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Financial Inflows Continue to Show Strength of the U.S. Economy
Mar 23, 2002

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  • The U.S. current-account deficit that includes both trade in goods and services as well as income, and net unilateral current transfer increased to $98.8 billion in the fourth quarter of 2001 from $98.5 billion in the third quarter according to a report released by the Bureau of Economic Analysis on March 14. The current account deficit was financed with net capital inflows of $194 billion in the fourth quarter, which were up $12 billion from the third quarter net capital inflows. The report comes at a time when there is growing concern over the sustainability of the United States trade deficit and the ability of the country to continue attracting foreign investors.

    Although foreign direct investment in the United Stated dropped in the fourth quarter by $ 13.4 billion, continuing a trend that started in third quarter of 2001 when direct investment flows netted a $20 billion drop, the net financial inflows were positive due to a large purchase of United States securities by foreigners. In fact, in the fourth quarter of 2001 foreigners purchased securities in the United States for $246 billion and totalled assets owned by foreigners (including direct investment) reached $263 billion. As a result, the net recorded financial inflows--net acquisitions by foreign residents of assets in the United States less net acquisitions by U.S. residents of assets abroad--were $157.3 billion in the fourth quarter, compared with $40.3 billion in the third, which dissipates any concerns that confidence in the United States economy is beginning to wan down.

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