A surplus on income from investments declined to $2.6 billion from $3.0 billion the fourth quarter of last year. One-way transfers led to net outflows of $17.1 billion in the quarter, up from an outflow of $15.4 billion in the previous three months.
In 2002 overall, the current account deficit amounted to a record $480.86 dollars, slightly less than the earlier estimate of a 503-billion-dollar gap. The capital account showed net outflows of about $300 million, barely changed from the previous quarter.
Financial inflows — the net value of US assets acquired by foreigners less foreign assets bought by US residents — declined to $112.8 billion from $152.5 billion in the last quarter of 2002.
Foreign purchases of US securities other than government bonds declined to $50.9 billion in the first quarter of 2003 from $67.0 billion in the previous quarter.
Foreigners sold a net $3.3 billion in US stocks, partially reversing net purchases of $11.9 billion in the last quarter of 2002. Instead, overseas investors ploughed into US company bonds. Foreign purchases of US corporate bonds soared to $60.1 billion from $39.7 billion. Foreign purchases of US government bonds edged up to $13.5 billion from $12.7 billion.
MAHATHIR ATTACKS WEST
The Malaysian Prime Minister Mahathir Mohamad has launched a scathing attack on what he called the endless wars of Europe and its colonies such as the United States and Australia.
Dr Mahathir told the general assembly of his United Malays National Organisation (Umno) that the response to the 11 September attacks had marked a return to old ways of attacking Muslim countries and Muslims, whether they are guilty or not.
Dr Mahathir is due to step down as prime minister in October, and so this is one of the last times he will address his party's congress as the leader of Malaysia.He used the significance of the occasion to deliver an emotional speech, which included a passionate attack on the morals of Western nations, and what he said was their desire to impose their cultural values on the rest of the world.
But it was Dr Mahathir's comments about the war in Iraq which will prove more controversial.In an obvious reference to recent events, he said that false allegations had been invented to justify military action.
He also claimed that Western powers had begun to invade and rule certain countries in order to exploit the wealth of those countries, and not because of security concerns.He went on to warn that Malaysia could also be targeted.This speech will annoy the United States Government and its allies, but it will not come as any surprise.
Dr Mahathir has never been afraid to use robust, undiplomatic language to criticise the West, even though such comments can undermine Malaysia's bilateral relations.
CHANCELLOR STICKS TO EURO SCRIPT
Chancellor Gordon Brown has stressed that Britain will adopt the European single currency only if his five tests for euro entry are unambiguously met.Despite his recent pledge to step up preparations for euro entry, Mr Brown sounded a characteristic note of caution on the issue, in his annual speech to banking and business leaders at London's Mansion House.
He said there would be "no short-cuts and no fudge" on the five tests for whether the UK should adopt the single currency."To join in the wrong way or on the wrong basis without rigorously ensuring the tests are met would not be in the national economic interest. "And we will do nothing to put stability, growth, or the funding of public services at risk," he said.
BONUS RISE RELIEF FOR JAPAN
Summer bonuses are rising for Japanese employees, in a development which spells some much-needed good news for an economy hard-hit by years of deflation.Major Japanese companies pay bonuses twice a year, and the rise of 4.32% on average, with the car industry up more than 10% — is the first in several years.
A rise in profits as a result of restructuring has enabled the boost, according to Keidanren, Japan's biggest employers' federation.Consumer spending normally amounts for about two thirds of the Japanese economy.But ever-rising unemployment, repeated recessions and a steady slide in prices has led to a consumer slowdown which has helped trap the economy in the doldrums.
EU LEADERS TO DEBATE CONSTITUTION
European leaders are due to consider a European Union draft constitution that sets out sweeping political reforms.Leaders from the 15 member countries, and 10 which are due to join the EU next May, are meeting at the secluded Greek resort of Porto Carras, near Thessaloniki.
The Greek Government says the proposed constitution will make Europe into an equal partner of the United States in world affairs.But the leaders still appear to hold widely differing opinions on the draft constitution, which was completed a week ago after 16 months of negotiations.In the first day of the summit, the EU leaders agreed to spend more money to protect the EU's expanding borders against illegal immigrants.
But British plans to radically change asylum policy were knocked off the agenda after meeting strong opposition from other member states.
US ECONOMY 'RECOVERING'
The US economy is showing signs of a recovery, a closely-watched survey suggests.The Conference Board index — a key measure of leading US economic indicators — rose 1% in May.Analysts had expected a 0.7% increase, following April's 0.1% rise.Ken Goldstein, economist for the Conference Board, said the index "finally points to a recovery" in the US economy almost a year and a half after it came out of recession.
The board's survey of economic health checks, such as joblessness and hours worked in factories, saw increases in eight of 10 indicators.However, Mr Goldstein said the dangers evident in the first five months of the year, including a lack of business confidence, had not disappeared completely.
