01 trillion change in the net investment position from the fourth quarter of 2019 to the first quarter of 2020 came from net financial transactions of –$184.2 billion and net other changes in position, such as price and exchange rate changes, of –$822.8 billion (Table A).

Coronavirus (COVID-19) Impact on First Quarter 2020 International Investment Position

In the first quarter of 2020, the declines in U.S. assets and liabilities reflect the impact of the COVID-19 pandemic. The disruption to global production and financial markets led to sharp declines in global stock prices, the appreciation of the U.S. dollar against most foreign currencies, and a shortage of U.S. dollar liquidity in foreign money markets. The stock price declines and the appreciation of the U.S. dollar are reflected in price changes and exchange rate changes. Currency swap transactions between the U.S. Federal Reserve System and several foreign central banks to alleviate the shortage of U.S. dollar liquidity contributed to record levels of U.S. acquisition of assets and U.S. incurrence of liabilities. The full economic effects of the COVID-19 pandemic cannot be quantified in the statistics for the first quarter because the impacts are generally embedded in source data and cannot be separately identified. For more information on the currency swaps, see the technical note that accompanied the June 19 international transactions accounts news release.

Table A. Quarterly Change in the U.S. Net International Investment Position
Billions of dollars, not seasonally adjusted

	Position, 2019 Q4	Change in position in 2020 Q1			Position, 2020 Q1
		Total	Attributable to:
			Financial transactions	Other changes in position 1
U.S. net international investment position	-11,050.5	-1,007.0	-184.2	-822.8	-12,057.5
Net position excluding financial derivatives	-11,070.7	-1,022.1	-162.4	-859.8	-12,092.8
Financial derivatives other than reserves, net	20.2	15.2	-21.8	37.0	35.3
U.S. assets	29,152.8	-2,385.7	(2)	(2)	26,767.1
Assets excluding financial derivatives	27,362.4	-3,595.8	739.9	-4,335.7	23,766.6
Financial derivatives other than reserves	1,790.4	1,210.1	(2)	(2)	3,000.5
U.S. liabilities	40,203.3	-1,378.7	(2)	(2)	38,824.6
Liabilities excluding financial derivatives	38,433.0	-2,573.6	902.3	-3,475.9	35,859.4
Financial derivatives other than reserves	1,770.3	1,194.9	(2)	(2)	2,965.2
1. Disaggregation of other changes in position into price changes, exchange rate changes, and other changes in volume and valuation is only presented for annual statistics (see table B and table 2 in this release). 2. Financial transactions and other changes in financial derivatives positions are available only on a net basis; they are not separately available for U.S. assets and U.S. liabilities.

U.S. assets decreased by $2.39 trillion, to a total of $26.77 trillion, at the end of the first quarter, mostly reflecting decreases in portfolio investment and direct investment assets that were partly offset by increases in financial derivatives and in other investment assets. Portfolio investment assets decreased by $2.39 trillion, to $10.99 trillion, and direct investment assets decreased by $1.82 trillion, to $6.98 trillion, reflecting sharp decreases in foreign stock prices and the depreciation of major foreign currencies against the U.S. dollar that lowered the value of these assets in dollar terms. These large changes in asset prices reflected a sudden decrease in production and earnings as global economic activity was disrupted by the COVID-19 pandemic.

U.S. liabilities decreased by $1.38 trillion, to a total of $38.82 trillion, at the end of the first quarter, mostly reflecting decreases in direct investment and portfolio investment liabilities that were partly offset by increases in financial derivatives and in other investment liabilities. Direct investment liabilities decreased by $1.78 trillion, to $8.77 trillion, and portfolio investment liabilities decreased by $1.61 trillion, to $19.78 trillion, mostly reflecting decreases in U.S. stock prices amid the COVID-19 pandemic.

Annual Update for Year 2019

The U.S. net international investment position was –$11.05 trillion at the end of 2019 compared to –$9.67 trillion at the end of 2018 (Table 2).

The –$1.38 trillion change in the net investment position from the end of 2018 to the end of 2019 came from net financial transactions of –$395.5 billion and net other changes in position, such as price and exchange rate changes, of –$980.5 billion (Table B).

U.S. assets increased by $3.92 trillion, to a total of $29.15 trillion, at the end of 2019, reflecting increases in all major categories of assets, particularly in portfolio investment and direct investment assets. Portfolio investment assets increased by $1.94 trillion, to $13.38 trillion, and direct investment assets increased by $1.35 trillion, to $8.80 trillion, driven mainly by foreign stock price increases.

U.S. liabilities increased by $5.30 trillion, to a total of $40.20 trillion, at the end of 2019, reflecting increases in all major categories of liabilities, particularly in portfolio investment and direct investment liabilities. Portfolio investment liabilities increased by $2.55 trillion, to $21.39 trillion, and direct investment liabilities increased by $2.15 trillion, to $10.55 trillion, driven mainly by U.S. stock price increases.

Table B. Annual Change in the U.S. Net International Investment Position
Billions of dollars

	Position, 2018	Change in position in 2019						Position, 2019
		Total	Attributable to:
			Financial transactions	Other changes in position
				Total	Price changes	Exchange rate changes	Changes in volume and valuation n.i.e
U.S. net international investment position	-9,674.4	-1,376.1	-395.5	-980.5	(1)	(1)	(1)	-11,050.5
Net position excl. derivatives	-9,716.5	-1,354.2	-357.2	-997.0	-1,104.9	119.5	-11.5	-11,070.7
Financial derivatives, net	42.0	-21.9	-38.3	16.4	(1)	(1)	(1)	20.2
U.S. assets	25,233.8	3,919.0	(2)	(2)	(2)	(2)	(2)	29,152.8
Assets excl. derivatives	23,784.2	3,578.2	440.8	3,137.4	3,080.1	128.3	-71.0	27,362.4
Financial derivatives	1,449.6	340.8	(2)	(2)	(2)	(2)	(2)	1,790.4
U.S. liabilities	34,908.2	5,295.1	(2)	(2)	(2)	(2)	(2)	40,203.3
Liabilities excl. derivatives	33,500.7	4,932.4	798.0	4,134.4	4,185.0	8.8	-59.4	38,433.0
Financial derivatives	1,407.5	362.7	(2)	(2)	(2)	(2)	(2)	1,770.3
1. Data are not separately available for price changes, exchange rate changes, and changes in volume and valuation n.i.e. (not included elsewhere). 2. Financial transactions and other changes in financial derivatives positions are available only on a net basis; they are not separately available for U.S. assets and U.S. liabilities.

Corporate Profits fall $263 billion in 1st Quarter 2020 - real GDP decreased 5.0 percent

Corporate Profits

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $262.8 billion in the first quarter, in contrast to an increase of $53.0 billion in the fourth quarter (table 10).

Profits of domestic financial corporations decreased $37.5 billion in the first quarter, in contrast to an increase of $0.7 billion in the fourth quarter. Profits of domestic nonfinancial corporations decreased $181.8 billion, in contrast to an increase of $53.7 billion. Rest-of-the-world profits decreased $43.5 billion, compared with a decrease of $1.4 billion.

Updates to GDP

In the third estimate, first-quarter real GDP decreased 5.0 percent from the fourth quarter, unrevised from the second estimate. An upward revision to nonresidential fixed investment was offset by downward revisions to private inventory investment, PCE, and exports.  For more information, see the Technical Note. For information on updates to GDP, see the "Additional Information" section below.

	Advance Estimate	Second Estimate	Third Estimate
	(Percent change from preceding quarter)
Real GDP	-4.8	-5.0	-5.0
Current-dollar GDP	-3.5	-3.5	-3.4
Real GDI	…	-4.2	-4.4
Average of Real GDP and Real GDI	…	-4.6	-4.7
Gross domestic purchases price index	1.6	1.7	1.7
PCE price index	1.3	1.3	1.3
PCE price index excluding food and energy	1.8	1.6	1.7

Global foreign direct investment projected to plunge 40% in 2020

Global foreign direct investment (FDI) flows are forecast to decrease by up to 40% in 2020, from their 2019 value of $1.54 trillion, according to UNCTAD’s World Investment Report 2020.

This would bring FDI below $1 trillion for the first time since 2005. In addition, FDI is projected to decrease by a further 5% to 10% in 2021 and to initiate a recovery in 2022, the report says.

“The outlook is highly uncertain. Prospects depend on the duration of the health crisis and on the effectiveness of policies mitigating the pandemic’s economic effects,” said UNCTAD Secretary-General Mukhisa Kituyi.

The pandemic is a supply, demand and policy shock for FDI. The lockdown measures are slowing down existing investment projects. The prospect of a deep recession will lead multinational enterprises (MNEs) to reassess new projects. Policy measures taken by governments during the crisis include new investment restrictions.

Investment flows are expected to slowly recover starting 2022, led by global value chains (GVCs) restructuring for resilience, replenishment of capital stock and recovery of the global economy.

Early warning sign

MNE profit alerts are an early warning sign. The top 5,000 MNEs worldwide, which account for most of global FDI, have seen expected earnings for the year revised down by 40% on average, with some industries plunging into losses. Lower profits will hurt reinvested earnings, which on average account for more than 50% of FDI.

Early indicators confirm the immediacy of the impact. Both new greenfield investment project announcements and cross-border mergers and acquisitions (M&As) dropped by more than 50% in the first months of 2020 compared with last year.

In global project finance, an important source of investment in infrastructure projects, new deals fell by more than 40%.

“The impact, although severe everywhere, varies by region. Developing economies are expected to see the biggest fall in FDI because they rely more on investment in GVC-intensive and extractive industries, which have been severely hit, and because they are not able to put in place the same economic support measures as developed economies,” said James Zhan, UNCTAD’s director of investment and enterprise.

“Despite the drastic decline in global FDI flows during the crisis, the international production system will continue to play an important role in economic recovery and development. Global FDI flows will continue to add to the existing FDI stock, which stood at $37 trillion at the end of 2019,” Mr. Zhan added.

Global FDI flows rose modestly in 2019, following the sizable declines registered in 2017 and 2018. At $1.54 trillion, inflows were 3% up.

The rise in FDI was mainly the result of higher flows to developed economies, as the impact of the 2017 tax reforms in the United States waned.

