U.S. International Transactions in 2001

By Helkie, William L.; Holland, Sara B. | Federal Reserve Bulletin, May 2002 | Go to article overview

U.S. International Transactions in 2001


Helkie, William L., Holland, Sara B., Federal Reserve Bulletin


The U.S. current account deficit narrowed noticeably in 2001. Both imports and exports of goods and services fell during the year in response to a global weakening of economic activity. The decline in the deficit followed a substantial widening during most of the past decade. For 2001, a smaller merchandise trade deficit and a slightly larger surplus in trade in services offset a continued widening of the deficit on investment income.

Meager foreign economic growth and the continued real appreciation of the dollar throughout the year induced a $61 billion decline in the value of U.S. exports of goods and services. The slowing in the U.S. economy caused imports of goods and services to fall even more--$89 billion. In the third quarter the deficit declined further, but only temporarily, because payments for imported services were reduced by a one-time large estimated insurance payment from foreign insurers (reported on an accrual basis) related to the destruction caused by the terrorist attacks of September 11. The net effect of these developments was a $28 billion narrowing in the goods and services deficit for 2001 (table 1).

The deficit in investment income widened slightly. Higher net payments on the growing net portfolio liability position were nearly offset by higher net receipts from direct investment. Weak growth abroad and the effect of lower oil prices on the profitability of U.S. energy companies lowered the return on U.S. foreign direct investment assets; slower growth in the United States reduced the return on foreign direct investment assets in the United States by an even greater amount. The deficit on unilateral transfers narrowed slightly.

Although smaller than the deficit in 2000, the U.S. current account deficit in 2001 was still large relative to U.S. historical experience (chart 1). The U.S. current account deficit is the counterpart of a net inflow of foreign capital that represents a source of saving (of more than $400 billion) to help finance U.S. domestic investment. To finance the U.S. current account deficit, net private capital flowed in at a record pace in 2001 and included unprecedented net inflows through private securities transactions. Net official capital outflows were slight. The statistical discrepancy in the U.S. international accounts was negative, indicating either small unrecorded net capital outflows or an underreporting of the current account deficit.

[GRAPHIC OMITTED]

MAJOR ECONOMIC INFLUENCES ON U.S. INTERNATIONAL TRANSACTIONS

Several factors had a significant influence on U.S. international transactions in 2001: cyclical movements in U.S. and foreign economic activity, a decline in primary commodity prices, movements in U.S. international price competitiveness, swings in the rates of return on real and financial assets at home and abroad, and the terrorist attacks of September 11.

U.S. Economic Activity

In 2001 the U.S. economy turned in its weakest performance in a decade, and the slowing pace of activity contributed to a decline in U.S. imports. Real gross domestic product increased at an annual rate of 3/4 percent in the first half of the year and remained virtually stagnant in the second half (table 2). Although the effects of the weakening economy were broadly felt, the manufacturing sector was especially hard hit. Faced with slumping demand both in the United States and abroad, manufacturers cut production aggressively to limit excessive buildups of inventories relative to sales. In addition, businesses sharply reduced their investment spending with particularly dramatic cuts in outlays for high-technology equipment. Firms trimmed payrolls through most of the year, and by year-end the unemployment rate moved up 1 3/4 percentage points, to around 5 3/4 percent. Job losses were especially large following the terrorist attacks of September 11, which had extremely adverse effects on certain sectors of the economy--most notably the air transportation and hospitality industries. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

U.S. International Transactions in 2001
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.