EU HOLDS BACK ON TRICHET DECISION
The EU will wait until October before deciding its official candidate to head the European Central Bank, widely expected to be Jean-Claude Trichet, who was cleared of involvement in a French banking scandal.
France had been lobbying EU leaders at a three-day summit in Greece to adopt the Bank of France governor as their official candidate for the role.
CARTEL CRACKDOWN TAKES EFFECT
Company bosses who conspire to force prices higher face jail under tough new laws which come into force on June 20, 2003.
The Enterprise Act, which has been in the legislative pipeline for 18 months, sets out penalties of up to five years' imprisonment and unlimited fines for directors found guilty of serious market abuses such as price-fixing.
BANK REMAINS SPLIT ON RATES
The Bank of England's rate-setting body voted 6-3 in favour of keeping rates on hold at its meeting earlier this month.The decision meant UK rates stayed unchanged at 3.75% although analysts still expect the Bank to cut rates later this year.
It is the fourth month in a row that the Bank's Monetary Policy Committee (MPC) has been split.At May's meeting, the MPC was split 5-4, with the decision to leave rates on hold passed only by the governor's casting vote.
US HITS OUT AT CATFISH AND CHIPS
The newly aggressive line on world trade emanating from the US was again in evidence as the Department of Commerce took aim at Vietnamese catfish and South Korean microchips.
The decision to slap a 45% tariff on memory chips from financially troubled vendor Hynix comes at the behest of US manufacturer Micron, which alleged that the South Korean government was unfairly subsidising the company's exports.
JOB CUTS BEGIN AT SINGAPORE AIR
Singapore Air, once one of the most profitable airlines in the world, has been forced to make the largest number of job cuts in its history.The sharp fall in passenger numbers following the break-out of the SARS virus caused the airline to lose $6m (£3.6m) a day during April and May.
S KOREA BAILS OUT STRIKE-HIT BANK
A rush by customers to pull their money out of South Korea's oldest lender — amid a strike by its workers against a state sell-off plan — has triggered an emergency injection of funds.
The Bank of Korea, the country's central bank, says it has pumped 2 trillion won ($1.7bn; £1bn) into Chohung Bank, the fourth largest in South Korea, to avert any risk of a run on the bank.
BLAIR'S PLEA TO TACKLE OIL CORRUPTION
UK Prime Minister Tony Blair has launched an initiative to persuade multinational oil, gas and mining firms to declare publicly any payments to government officials in developing countries.The aim is to tackle corruption by making such financial transactions more transparent.
The UK-led plan was unveiled at a conference in London attended by governments from resource-rich countries, multinational oil exploration and mining firms, and lobby groups campaigning for change.Governments and multinationals are being asked to sign up to a system designed to make public the large sums of money paid out by multinationals to governments.
BRAZIL CUTS RATES AS INFLATION EASES
Brazil has cut its interest rates for the first time in nearly year amid signs that runaway inflation is easing off.The Brazilian central bank trimmed its base rate by half a percentage point to 26%, marking the first time rates have fallen since July last year.
The banks' rate-setting Monetary Policy Committee said the move came in response to signs that inflation, which in 2002 touched a seven-year high of 12.5%, is beginning to moderate.
PENSION PLEA SENT TO ALL FRENCH HOMES
French Prime Minister Jean-Pierre Raffarin is sending a personal letter to every French household to explain why he is pushing ahead with his controversial pension reforms.The reforms have sparked weeks of strikes in France, seriously disrupting education, transport and other parts of the public sector. The next wave of strikes and demonstrations is already planned as unions maintain their opposition to the plans, which would force people to work longer to claim a full pension.
HOUSE PRICE GROWTH 'SET TO SLOW'
Hmeowners have been warned by one of Britain's biggest mortgage lenders that house price rises will slow in the coming year.The Woolwich said that although there were signs of returning confidence, the fundamental weakness of the housing market could hit growth.
The bank concluded that economic woes such as slower income growth, lower bonus payments, and higher household taxes would impair the housing market.
IMF FORECASTS 'INACCURATE'
The International Monetary Fund has a poor track record of successfully predicting financial crises, auditors have warned.In particular, the much-watched World Economic Outlook was criticised for failing to sufficiently flag up potential trouble, a review by the General Accounting Office found.
The review found that, of the 134 recessions that occurred in 87 developing countries between 1991 and 2001, the IMF predicted just 15.In addition, the report found that the IMF's forecasts for current account "were inaccurate most of the time".
The Fund has been much criticised in the past for failing to warn of major economic crises such as the Asian financial meltdown in 1997-1998 and the Mexican peso devaluation in 1995.The IMF has been trying to overhaul its tools for predictions, but critics say the reforms have not gone far enough.
US PRICES EASE DEFLATION FEARS
Rising living costs helped push up US inflation in May, allaying fears that the economy could slip into deflation.Consumer prices, excluding volatile food and energy prices, advanced 0.3% in May, the fastest rate in nine months.