Flows to transition economies also increased, while those to developing economies declined marginally. FDI flows to structurally weak, vulnerable and small economies remained stable overall, declining by only 1%.

Figure 1: Global FDI infows, 2015–2019 and 2020–2022 forecast

Source: UNCTAD

 

Figure 2: Impact of the pandemic on FDI: transmission mechanisms

Source: UNCTAD

 

Related links:

• Coronavirus (COVID-19) : News, analysis and resources
• World Investment Report 2020
• COVID-19 will likely transform global production, says UN report
• Investment flows in Africa set to drop 25% to 40% in 2020
• Investment flows to developing countries in Asia could fall up to 45% in 2020
• Foreign investment in Latin America expected to halve in 2020

U.S. International Transactions, First Quarter 2020 and Annual Update

The U.S. current account deficit, which reflects the combined balances on trade in goods and services and income flows between U.S. residents and residents of other countries, narrowed by $0.1 billion, or 0.1 percent, to $104.2 billion in the first quarter of 2020, according to statistics from the U.S. Bureau of Economic Analysis (BEA). The revised fourth quarter deficit was $104.3 billion.

The first quarter deficit was 1.9 percentage  of current dollar gross domestic product, up less than 0.1 percentage point from the fourth quarter.

The $0.1 billion narrowing of the current account deficit in the first quarter mainly reflected a reduced deficit on goods that was largely offset by a reduced surplus on primary income and an expanded deficit on secondary income.

Coronavirus (COVID-19) Impact on First Quarter 2020 International Transactions

The declines in first quarter 2020 current account transactions are, in part, due to the impact of COVID-19, as many businesses were operating at limited capacity or ceased operations completely, and the movement of travelers across borders was restricted. In the financial account, currency swaps between the U.S. Federal Reserve System and several foreign central banks contributed to record levels of U.S. acquisition of assets and U.S. incurrence of liabilities. The full economic effects of the COVID-19 pandemic cannot be quantified in the statistics for the first quarter because the impacts are generally embedded in source data and cannot be separately identified. For more information on the impact of COVID-19 on the statistics, see the technical note that accompanies this release.

Current Account Transactions (tables 1-5)

Exports of goods and services to, and income received from, foreign residents decreased $47.5 billion, to $902.3 billion, in the first quarter. Imports of goods and services from, and income paid to, foreign residents decreased $47.7 billion, to $1.01 trillion.

Trade in Goods (table 2)

Exports of goods decreased $8.4 billion, to $403.0 billion, mostly reflecting decreases in capital goods, mainly civilian aircraft, and in consumer goods, mainly jewelry and collectibles. Imports of goods decreased $18.6 billion, to $595.3 billion, mostly reflecting decreases in consumer goods, mainly cell phones and other household goods, and in capital goods, mainly computers, telecommunications equipment, and other industrial machinery.

Trade in Services (table 3)

Exports of services decreased $11.7 billion, to $209.4 billion, and imports of services decreased $12.2 billion, to $136.1 billion. The decreases in both exports and imports mainly reflected decreases in travel, primarily other personal travel, and in transport, primarily air passenger transport.

Primary Income (table 4)

Receipts of primary income decreased $27.8 billion, to $255.1 billion, and payments of primary income decreased $18.3 billion, to $202.7 billion. The decreases in both receipts and payments mostly reflected decreases in direct investment income, mainly earnings.

Secondary Income (table 5)

Receipts of secondary income increased $0.3 billion, to $34.8 billion, and payments of secondary income increased $1.5 billion, to $72.4 billion. The increases in both receipts and payments mainly reflected increases in private transfers, primarily private sector fines and penalties.

Capital Account Transactions (table 1)

Capital transfer payments increased $0.9 billion, to $3.0 billion in the first quarter, primarily reflecting an increase in investment grants.

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

Net financial account transactions were −$201.1 billion in the first quarter, reflecting net U.S. borrowing from foreign residents.

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

First quarter transactions increased U.S. residents’ foreign financial assets by $722.7 billion. Transactions increased portfolio investment assets by $144.7 billion, resulting from large and partly offsetting transactions in equity securities and debt securities, and other investment assets, mostly currency and deposits, by $614.6 billion. Transactions in deposits included $353.9 billion in foreign currency acquired by the Federal Reserve System from central bank liquidity swaps with foreign central banks. Transactions decreased direct investment assets, mostly debt instruments, by $36.3 billion, and reserve assets by $0.2 billion.

Liabilities (tables 1, 6, 7, and 8)

First quarter transactions increased U.S. liabilities to foreign residents by $902.0 billion. Transactions increased direct investment liabilities, mainly equity, by $47.8 billion; portfolio investment liabilities by $21.3 billion, resulting from large and mostly offsetting transactions in equity securities and debt securities; and other investment liabilities, mostly currency and deposits and loans, by $832.9 billion. Transactions in deposits included $387.3 billion in interbank deposits received by the U.S. branches of foreign banks from affiliated foreign banks. These were mainly the U.S. dollars that foreign central banks obtained through the swaps described in the assets section above, which they then lent to foreign banks.

Financial Derivatives (table 1)

Net transactions in financial derivatives were −$21.8 billion in the first quarter, reflecting net borrowing from foreign residents.

Updates to Fourth Quarter 2019 International Transactions Accounts Balances Billions of dollars, seasonally adjusted
	Preliminary estimate	Revised estimate
Current account balance	-109.8	−104.3
Goods balance	−202.8	−202.5
Services balance	62.9	72.7
Primary income balance	67.3	62.0
Secondary income balance	−37.3	−36.5
Net financial account transactions	−71.8	−29.3

Gross Domestic Product, 1st Quarter 2020 (Second Estimate); Corporate Profits, 1st Quarter 2020 (Preliminary Estimate)

Real gross domestic product (GDP) decreased at an annual rate of 5.0 percent in the first quarter of 2020 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.1 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the decrease in real GDP was 4.8 percent. With the second estimate, a downward revision to private inventory investment was partly offset by upward revisions to personal consumption expenditures (PCE) and nonresidential fixed investment (see "Updates to GDP" on page 2).

Coronavirus (COVID-19) Impact on the First-Quarter 2020 GDP Estimate

The decline in first quarter GDP reflected the response to the spread of COVID-19, as governments issued "stay-at-home" orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified. For more information, see the Technical Note.

The decrease in real GDP in the first quarter reflected negative contributions from PCE, private inventory investment, nonresidential fixed investment, and exports that were partly offset by positive contributions from residential fixed investment, federal government spending, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased (table 2).

The decrease in PCE reflected a decrease in services, led by health care as well as food services and accommodations. The decrease in private inventory investment was mainly in nondurable goods manufacturing, led by petroleum and coal products. The decrease in nonresidential fixed investment primarily reflected a decrease in equipment, led by transportation equipment. The decrease in exports primarily reflected a decrease in services, led by travel.

Real gross domestic income (GDI) decreased 4.2 percent in the first quarter, in contrast to an increase of 3.1 percent (revised) in the fourth quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, decreased 4.6 percent in the first quarter, in contrast to an increase of 2.6 percent in the fourth quarter (table 1).

Current‑dollar GDP decreased 3.5 percent, or $191.6 billion, in the first quarter to a level of $21.54 trillion. In the fourth quarter, GDP increased 3.5 percent, or $186.6 billion (tables 1 and 3).

The price index for gross domestic purchases increased 1.7 percent in the first quarter, compared with an increase of 1.4 percent in the fourth quarter (table 4). The PCE price index increased 1.3 percent, compared with an increase of 1.4 percent. Excluding food and energy prices, the PCE price index increased 1.6 percent, compared with an increase of 1.3 percent.

More information on the source data that underlie the estimates is available in the "Key Source Data and Assumptions" file on BEA's website.

Updates to GDP

In the second estimate, first-quarter real GDP decreased 5.0 percent from the fourth quarter, a downward revision of 0.2 percentage point. The revision primarily reflected a downward revision to private inventory investment that was partly offset by upward revisions to PCE and nonresidential fixed investment. For more information, see the Technical Note. For information on updates to GDP, see the "Additional Information" section below.

	Advance Estimate	Second Estimate
	(Percent change from preceding quarter)
Real GDP	-4.8	-5.0
Current-dollar GDP	-3.5	-3.5
Real GDI	…	-4.2
Average of Real GDP and Real GDI	…	-4.6
Gross domestic purchases price index	1.6	1.7
PCE price index	1.3	1.3
PCE price index excluding food and energy	1.8	1.6

For the fourth quarter of 2019, the percent change in real GDI was revised from 2.6 percent to 3.1 percent based on new fourth-quarter data from the BLS Quarterly Census of Employment and Wages.

Corporate Profits

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $295.4 billion in the first quarter, in contrast to an increase of $53.0 billion in the fourth quarter (table 10).

Profits of domestic financial corporations decreased $67.4 billion in the first quarter, in contrast to an increase of $0.7 billion in the fourth quarter. Profits of domestic nonfinancial corporations decreased $169.5 billion, in contrast to an increase of $53.7 billion. Rest-of-the-world profits decreased $58.6 billion, compared with a decrease of $1.4 billion. In the first quarter, receipts decreased $72.7 billion, and payments decreased $14.2 billion.

Upcoming Annual Update of the National Income and Product Accounts

BEA will release results from the 2020 annual update of the National Income and Product Accounts on July 30, 2020, in conjunction with the advance estimate of GDP for the second quarter of 2020. For estimates of real GDP and its major components, the span of the update will cover the most recent five years (2015-2019) and the first quarter of 2020. Estimates of income and saving will be subject to revision from 1999 through the first quarter of 2020. More information on the 2020 annual update is included in the May Survey of Current Business article, "GDP and the Economy."

EXIM Approved 161 Small Business Authorizations Totaling Nearly $139 Million and Supporting 800 U.S. Jobs in March

EXIM Continues to Provide Critically Needed Support to U.S. Small Businesses Contending with the Historic Challenge of COVID-19

In March, the Export-Import Bank of the United States (EXIM) approved 161 authorizations totaling $138.8 million in support of American small businesses that export “Made in the USA” products around the world. These small-business related authorizations supported a preliminary estimate of 800 U.S. jobs in March 2020.

This total includes $134.6 million of short-term authorizations and $4.2 million of medium-term authorizations supporting small businesses.

“Now, more than ever, EXIM stands ready to support America’s small businesses and workers as they seek to export their outstanding ‘Made in the USA’ goods and services to the global marketplace during this very challenging time,” said EXIM President and Chairman Kimberly A. Reed. “To that end, EXIM is raising awareness about its programs – including export credit insurance, working capital guarantees, loan guarantees, and loans – and numerous COVID-19-related relief measures with diverse small-business exporters and potential exporters, as well as the brokers and financial institutions who assist them. We also encourage small-business exporters to reach out directly to EXIM if they need assistance.”

To see how small businesses from every state are using EXIM products, view success stories online.

EXIM Authorizations March 2020
EXIM Product	Total (in millions)	Short-Term (in millions)	Medium-Term (in millions)	Long-Term (in millions)
Export Credit Insurance	$ 163.3	$ 159.5	$ 3.8	–
Working Capital Guarantees	$ 19.7	$ 19.7	–	–
Guarantees and Loans	$ 130.5	–	$ 12.2	$ 118.3
Total	$ 313.5	$ 179.2	$ 16.0	$ 118.3
Small Business/MWOB
Small Business	$ 138.8	$ 134.6	$ 4.2	–
Minority and Women-Owned Business	$ 17.7	$ 17.7	$ 0.0	–
Top Industry
Manufacturing	$ 130.5	$ 125.6	$ 4.9	–

ABOUT EXIM:

EXIM is an independent federal agency that promotes and supports American jobs by providing competitive and necessary export credit to support sales of U.S. goods and services to international buyers. A robust EXIM can level the global playing field for U.S. exporters when they compete against foreign companies that receive support from their governments. EXIM also contributes to U.S. economic growth by helping to create and sustain hundreds of thousands of jobs in exporting businesses and their supply chains across the United States. In recent years, approximately 90 percent of the total number of the agency’s authorizations has directly supported small businesses. Since 1992, EXIM has generated more than $9 billion for the U.S. Treasury for repayment of U.S. debt.

BEA News: U.S. International Trade in Goods and Services, March 2020

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $44.4 billion in March, up $4.6 billion from $39.8 billion in February, revised.

U.S. International Trade in Goods and Services Deficit

Deficit:	$44.4 Billion	+11.6%°
Exports:	$187.7 Billion	-9.6%°
Imports:	$232.2 Billion	-6.2%°
Next release: June 4, 2020 (°) Statistical significance is not applicable or not measurable. Data adjusted for seasonality but not price changes Source: U.S. Census Bureau, U.S. Bureau of Economic Analysis; U.S. International Trade in Goods and Services, May 5, 2020

Coronavirus (COVID-19) Impact on March 2020 International Trade in Goods and Services

The declines in March exports and imports were, in part, due to the impact of COVID-19, as many businesses were operating at limited capacity or ceased operations completely, and the movement of travelers across borders was restricted. The full economic effects of the COVID-19 pandemic cannot be quantified in the trade statistics for March because the impacts are generally embedded in source data and cannot be separately identified. The Census Bureau and the Bureau of Economic Analysis have monitored data quality and determined estimates in this release meet publication standards. For more information on the compilation of this month’s report, see www.census.gov/foreign-trade/statistics/notices/COVIDFAQSFT900.pdf for goods or www.bea.gov/help/faq/1412 for services.

Exports, Imports, and Balance (exhibit 1)

March exports were $187.7 billion, $20.0 billion less than February exports. March imports were $232.2 billion, $15.4 billion less than February imports.

The March increase in the goods and services deficit reflected an increase in the goods deficit of $4.6 billion to $65.6 billion and a decrease in the services surplus of $0.1 billion to $21.2 billion.

Year-to-date, the goods and services deficit decreased $28.1 billion, or 17.8 percent, from the same period in 2019. Exports decreased $21.7 billion or 3.5 percent. Imports decreased $49.7 billion or 6.4 percent.

Three-Month Moving Averages (exhibit 2)

The average goods and services deficit decreased $1.4 billion to $43.2 billion for the three months ending in March.

• Average exports decreased $7.2 billion to $201.3 billion in March.
• Average imports decreased $8.6 billion to $244.5 billion in March.

Year-over-year, the average goods and services deficit decreased $9.4 billion from the three months ending in March 2019.

• Average exports decreased $7.2 billion from March 2019.
• Average imports decreased $16.6 billion from March 2019.

Exports (exhibits 3, 6, and 7)

Exports of goods decreased $9.2 billion to $128.1 billion in March.

  Exports of goods on a Census basis decreased $8.8 billion.

• Industrial supplies and materials decreased $2.9 billion.
  • Crude oil decreased $1.0 billion.
  • Other petroleum products decreased $0.9 billion.
  • Fuel oil decreased $0.4 billion.
• Automotive vehicles, parts, and engines decreased $2.5 billion.
  • Automotive parts and accessories decreased $0.9 billion.
  • Passenger cars decreased $0.8 billion.
  • Trucks, buses, and special purpose vehicles decreased $0.4 billion.
• Capital goods decreased $2.0 billion.
  • Other industrial machinery decreased $0.4 billion.
  • Civilian aircraft parts decreased $0.4 billion.
  • Civilian aircraft decreased $0.2 billion.
  • Civilian aircraft engines decreased $0.2 billion.

  Net balance of payments adjustments decreased $0.4 billion.

Exports of services decreased $10.8 billion to $59.6 billion in March.

• Travel decreased $7.5 billion.
• Transport decreased $2.6 billion.

Imports (exhibits 4, 6, and 8)

Imports of goods decreased $4.7 billion to $193.7 billion in March.

  Imports of goods on a Census basis decreased $4.2 billion.

• Consumer goods decreased $4.0 billion.
  • Cell phones and other household goods decreased $2.5 billion.
  • Gem diamonds decreased $0.9 billion.
• Automotive vehicles, parts, and engines decreased $2.7 billion.
  • Automotive parts and accessories decreased $1.5 billion.
  • Passenger cars decreased $0.5 billion.
• Capital goods increased $1.5 billion.
  • Computers increased $0.8 billion.
  • Semiconductors increased $0.8 billion.

  Net balance of payments adjustments decreased $0.5 billion.

Imports of services decreased $10.7 billion to $38.5 billion in March.

• Travel decreased $7.7 billion.
• Transport decreased $2.9 billion.

Real Goods in 2012 Dollars – Census Basis (exhibit 11)

The real goods deficit increased $6.5 billion to $75.3 billion in March.

• Real exports of goods decreased $7.7 billion to $143.0 billion.
• Real imports of goods decreased $1.2 billion to $218.3 billion.

Revisions

Revisions to February exports

• Exports of goods were revised up $0.1 billion.
• Exports of services were revised up $0.1 billion.

Revisions to February imports

• Imports of goods were revised down less than $0.1 billion.
• Imports of services were revised up $0.1 billion.

Goods by Selected Countries and Areas: Monthly – Census Basis (exhibit 19)

The March figures show surpluses, in billions of dollars, with South and Central America ($5.0), Hong Kong ($1.9), OPEC ($1.5), Brazil ($1.4), Saudi Arabia ($0.3), and United Kingdom ($0.1). Deficits were recorded, in billions of dollars, with European Union ($16.9), China ($15.5), Mexico ($9.0), Germany ($6.0), Japan ($4.6), Italy ($2.8), Canada ($2.6), Taiwan ($2.0), South Korea ($1.9), India ($1.7), France ($0.7), and Singapore (less than $0.1).

• The deficit with the European Union increased $4.3 billion to $16.9 billion in March. Exports decreased $0.6 billion to $21.8 billion and imports increased $3.7 billion to $38.7 billion.
• The surplus with the United Kingdom decreased $1.2 billion to $0.1 billion in March. Exports decreased $1.3 billion to $4.9 billion and imports decreased less than $0.1 billion to $4.8 billion.
• The deficit with China decreased $4.2 billion to $15.5 billion in March. Exports increased $0.3 billion to $7.8 billion and imports decreased $3.9 billion to $23.3 billion.

Statement from U.S. Secretary of Commerce Wilbur Ross on Q1 2020 GDP Advance Estimate

The Department of Commerce’s Bureau of Economic Analysis (BEA) released the advance estimate for gross domestic product (GDP) for the first quarter of 2020, finding that real gross domestic product contracted at an annual rate of 4.8 percent.

U.S. Secretary of Commerce Wilbur Ross issued the following statement in response:

"Today’s GDP numbers are weak, but in line with expectations as a result of the COVID-19-driven disruptions to daily lives at home and around the globe that have rocked global markets and supply chains. We continue to have the most resilient economy in the world, driven by innovative and hardworking Americans who have shown that they are willing to make the needed sacrifices to defeat this invisible enemy.

The President has taken bold action to leverage the expertise and resources of the entire Nation in this fight. Congress has confronted the seriousness of this challenge with trillions of dollars in relief funding for those impacted by the virus, establishing a firm footing for a swift and strong American comeback. When this chapter ends, America will be both stronger and healthier than ever because of the President’s decisive and timely actions."

U.S. GDP Shrinks Almost 5% 1st Q 2020 Because of Covid-19 Shutdown. Covid Recession Guaranteed.

Real gross domestic product (GDP) decreased at an annual rate of 4.8 percent in the first quarter of 2020 (table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2019, real GDP increased 2.1 percent.

The GDP estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see "Source Data for the Advance Estimate" on page 2). The "second" estimate for the first quarter, based on more complete data, will be released on May 28, 2020.

Coronavirus (COVID-19) Impact on the Advance First-Quarter 2020 GDP Estimate

The decline in first quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued "stay-at-home" orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified. For more information, see the Technical Note

The decrease in real GDP in the first quarter reflected negative contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, and private inventory investment that were partly offset by positive contributions from residential fixed investment, federal government spending, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased (table 2).

The decrease in PCE reflected decreases in services, led by health care, and goods, led by motor vehicles and parts. The decrease in nonresidential fixed investment primarily reflected a decrease in equipment, led by transportation equipment. The decrease in exports primarily reflected a decrease in services, led by travel.

Current‑dollar GDP decreased 3.5 percent, or $191.2 billion, in the first quarter to a level of $21.54 trillion. In the fourth quarter, GDP increased 3.5 percent, or $186.6 billion (tables 1 and 3).

The price index for gross domestic purchases increased 1.6 percent in the first quarter, compared with an increase of 1.4 percent in the fourth quarter (table 4). The PCE price index increased 1.3 percent, compared with an increase of 1.4 percent. Excluding food and energy prices, the PCE price index increased 1.8 percent, compared with an increase of 1.3 percent.

Personal Income and Outlays

Current-dollar personal income increased $95.2 billion in the first quarter, compared with an increase of $144.1 billion in the fourth quarter. The deceleration was more than accounted for by a deceleration in compensation that was partly offset by an acceleration in personal current transfer receipts (table 8).

Disposable personal income increased $76.7 billion, or 1.9 percent, in the first quarter, compared with an increase of $123.7 billion, or 3.0 percent, in the fourth quarter. Real disposable personal income increased 0.5 percent, compared with an increase of 1.6 percent.

Personal outlays decreased $253.5 billion, after increasing $118.8 billion. The decrease was mainly accounted for by a decrease in PCE.

Personal saving was $1.60 trillion in the first quarter, compared with $1.27 trillion in the fourth quarter. The personal saving rate—personal saving as a percentage of disposable personal income—was 9.6 percent in the first quarter, compared with 7.6 percent in the fourth quarter.

Financing for Sustainable Development Report 2020

Full report:

 Overview only (pdf)

 Full text (pdf)

Press release (9 April 2020):

60 International Agencies Urge Rapid, Coordinated Response As Pandemic Threatens to Destabilize Poor Countries’ Finances (pdf)

The global economic recession and financial turmoil from COVID-19 are derailing implementation of the Addis Ababa Action Agenda and the achievement of the Sustainable Development Goals (SDGs). Even before the pandemic, the 2020 Financing for Sustainable Development Report (FSDR) of the Inter-agency Task Force noted that there was backsliding in many areas. Due to the COVID-19 crisis, global financial markets have witnessed heavy losses and intense volatility. Particularly worrisome is the prospect of a new debt crisis. The FSDR highlights both immediate and longer-term actions, including arresting the backslide, to respond to the COVID-19 crisis. The FSDR calls for:

 

• A globally coordinated stimulus package, including reversing the decline in aid and increased concessional finance.
• To prevent a debt crisis:

o Immediately suspending debt payments from poor countries. 

o Beyond the crisis, reassess debt sustainability/revisit existing mechanisms.

• To stabilize financial markets by continuing to inject liquidity:

o In the medium-term, explore regulatory frameworks to limit over-borrowing for non-productive investments, such as repaying shareholders.

 

• Partnering with the private sector:

o In the short term, banks to roll over debt to SMEs and individuals that are cash strapped. 

o In the medium-term, promote sustainable investment.

 

• Building back better for sustainable development:

o Public and private investment in sustainable development including in resilient infrastructure.

o Strengthening social protection systems.

o Investment in crisis prevention, risk reduction and planning.

o Eliminate trade barriers and restrictions that affect supply chains.

• Digital technologies present tremendous potential for the SDGs, but COVID-19 has underlined challenges and risks: 

o Public policies should be adjusted to fully exploit their potential, while addressing exclusion and risks of discrimination, and ensuring benefits for society at large, including decent jobs.

 

The 2020 FSDR begins with an analysis of the extremely challenging global macroeconomic context (chapter I). The thematic chapter (chapter II) analyses financing sustainable development in an era of transformative digital technologies. The remainder of the report (Chapters III.A to III.G and IV) discusses progress in the seven action areas of the Addis Agenda, and presents policy options at the national and international level.

 

The 2020 FSDR is the fifth report on implementing the Financing for Development outcomes and the means of implementation of the SDGs since the adoption of the 2030 Agenda and the Addis Ababa Action Agenda. The assessment draws on the expertise, analysis and data from more than 60 agencies and international institutions that make up the Task Force, which is led by UN DESA and includes the World Bank Group, the International Monetary Fund and the World Trade Organisation, UNCTAD and UNDP in leading roles.

Chapters:

• Chapter I: The global economic context and its implications for the Sustainable Development Goals
• Chapter II: Financing sustainable development in an era of transformative digital technologies
• Chapter III.A: Domestic public resources
• Chapter III.B: Domestic and international private business and finance
• Chapter III.C: International development cooperation
• Chapter III.D: International trade as an engine for development
• Chapter III.E: Debt and debt sustainability
• Chapter III.F: Addressing systemic issues
• Chapter III.G: Science, technology, innovation and capacity-building
• Chapter IV: Data, monitoring and follow-up

Policy Notes:

• Corona crisis causes turmoil in financial markets

The global economic recession and financial turmoil from COVID-19 are derailing implementation of the Addis Ababa Action Agenda and achievement of the Sustainable Development Goals (SDGs). Even before the pandemic, the 2020 Financing for Sustainable Development Report (FSDR) of the Inter-agency Task Force noted that there was backsliding in many areas. Due to the COVID-19 crisis, global financial markets have witnessed heavy losses and intense volatility. Particularly worrisome is the prospect of a new debt crisis. The FSDR highlights both immediate and longer-term actions, including arresting the backslide, to respond to the COVID-19 crisis.

Byrnes & Bloink’s Covid-19 TaxFacts Intelligence Weekly for April 10, 2020

Texas A&M University School of Law has launched a Covid-19 expert response team.  Listen to Professor Neal Newman and William discussing the Covid-19 SBA forgiveness loans, deferral on paying the employer's Social Security tax, and the Employee Retention Tax Credit (YouTube). Find the response team members from all disciplines here: Download Texas A&M Coronavirus_Experts

Prof. William H. Byrnes

Robert Bloink, J.D., LL.M.

Today we have three big updates from the newly-passed CARES Act. The first allows NOLs for tax years 2018 through 2020 to be carried back five years. This give business who had NOLs and were waiting to carry them forward to future tax years to apply them to past years, potentially resulting in additional tax refunds. The other two updates relate to deferrals and tax credits for payroll taxes in 2020.

CARES Act Provides NOL Relief for Struggling Businesses The CARES Act allows corporations to carry back net operating losses (NOLs) incurred in 2018, 2019, and 2020 for five years (excluding offset to untaxed foreign earnings transition tax). Post-tax reform, these NOLs could only be carried forward. For tax years beginning prior to January 1, 2021, businesses can offset 100% of taxable income with NOL carryovers and carrybacks (the 80% taxable income limitation was lifted). With respect to partnerships and pass-through entities, the CARES Act amended the effective date for the new excess business loss rules created by the 2017 tax reform legislation. The new rules will only apply beginning in 2021 (rather than 2018). Pass-through taxpayers who have filed a return reflecting excess business losses will presumably be entitled to refund by filing an amended return, absent guidance to the contrary. For more information, visit Tax Facts Online. Read More

CARES Act Permits Penalty-Free Payroll Tax Deferral for Employers The CARES Act allows both employers and independent contractors to defer payment of employer payroll taxes without penalty. Importantly, employers with fewer than 500 employees are entitled to withhold payroll taxes as an advance repayment of the tax credit for paid sick leave and expanded FMLA leave under the FFCRA. Under the CARES Act payroll tax deferral, employers are permitted to defer the employer portion of the payroll tax on wages paid through December 31, 2020 for up to two years. Payroll taxes are generally due in two installments under CARES: 50% by December 31, 2021 and the remaining 50% by December 31, 2022. Economic hardship is presumed, meaning the employer does not have to produce documentation establishing that COVID-19 impacted the business. Payroll tax deferral options apparently apply to all employers, regardless of size. However, employers who have loans forgiven under the CARES Act Payroll Protection Loan program are not eligible for the deferral. For more information, visit Tax Facts Online. Read More

CARES Act Employee Retention Tax Credit The CARES Act creates a new refundable tax credit designed to help employers who retain employees during the COVID-19 health crisis. The credit is taken against employment taxes and is equal to 50% of the first $10,000 of qualified wages paid to the employee. The credit is available for calendar quarters where either (1) operations were either fully or partially suspended because of a government-issued order relating to COVID-19 or (2) the business' gross receipts declined by more than 50% when compared to the same calendar quarter in 2019. For more information, visit Tax Facts Online. Read More

BEA News: U.S. International Trade in Goods and Services, February 2020

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $39.9 billion in February, down $5.5 billion from $45.5 billion in January, revised.

U.S. International Trade in Goods and Services Deficit

Deficit:	$39.9 Billion	-12.2%°
Exports:	$207.5 Billion	-0.4%°
Imports:	$247.5 Billion	-2.5%°
Next release: May 5, 2020 (°) Statistical significance is not applicable or not measurable. Data adjusted for seasonality but not price changes Source: U.S. Census Bureau, U.S. Bureau of Economic Analysis; U.S. International Trade in Goods and Services, April 2, 2020

Exports, Imports, and Balance (exhibit 1)

February exports were $207.5 billion, $0.8 billion less than January exports. February imports were $247.5 billion, $6.3 billion less than January imports.

The February decrease in the goods and services deficit reflected a decrease in the goods deficit of $5.9 billion to $61.2 billion and a decrease in the services surplus of $0.4 billion to $21.3 billion.

Year-to-date, the goods and services deficit decreased $19.7 billion, or 18.7 percent, from the same period in 2019. Exports increased $1.1 billion or 0.3 percent. Imports decreased $18.6 billion or 3.6 percent.

Three-Month Moving Averages (exhibit 2)

The average goods and services deficit decreased $1.3 billion to $44.7 billion for the three months ending in February.

• Average exports decreased $0.1 billion to $208.4 billion in February.
• Average imports decreased $1.3 billion to $253.1 billion in February.

Year-over-year, the average goods and services deficit decreased $10.6 billion from the three months ending in February 2019.

• Average exports increased $1.6 billion from February 2019.
• Average imports decreased $9.0 billion from February 2019.

Exports (exhibits 3, 6, and 7)

Exports of goods increased $1.0 billion to $137.2 billion in February.

  Exports of goods on a Census basis increased $1.0 billion.

• Industrial supplies and materials increased $0.7 billion.
  • Fuel oil increased $0.5 billion.
  • Other petroleum products increased $0.5 billion.
• Automotive vehicles, parts, and engines increased $0.5 billion.
  • Automotive parts and accessories increased $0.3 billion.
• Consumer goods decreased $0.7 billion.
  • Pharmaceutical preparations decreased $0.3 billion.
  • Gem diamonds decreased $0.2 billion.

  Net balance of payments adjustments decreased less than $0.1 billion.

Exports of services decreased $1.7 billion to $70.3 billion in February.

• Travel decreased $1.3 billion.
• Financial services decreased $0.3 billion.
• Transport decreased $0.2 billion.

Imports (exhibits 4, 6, and 8)

Imports of goods decreased $5.0 billion to $198.4 billion in February.

  Imports of goods on a Census basis decreased $5.1 billion.

• Capital goods decreased $3.7 billion.
  • Computers decreased $1.4 billion.
  • Telecommunications equipment decreased $0.6 billion.
  • Computer accessories decreased $0.5 billion.
• Industrial supplies and materials decreased $1.6 billion.
  • Fuel oil decreased $0.6 billion.
  • Organic chemicals decreased $0.4 billion.
• Consumer goods decreased $1.1 billion.
• Automotive vehicles, parts, and engines increased $1.4 billion.
  • Passenger cars increased $1.4 billion.

  Net balance of payments adjustments increased $0.2 billion.

Imports of services decreased $1.4 billion to $49.1 billion in February.

• Travel decreased $0.8 billion.
• Transport decreased $0.5 billion.

Real Goods in 2012 Dollars – Census Basis (exhibit 11)

The real goods deficit decreased $9.0 billion to $69.0 billion in February.

• Real exports of goods increased $3.7 billion to $150.5 billion.
• Real imports of goods decreased $5.3 billion to $219.5 billion.

Revisions

In addition to revisions to source data for the January statistics, exports of energy-related petroleum products in exhibit 17 were revised beginning with January 2019 to incorporate corrections that averaged $229 million per month. These corrections did not affect other exhibits.

Revisions to January exports

• Exports of goods were revised down $0.1 billion.
• Exports of services were revised down $0.1 billion.

Revisions to January imports

• Imports of goods were revised down less than $0.1 billion.
• Imports of services were revised down $0.1 billion.

Goods by Selected Countries and Areas: Monthly – Census Basis (exhibit 19)

The February figures show surpluses, in billions of dollars, with South and Central America ($5.9), Brazil ($1.9), Hong Kong ($1.5), United Kingdom ($1.3), OPEC ($1.2), Singapore ($0.7), and Saudi Arabia ($0.3). Deficits were recorded, in billions of dollars, with China ($19.7), European Union ($12.6), Mexico ($9.7), Japan ($5.1), Germany ($4.8), Italy ($2.3), South Korea ($1.7), India ($1.6), Canada ($1.6), Taiwan ($1.5), and France ($0.5).

• The deficit with China decreased $4.0 billion to $19.7 billion in February. Exports decreased $0.3 billion to $7.5 billion and imports decreased $4.2 billion to $27.2 billion.
• The deficit with the European Union (excluding the United Kingdom) decreased $2.2 billion to $12.6 billion in February. Exports decreased $0.6 billion to $22.4 billion and imports decreased $2.7 billion to $35.0 billion.
• The deficit with South Korea increased $1.1 billion to $1.7 billion in February. Exports decreased $1.0 billion to $4.7 billion and imports increased $0.2 billion to $6.4 billion.

U.S. International Investment Position, Fourth Quarter and Year 2019

Fourth Quarter

The U.S. net international investment position, the difference between U.S. residents’ foreign financial assets and liabilities, was –$10.99 trillion at the end of the fourth quarter of 2019, according to statistics released by the U.S. Bureau of Economic Analysis (BEA). Assets totaled $29.32 trillion and liabilities were $40.31 trillion.

At the end of the third quarter, the net investment position was –$10.98 trillion (Table 1). 

The –$14.1 billion change in the net investment position from the third quarter to the fourth quarter came from net financial transactions of –$91.2 billion and net other changes in position, such as price and exchange rate changes, of $77.1 billion (Table A).

Table A. Quarterly Change in the U.S. Net International Investment Position
Billions of dollars, not seasonally adjusted

	Position, 2019:III	Change in position in 2019:IV			Position, 2019:IV
		Total	Attributable to:
			Financial transactions	Other changes in position 1
U.S. net international investment position	-10,977.3	-14.1	-91.2	77.1	-10,991.4
Net position excluding financial derivatives	-11,007.7	-3.8	-90.3	86.4	-11,011.5
Financial derivatives other than reserves, net	30.4	-10.2	-0.9	-9.3	20.2
U.S. assets	28,279.2	1,038.2	(2)	(2)	29,317.5
Assets excluding financial derivatives	26,201.0	1,326.1	-24.5	1,350.6	27,527.1
Financial derivatives other than reserves	2,078.3	-287.9	(2)	(2)	1,790.4
U.S. liabilities	39,256.5	1,052.3	(2)	(2)	40,308.8
Liabilities excluding financial derivatives	37,208.7	1,329.9	65.7	1,264.2	38,538.6
Financial derivatives other than reserves	2,047.9	-277.6	(2)	(2)	1,770.3
1. Disaggregation of other changes in position into price changes, exchange rate changes, and other changes in volume and valuation is only presented for annual statistics released in June each year. 2. Financial transactions and other changes in financial derivatives positions are available only on a net basis; they are not separately available for U.S. assets and U.S. liabilities.

U.S. assets increased by $1.04 trillion, to a total of $29.32 trillion, at the end of the fourth quarter, mostly reflecting increases in portfolio investment and direct investment assets. Portfolio investment assets increased by $874.6 billion, to $13.51 trillion, and direct investment assets increased by $471.5 billion, to $8.84 trillion. These increases were driven mainly by foreign stock price increases and the appreciation of foreign currencies against the U.S. dollar that raised the value of these assets in dollar terms.  

U.S. liabilities increased by $1.05 trillion, to a total of $40.31 trillion, at the end of the fourth quarter, mostly reflecting increases in direct investment and portfolio investment liabilities. Direct investment liabilities increased by $641.3 billion, to $10.58 trillion, and portfolio investment liabilities increased by $614.4 billion, to $21.48 trillion. These increases were driven mainly by U.S. stock price increases that raised the value of these liabilities.

Updates to Third Quarter 2019 International Investment Position Aggregates
Trillions of dollars, not seasonally adjusted

	Preliminary estimate	Revised estimate
U.S. net international investment position	-10.95	-10.98
U.S. assets	28.26	28.28
U.S. liabilities	39.21	39.26

Year 2019

The U.S. net international investment position was –$10.99 trillion at the end of 2019 compared to –$9.55 trillion at the end of 2018 (Table 1).

The –$1.44 trillion change in the net investment position from the end of 2018 to the end of 2019 came from net financial transactions of –$395.9 billion and net other changes in position, such as price and exchange rate changes, of –$1.04 trillion (Table B).

Table B. Annual Change in the U.S. Net International Investment Position
Billions of dollars

	Position, 2018	Change in position in 2019			Position, 2019
		Total	Attributable to:
			Financial transactions	Other changes in position 1
U.S. net international investment position	-9,554.7	-1,436.7	-395.9	-1,040.8	-10,991.4
Net position excluding financial derivatives	-9,592.4	-1,419.1	-357.5	-1,061.6	-11,011.5
Financial derivatives other than reserves, net	37.7	-17.5	-38.4	20.8	20.2
U.S. assets	25,241.5	4,076.0	(2)	(2)	29,317.5
Assets excluding financial derivatives	23,749.2	3,777.9	426.9	3,350.9	27,527.1
Financial derivatives other than reserves	1,492.3	298.1	(2)	(2)	1,790.4
U.S. liabilities	34,796.2	5,512.6	(2)	(2)	40,308.8
Liabilities excluding financial derivatives	33,341.6	5,197.0	784.4	4,412.5	38,538.6
Financial derivatives other than reserves	1,454.6	315.7	(2)	(2)	1,770.3
1. Disaggregation of other changes in position into price changes, exchange rate changes, and other changes in volume and valuation is only presented for annual statistics released in June each year. 2. Financial transactions and other changes in financial derivatives positions are available only on a net basis; they are not separately available for U.S. assets and U.S. liabilities.

U.S. assets increased by $4.08 trillion, to a total of $29.32 trillion, at the end of 2019, reflecting increases in all major categories of assets, particularly in portfolio investment and direct investment assets. Portfolio investment assets increased by $2.02 trillion, to $13.51 trillion, and direct investment assets increased by $1.33 trillion, to $8.84 trillion. These increases were driven mainly by foreign stock price increases that raised the value of these assets.

U.S. liabilities increased by $5.51 trillion, to a total of $40.31 trillion, at the end of 2019, reflecting increases in all major categories of liabilities, particularly in portfolio investment and direct investment liabilities. Portfolio investment liabilities increased by $2.76 trillion, to $21.48 trillion, and direct investment liabilities increased by $2.10 trillion, to $10.58 trillion. These increases were driven mainly by U.S. stock price increases that raised the value of these liabilities.

Upcoming Update to the U.S. International Investment Position

The annual update of the U.S. international investment position will be released along with preliminary estimates for the first quarter of 2020 on June 30, 2020. A preview of the annual update will appear in the April 2020 issue of the Survey of Current Business.

Gross Domestic Product, Fourth Quarter and Year 2019; Corporate Profits, Fourth Quarter and Year 2019

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the fourth quarter of 2019 (table 1), according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP also increased 2.1 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month.  In the second estimate, the increase in real GDP was also 2.1 percent. In the third estimate, an upward revision to personal consumption expenditures (PCE) was largely offset by downward revisions to federal government spending and nonresidential fixed investment (see "Updates to GDP" on page 2).

The increase in real GDP in the fourth quarter reflected positive contributions from PCE, exports, residential fixed investment, federal government spending, and state and local government spending that were partly offset by negative contributions from private inventory investment and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased (table 2).

Real GDP growth in the fourth quarter was the same as that in the third. In the fourth quarter, a downturn in imports and an acceleration in government spending were offset by a larger decrease in private inventory investment and a slowdown in PCE.

Real gross domestic income (GDI) increased 2.6 percent in the fourth quarter, compared with an increase of 1.2 percent in the third quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.4 percent in the fourth quarter, compared with an increase of 1.7 percent in the third quarter (table 1).

Current‑dollar GDP increased 3.5 percent, or $186.6 billion, in the fourth quarter to a level of $21.73 trillion. In the third quarter, current-dollar GDP increased 3.8 percent, or $202.2 billion (tables 1 and 3).

The price index for gross domestic purchases increased 1.4 percent in the fourth quarter, the same increase as in the third quarter (table 4). The PCE price index increased 1.4 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.3 percent, compared with an increase of 2.1 percent.

More information on the source data that underlie the estimates is available in the "Key Source Data and Assumptions" file on BEA's website.

Updates to GDP

In the third estimate, the fourth-quarter growth rate in real GDP was unrevised from the second estimate. PCE, residential investment, and state and local government spending were revised up. These upward revisions were offset by downward revisions to federal government spending and nonresidential fixed investment as well as an upward revision to imports. For more information, see the Technical Note. For information on updates to GDP, see the "Additional Information" section that follows.

	Advance Estimate	Second Estimate	Third Estimate
	(Percent change from preceding quarter)
Real GDP	2.1	2.1	2.1
Current-dollar GDP	3.6	3.5	3.5
Real GDI	...	...	2.6
Average of Real GDP and Real GDI	...	...	2.4
Gross domestic purchases price index	1.5	1.4	1.4
PCE price index	1.6	1.3	1.4
PCE price index excluding food and energy	1.3	1.2	1.3

GDP for 2019

Real GDP increased 2.3 percent in 2019 (from the 2018 annual level to the 2019 annual level), compared with an increase of 2.9 percent in 2018 (table 1).

The increase in real GDP in 2019 reflected positive contributions from PCE, nonresidential fixed investment, federal government spending, state and local government spending, and private inventory investment that were partly offset by a negative contribution from residential fixed investment. Imports increased (table 2).

The deceleration in real GDP in 2019, compared to 2018, primarily reflected decelerations in nonresidential fixed investment, exports, and PCE which were partly offset by accelerations in both state and local and federal government spending. Imports increased less in 2019 than in 2018.

Current-dollar GDP increased 4.1 percent, or $847.5 billion, in 2019 to a level of $21.43 trillion, compared with an increase of 5.4 percent, or $1,060.8 billion, in 2018 (table 1 and table 3).

Real GDI increased 1.9 percent in 2019, compared with an increase of 2.5 percent in 2018 (table 1).

The price index for gross domestic purchases increased 1.5 percent in 2019, compared with an increase of 2.4 percent in 2018 (table 4). The PCE price index increased 1.4 percent, compared with an increase of 2.1 percent. Excluding food and energy prices, the PCE price index increased 1.6 percent, compared with an increase of 1.9 percent (table 4).

Measured from the fourth quarter of 2018 to the fourth quarter of 2019, real GDP increased 2.3 percent during the period. That compared with an increase of 2.5 percent during 2018. Real GDI, as measured from the fourth quarter of 2018 to the fourth quarter of 2019, increased 2.0 percent during 2019. That compared with an increase of 2.3 percent during 2018 (table 6).

The price index for gross domestic purchases, as measured from the fourth quarter of 2018 to the fourth quarter of 2019, increased 1.4 percent during 2019. That compared with an increase of 2.2 percent during 2018.  The PCE price index increased 1.4 percent, compared with an increase of 1.9 percent. Excluding food and energy, the PCE price index increased 1.6 percent, compared with an increase of 1.9 percent (table 6).

Corporate Profits, Fourth Quarter and 2019

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $53.0 billion in the fourth quarter, in contrast to a decrease of $4.7 billion in the third quarter (table 10).

Profits of domestic financial corporations increased $0.7 billion in the fourth quarter, in contrast to a decrease of $4.7 billion in the third quarter. Profits of domestic nonfinancial corporations increased $53.7 billion, in contrast to a decrease of $5.5 billion. Rest-of-the-world profits decreased $1.4 billion, in contrast to an increase of $5.5 billion. In the fourth quarter, receipts increased $3.4 billion, and payments increased $4.8 billion.

In 2019, profits from current production were unchanged, compared with an increase of $68.7 billion in 2018. Profits of domestic financial corporations increased $7.1 billion, compared with an increase of $11.1 billion. Profits of domestic nonfinancial corporations decreased $36.4 billion, in contrast to an increase of $10.0 billion. Rest-of-the-world profits increased $29.3 billion, compared with an increase of $47.6 billion.

U.S. International Transactions, Fourth Quarter and Year 2019

Current Account Deficit Narrows by 12.4 Percent in Fourth Quarter

Current Account Balance, Fourth Quarter

The U.S. current account deficit, which reflects the combined balances on trade in goods and services and income flows between U.S. residents and residents of other countries, narrowed by $15.6 billion, or 12.4 percent, to $109.8 billion in the fourth quarter of 2019, according to statistics from the U.S. Bureau of Economic Analysis (BEA). The revised third quarter deficit was $125.4 billion.

The fourth quarter deficit was 2.0 percent of current dollar gross domestic product (GDP), down from 2.3 percent in the third quarter.

The $15.6 billion narrowing of the current account deficit in the fourth quarter mainly reflected a reduced deficit on goods that was partly offset by an expanded deficit on secondary income.

Current Account Transactions (tables 1-5)

Exports of goods and services to, and income received from, foreign residents decreased $5.1 billion, to $936.1 billion, in the fourth quarter. Imports of goods and services from, and income paid to, foreign residents decreased $20.7 billion, to $1.05 trillion.

Trade in Goods (table 2)

Exports of goods decreased $2.5 billion, to $409.7 billion, led by a decrease in foods, feeds, and beverages, mainly soybeans. Changes in the other major categories were nearly offsetting. Imports of goods decreased $20.6 billion, to $612.5 billion, mainly reflecting decreases in consumer goods, led by apparel, footwear, and household goods, and in automotive, vehicles, parts, and engines, led by trucks, buses, and special purpose vehicles.

Trade in Services (table 3)

Exports of services increased $2.8 billion, to $213.9 billion, mainly reflecting increases in travel, primarily other personal travel, and in other business services, mostly professional and management consulting services. Imports of services increased $2.3 billion, to $151.0 billion, reflecting increases in all major categories. Increases were led by travel, mainly other personal travel.

Primary Income (table 4)

Receipts of primary income decreased $2.8 billion, to $278.0 billion, and payments of primary income decreased $4.2 billion, to $210.7 billion. The decreases in both receipts and payments mainly reflected decreases in other investment income, mostly interest on loans and deposits.

Secondary Income (table 5)

Receipts of secondary income decreased $2.5 billion, to $34.4 billion, mainly reflecting a decrease in private sector fines and penalties, a component of private transfer receipts. Payments of secondary income increased $1.9 billion, to $71.7 billion, mainly reflecting an increase in U.S. government grants.

Financial Account Transactions, Fourth Quarter (tables 1, 6, 7, and 8)

Net financial account transactions were −$71.8 billion in the fourth quarter, reflecting net U.S. borrowing from foreign residents.

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

Fourth quarter transactions increased U.S. residents' foreign financial assets by $1.0 billion. Transactions increased direct investment assets, mainly equity, by $35.2 billion; portfolio investment assets by $18.9 billion, resulting from large and mostly offsetting transactions in equity securities and debt securities; and reserve assets by $0.2 billion. Transactions decreased other investment assets, primarily loans, by $53.4 billion.

Liabilities (tables 1, 6, 7, and 8)

Fourth quarter transactions increased U.S. liabilities to foreign residents by $71.9 billion. Transactions increased direct investment liabilities, mainly equity, by $43.5 billion and other investment liabilities, mainly loans, by $56.5 billion. Transactions decreased portfolio investment liabilities, mainly short-term debt securities, by $28.2 billion.

Financial Derivatives (table 1)

Net transactions in financial derivatives were −$0.9 billion in the fourth quarter, reflecting net borrowing from foreign residents.

Updates to Third Quarter 2019 International Transactions Accounts Balances Billions of dollars, seasonally adjusted
	Preliminary estimate	Revised estimate
Current account balance	-124.1	−125.4
Goods balance	−219.6	−220.9
Services balance	62.2	62.5
Primary income balance	68.7	65.9
Secondary income balance	−35.5	−32.9
Net financial account transactions	−47.9	−76.4

Current Account Balance, Year 2019

The U.S. current account deficit widened by $7.4 billion, or 1.5 percent, to $498.4 billion in 2019. The deficit was 2.3 percent of current dollar GDP, down from 2.4 percent in 2018.

The $7.4 billion widening of the current account deficit in 2019 mainly reflected an expanded deficit on secondary income and a reduced surplus on services that were partly offset by a reduced deficit on goods.

Current Account Transactions (tables 1-5)

Exports of goods and services to, and income received from, foreign residents increased $28.3 billion, to $3.76 trillion, in 2019. Imports of goods and services from, and income paid to, foreign residents increased $35.6 billion, to $4.26 trillion.

Trade in Goods (table 2)

Exports of goods decreased $21.5 billion, to $1.65 trillion, mainly reflecting a decrease in capital goods, mostly civilian aircraft. Imports of goods decreased $42.6 billion, to $2.52 trillion, mainly reflecting a decrease in industrial supplies and materials, mostly petroleum and products.

Trade in Services (table 3)

Exports of services increased $18.2 billion, to $845.2 billion, mainly reflecting an increase in other business services, primarily professional and management consulting services. Imports of services increased $28.1 billion, to $595.4 billion, reflecting increases in all major categories. Increases were led by travel, mostly other personal travel.

Primary Income (table 4)

Receipts of primary income increased $38.9 billion, to $1.12 trillion, and payments of primary income increased $35.9 billion, to $866.1 billion. The increases in both receipts and payments mainly reflected increases in other investment income, mostly interest on loans, and in portfolio investment income, mostly dividends on equity and investment fund shares.

Secondary Income (table 5)

Receipts of secondary income decreased $7.4 billion, to $142.8 billion, mainly reflecting a decrease in private transfers, mostly insurance-related transfers. Payments of secondary income increased $14.3 billion, to $281.7 billion, mainly reflecting an increase in private transfers, mostly insurance-related transfers.

Financial Account Transactions, Year 2019 (tables 1, 6, 7, and 8)

Net financial account transactions were −$395.9 billion in 2019, reflecting net U.S. borrowing from foreign residents.

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

Transactions in 2019 increased U.S. residents' foreign financial assets by $426.9 billion. Transactions increased direct investment assets, mainly equity, by $197.7 billion; portfolio investment assets, resulting from large and mostly offsetting transactions in equity securities and debt securities, by $35.9 billion; other investment assets, mostly bank deposits, by $188.7 billion; and reserve assets by $4.7 billion.

Liabilities (tables 1, 6, 7, and 8)

Transactions in 2019 increased U.S. liabilities to foreign residents by $784.4 billion. Transactions increased direct investment liabilities, mostly equity, by $310.8 billion; portfolio investment liabilities, resulting from large and partly offsetting transactions in equity securities and debt securities, by $231.6 billion; and other investment liabilities, mostly bank deposits, by $242.0 billion.

Financial Derivatives (table 1)

Net transactions in financial derivatives were −$38.4 billion in 2019, reflecting net borrowing from foreign residents.

Upcoming Update to the U.S. International Transactions Accounts

The annual update of the U.S. international transactions accounts will be released along with preliminary estimates for the first quarter of 2020 on June 19, 2020. A preview of the annual update will appear in the April 2020 issue of the Survey of Current Business.

Change to the European Union

With the release of "U.S. International Transactions, First Quarter 2020 and Annual Update" on June 19, 2020, statistics for the area grouping "European Union" will exclude the United Kingdom, which withdrew from the European Union effective February 1, 2020. For more information, see "What is the impact of the United Kingdom's withdrawal from the European Union on BEA's data products?"

Zombie Apocalypse or Just Another Flu Season?

• CDC estimates that the burden of illness during the 2018–2019 season included an estimated 35.5 million people getting sick with influenza, 16.5 million people going to a health care provider for their illness, 490,600 hospitalizations, and 34,200 deaths from influenza (Table 1). 
• The overall burden of influenza for the 2017-2018 season was an estimated 45 million influenza illnesses, 21 million influenza-associated medical visits, 810,000 influenza-related hospitalizations, and 61,000 influenza-associated deaths

Key Updates for Week 10, ending March 7, 2020

Flu activity as reported by clinical laboratories remains high but decreased for the fourth week in a row; however, influenza-like illness activity increased slightly.  Severity indicators remain moderate to low overall, but hospitalization rates differ by age group, with high rates among children and young adults.

Influenza-Associated Hospitalizations 2019-20 Season

The overall cumulative hospitalization rate was 61.6 per 100,000 population which is higher than all recent seasons at this time of year except for the 2017-18 season. Rates in children 0-4 years old and adults 18-49 years old are now the highest CDC has on record for these age groups, surpassing the rate reported during the 2009 H1N1 pandemic. Hospitalization rates for school-aged children are higher than any recent regular season but lower than rates during the pandemic.

• Laboratory confirmed influenza associated hospitalization rates for the overall U.S. population remain moderate compared to recent seasons, but rates for children 0-4 years and adults 18-49 years are now the highest CDC has on record for these age groups, surpassing rates reported during the 2009 H1N1 pandemic.  Hospitalization rates for school-aged children (5-17 years) are higher than any recent regular season but remain lower than rates experienced by this age group during the pandemic.
• Pneumonia and influenza mortality has been low, but 144 influenza-associated deaths in children have been reported so far this season. This number is higher for the same time period than in every season since reporting began in 2004-05, except for the 2009 pandemic.
• CDC estimates that so far this season there have been at least 36 million flu illnesses, 370,000 hospitalizations and 22,000 deaths from flu.

What viruses will the 2019-2020 flu vaccines protect against?

There are many different flu viruses and they are constantly changing. The composition of U.S. flu vaccines is reviewed annually and updated as needed to match circulating flu viruses. Flu vaccines protect against the three or four viruses (depending on the vaccine) that research suggests will be most common. For 2019-2020, trivalent (three-component) vaccines are recommended to contain:

• A/Brisbane/02/2018 (H1N1)pdm09-like virus (updated)
• A/Kansas/14/2017 (H3N2)-like virus (updated)
• B/Colorado/06/2017-like (Victoria lineage) virus

Quadrivalent (four-component) vaccines, which protect against a second lineage of B viruses, are recommended to contain:

• the three recommended viruses above, plus B/Phuket/3073/2013-like (Yamagata lineage) virus.

How well-matched are 2019-2020 vaccine viruses to circulating flu viruses? How well is flu vaccine protecting against illness?

It’s understandable that people want to know how well flu vaccines are working or are expected to work this season. CDC does not have flu vaccine effectiveness estimates for this season yet because it is still early in the season  and these estimates are based on epidemiologic studies comparing illness among vaccinated versus unvaccinated people. That data will be available later.

In the meantime, laboratory data can provide some insight into how well vaccines might work. The most helpful data for this is the antigenic characterization data, which are updated weekly in FluView. Limited antigenic data on recently circulating viruses are available at this point in the season, and the data suggest similarity of the circulating influenza A(H1N1)pdm09 and B/Yamagata viruses tested so far to the vaccine viruses. However, the influenza B/Victoria and A(H3N2) viruses that have been tested show some reduced similarity to the vaccine viruses. Again, at this point in the flu season, the antigenic data are limited and can only give early insights into how well vaccines might work. More information about how CDC antigenically characterizes flu viruses is available, and more complete antigenic data will be available in the coming weeks.

During past seasons when vaccine viruses were antigenically “like” most circulating viruses, vaccine effectiveness in the range of 40% to 60% has been observed. This means that people who get vaccinated may still get sick, but they are about half as likely to get sick as someone who was not vaccinated. Another important thing to remember is that vaccination may make illness less severe in people who get vaccinated and still get sick. In general people who get vaccinated are better off than people who do not get vaccinated. It’s important to remember though, that things can change very quickly with flu and we could still see circulation of flu viruses with significant antigenic drift this season.

 

 

EXIM Approved 1,585 Small Business Authorizations Totaling More Than $1.4 Billion and Supporting Approximately 12,000 Jobs

he Export-Import Bank of the United States (EXIM) has approved 1,585 authorizations totaling more than $1.42 billion in support of American small businesses that export “Made in the USA” products around the world since May 2019, when a quorum of the Board of Directors was restored, through January 31, 2020.

This total includes $1.28 billion of short-term authorizations and $69.8 million of medium-term authorizations.

“EXIM stands ready to help our small businesses, which are the backbone of American commerce,” said EXIM President and Chairman Kimberly A. Reed. “In recent years, nearly 90 percent of EXIM’s authorizations have supported small businesses. As part of our recent reauthorization, Congress has directed EXIM to increase the share of export financing for small businesses, and we are committed to ensuring all U.S. small businesses have the opportunity to export their ‘Made in the U.S.A.’ products around the world.”

These small-business related authorizations have supported an estimated 8,000 U.S. jobs in FY 2019 and a preliminary estimate of 4,000 U.S. jobs to date in FY 2020.

In an effort to build awareness and to increase transparency about EXIM’s commitment to small business, EXIM published a complete list of transactions online. Below is a summary of overall small business activity during this timeframe. To see how small businesses from every state are using EXIM products, view success stories online.

EXIM Authorizations May 9, 2019 – January 31, 2020
EXIM Product	Total (in millions)	Short-Term (in millions)	Medium-Term (in millions)	Long-Term (in millions)
Export Credit Insurance	$ 1,435.3	$ 1,382.9	$ 52.3	–
Working Capital Guarantees	$ 379.1	$ 379.1	–	–
Guarantees and Loans	$ 5,196.7	–	$ 169.8	$ 5,026.9
Total	$ 7,011.0	$ 1,762.0	$ 222.1	$ 5,026.9
Small Business/MWOB
Small Business	$ 1,425.2	$ 1,284.8	$69.8	$ 70.7
Minority and Women-Owned Business	$ 234.3	$ 205.9	$4.1	$ 24.4

ABOUT EXIM:

EXIM is an independent federal agency that promotes and supports American jobs by providing competitive and necessary export credit to overseas purchasers of U.S. goods and services. A robust EXIM can level the global playing field for U.S. exporters when they compete against foreign companies that receive support from their governments. EXIM also contributes to U.S. economic growth by helping to create and sustain hundreds of thousands of jobs in exporting businesses and their supply chains across the United States. In recent years, 90 percent of the total number of the agency’s authorizations has directly supported small businesses.

BEA News: Gross Domestic Product, Fourth Quarter and Year 2019

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the fourth quarter of 2019 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP also increased 2.1 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was also 2.1 percent. In the second estimate, an upward revision to private inventory investment was offset by a downward revision to nonresidential fixed investment (see "Updates to GDP" on page 2).

The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), federal government spending, exports, residential fixed investment, and state and local government spending that were partly offset by negative contributions from private inventory investment and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased (table 2).

Real GDP growth in the fourth quarter was the same as that in the third. In the fourth quarter, a downturn in imports and an acceleration in government spending were offset by a larger decrease in private inventory investment and a slowdown in PCE.

Current dollar GDP increased 3.5 percent, or $184.2 billion, in the fourth quarter to a level of $21.73 trillion. In the third quarter, GDP increased 3.8 percent, or $202.3 billion (tables 1 and 3).

The price index for gross domestic purchases increased 1.4 percent in the fourth quarter, the same increase as in the third quarter (table 4). The PCE price index increased 1.3 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.2 percent, compared with an increase of 2.1 percent.

More information on the source data that underlie the estimates is available in the "Key Source Data and Assumptions" file on BEA’s website.

Updates to GDP

In the second estimate, the fourth-quarter growth rate in real GDP was unrevised from the advance estimate. Private inventory investment, exports, federal government spending, and residential fixed investment were revised up. These upward revisions were offset by downward revisions to nonresidential fixed investment, PCE, state and local government spending, and an upward revision to imports. For more information, see the Technical Note and the "Additional Information" section below.

	Advance Estimate	Second Estimate
	(Percent change from preceding quarter)
Real GDP	2.1	2.1
Current-dollar GDP	3.6	3.5
Gross domestic purchases price index	1.5	1.4
PCE price index	1.6	1.3
PCE price index excluding food and energy	1.3	1.2

For the third quarter of 2019, the percent change in real GDI was revised from 2.1 percent to 1.2 percent based on new third-quarter data from the BLS Quarterly Census of Employment and Wages.

2019 GDP

Real GDP increased 2.3 percent in 2019 (from the 2018 annual level to the 2019 annual level), compared with an increase of 2.9 percent in 2018 (table 1).

The increase in real GDP in 2019 reflected positive contributions from PCE, nonresidential fixed investment, federal government spending, state and local government spending, and private inventory investment that were partly offset by a negative contribution from residential fixed investment. Imports increased (table 2).

The deceleration in real GDP in 2019, compared to 2018, primarily reflected decelerations in nonresidential fixed investment and PCE, which were partly offset by accelerations in both state and local and federal government spending. Imports increased less in 2019 than in 2018.

Current-dollar GDP increased 4.1 percent, or $846.9 billion, in 2019 to a level of $21.43 trillion, compared with an increase of 5.4 percent, or $1,060.8 billion, in 2018 (tables 1 and 3).

The price index for gross domestic purchases increased 1.5 percent in 2019, compared with an increase of 2.4 percent in 2018 (table 4). The PCE price index increased 1.4 percent, compared with an increase of 2.1 percent. Excluding food and energy prices, the PCE price index increased 1.6 percent, compared with an increase of 1.9 percent (table 4).

Measured from the fourth quarter of 2018 to the fourth quarter of 2019, real GDP increased 2.3 percent during the period. That compared with an increase of 2.5 percent during 2018. The price index for gross domestic purchases, as measured from the fourth quarter of 2018 to the fourth quarter of 2019, increased 1.4 percent during 2019. That compared with an increase of 2.2 percent during 2018. The PCE price index increased 1.4 percent, compared with an increase of 1.9 percent. Excluding food and energy, the PCE price index increased 1.6 percent, compared with an increase of 1.9 percent (table 6).

U.S. International Trade in Goods and Services, December 2019 & Annual Summary for 2019

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced that the goods and services deficit was $48.9 billion in December, up $5.2 billion from $43.7 billion in November, revised.

U.S. International Trade in Goods and Services Deficit

Deficit:	$48.9 Billion	+11.9%°
Exports:	$209.6 Billion	+0.8%°
Imports:	$258.5 Billion	+2.7%°
Next release: March 6, 2020 (°) Statistical significance is not applicable or not measurable. Data adjusted for seasonality but not price changes Source: U.S. Census Bureau, U.S. Bureau of Economic Analysis; U.S. International Trade in Goods and Services, February 5, 2020

Exports, Imports, and Balance (exhibit 1)

December exports were $209.6 billion, $1.6 billion more than November exports. December imports were $258.5 billion, $6.8 billion more than November imports.

The December increase in the goods and services deficit reflected an increase in the goods deficit of $5.1 billion to $69.7 billion and a decrease in the services surplus of $0.1 billion to $20.8 billion.

For 2019, the goods and services deficit decreased $10.9 billion, or 1.7 percent, from 2018. Exports decreased $1.5 billion or 0.1 percent. Imports decreased $12.5 billion or 0.4 percent.

Three-Month Moving Averages (exhibit 2)

The average goods and services deficit decreased $0.9 billion to $46.6 billion for the three months ending in December.

• Average exports increased $0.9 billion to $208.2 billion in December.
• Average imports decreased less than $0.1 billion to $254.8 billion in December.

Year-over-year, the average goods and services deficit decreased $10.4 billion from the three months ending in December 2018.

• Average exports increased $0.2 billion from December 2018.
• Average imports decreased $10.2 billion from December 2018.

Exports (exhibits 3, 6, and 7)

Exports of goods increased $1.3 billion to $137.7 billion in December.

  Exports of goods on a Census basis increased $1.3 billion.

• Industrial supplies and materials increased $1.7 billion.
  • Crude oil increased $1.5 billion.
• Other goods increased $1.0 billion.
• Automotive vehicles, parts, and engines decreased $1.0 billion.
  • Passenger cars decreased $0.6 billion.

  Net balance of payments adjustments increased less than $0.1 billion.

Exports of services increased $0.3 billion to $71.9 billion in December.

• Travel increased $0.2 billion.
• Other business services increased $0.1 billion.

Imports (exhibits 4, 6, and 8)

Imports of goods increased $6.4 billion to $207.5 billion in December.

  Imports of goods on a Census basis increased $6.2 billion.

• Industrial supplies and materials increased $4.0 billion.
  • Crude oil increased $1.7 billion.
  • Nonmonetary gold increased $0.9 billion.
  • Other petroleum products increased $0.6 billion.
• Other goods increased $1.2 billion.

  Net balance of payments adjustments increased $0.1 billion.

Imports of services increased $0.4 billion to $51.1 billion in December.

• Travel increased $0.2 billion.
• Transport increased $0.1 billion.

Real Goods in 2012 Dollars – Census Basis (exhibit 11)

The real goods deficit increased $4.3 billion to $80.5 billion in December.

• Real exports of goods increased $1.5 billion to $149.3 billion.
• Real imports of goods increased $5.8 billion to $229.8 billion.

Revisions

In addition to revisions to source data for the November statistics, the seasonally adjusted goods data were revised for January through November so that the totals of the seasonally adjusted months equal the annual totals.

Revisions to November exports

• Exports of goods were revised down $0.7 billion.
• Exports of services were revised up $0.1 billion.

Revisions to November imports

• Imports of goods were revised up less than $0.1 billion.
• Imports of services were revised up less than $0.1 billion.

Goods by Selected Countries and Areas: Monthly – Census Basis (exhibit 19)

The December figures show surpluses, in billions of dollars, with South and Central America ($4.6), Hong Kong ($1.9), Brazil ($0.9), OPEC ($0.7), United Kingdom ($0.6), Singapore ($0.5), and Saudi Arabia ($0.3). Deficits were recorded, in billions of dollars, with China ($25.7), European Union ($14.0), Mexico ($9.4), Germany ($5.5), Japan ($4.4), Canada ($4.4), Italy ($2.9), Taiwan ($2.4), South Korea ($1.9), India ($1.7), and France ($0.3).

• The deficit with Canada increased $2.4 billion to $4.4 billion in December. Exports increased $0.1 billion to $23.9 billion and imports increased $2.5 billion to $28.2 billion.
• The deficit with Mexico increased $0.9 billion to $9.4 billion in December. Exports decreased $0.6 billion to $20.2 billion and imports increased $0.3 billion to $29.6 billion.
• The deficit with Japan decreased $1.3 billion to $4.4 billion in December. Exports increased $0.9 billion to $6.7 billion and imports decreased $0.4 billion to $11.1 billion.

Annual Summary for 2019

Exports, Imports, and Balance (exhibit 1)

For 2019, the goods and services deficit was $616.8 billion, down $10.9 billion from $627.7 billion in 2018. Exports were $2,499.8 billion, down $1.5 billion from 2018. Imports were $3,116.5 billion, down $12.5 billion from 2018.

The 2019 decrease in the goods and services deficit reflected a decrease in the goods deficit of $21.4 billion, or 2.4 percent, to $866.0 billion and a decrease in the services surplus of $10.4 billion, or 4.0 percent, to $249.2 billion.

As a percentage of U.S. gross domestic product, the goods and services deficit was 2.9 percent in 2019, down from 3.0 percent in 2018.

Exports (exhibits 3, 6, and 7)

Exports of goods decreased $21.3 billion to $1,653.0 billion in 2019.

  Exports of goods on a Census basis decreased $20.5 billion.

• Capital goods decreased $15.8 billion.
  • Civilian aircraft decreased $12.6 billion.
• Industrial supplies and materials decreased $11.1 billion.
  • Other petroleum products decreased $7.6 billion.
• Other goods increased $5.1 billion.

  Net balance of payments adjustments decreased $0.8 billion.

Exports of services increased $19.7 billion to $846.7 billion in 2019.

• Other business services increased $13.7 billion.
• Telecommunications, computer, and information services increased $4.8 billion.

Imports (exhibits 4, 6, and 8)

Imports of goods decreased $42.6 billion to $2,519.0 billion in 2019.

  Imports of goods on a Census basis decreased $42.3 billion.

• Industrial supplies and materials decreased $53.6 billion.
  • Crude oil decreased $30.3 billion.
• Capital goods decreased $14.4 billion.
  • Computer accessories decreased $11.6 billion.
  • Telecommunications equipment decreased $11.6 billion.
  • Civilian aircraft engines increased $4.5 billion.
• Other goods increased $11.6 billion.
• Consumer goods increased $7.1 billion.
  • Pharmaceutical preparations increased $16.0 billion.
  • Gem diamonds decreased $4.1 billion.

  Net balance of payments adjustments decreased $0.3 billion.

Imports of services increased $30.2 billion to $597.5 billion in 2019.

• Travel increased $7.8 billion.
• Insurance services increased $7.1 billion.
• Other business services increased $5.6 billion.

Goods by Selected Countries and Areas – Census Basis (exhibits 14 and 14a)

The 2019 figures show surpluses, in billions of dollars, with South and Central America ($53.7), Hong Kong ($26.1), Netherlands ($21.5), Australia ($15.2), Belgium ($14.6), Brazil ($12.2), and United Kingdom ($6.0). Deficits were recorded, in billions of dollars, with China ($345.6), European Union ($177.9), Mexico ($101.8), Japan ($69.0), Germany ($67.2), Ireland ($52.7), Italy ($33.4), Malaysia ($27.4), Canada ($27.0), Switzerland ($26.7), India ($23.3), Taiwan ($23.0), South Korea ($20.6), Thailand ($20.2), France ($19.7), Russia ($16.5), and Indonesia ($12.4).

• The deficit with China decreased $73.9 billion to $345.6 billion in 2019. Exports decreased $13.5 billion to $106.6 billion and imports decreased $87.4 billion to $452.2 billion.
• The surplus with South and Central America increased $11.7 billion to $53.7 billion in 2019. Exports decreased $1.6 billion to $162.6 billion and imports decreased $13.3 billion to $108.9 billion.
• The deficit with Mexico increased $21.1 billion to $101.8 billion in 2019. Exports decreased $9.1 billion to $256.4 billion and imports increased $12.0 billion to $358.1 billion.