- Current account balance
- The current account balance is a broad measure of a country's trade that includes goods and services as well as international flows of income and transfers.
- Balance of trade
- The balance of trade is the gap, if any, between the value of a nation's exports and its imports.
Components of the current account
Can you name the four components of the current account?
UK statistics split the current account into four parts, each with its own balance.
Trade in goods records exports and imports of physical items, the things that ships, planes, trains and lorries carry between countries.
Can you think of an example?
A French car bought by a dealer in Leeds is a goods import. Scotch whisky shipped to buyers in Japan is a goods export, paid for with money flowing into the UK.
Trade in services records exports and imports of services, such as finance, law, software and tourism, which can cross borders without any shipment.
Can you think of an example?
An American tourist's hotel bill in London is a services export, because money flows in. A British firm paying an Indian company to write its software is a services import.
Primary income records income that residents earn abroad, mainly returns on investments and pay for work, against the same income paid to non-residents.
Can you think of an example?
Pay a British engineer earns on a three-month job in Spain, and interest a British bank earns on a loan to a Spanish firm, are primary income inflows. Dividends a British company pays to American shareholders are an outflow.
Secondary income records transfers, which are payments sent abroad or received without any direct good or service given in return.
Can you think of an example?
Aid the UK government gives to another country is a secondary income outflow. So is money that a worker in Britain sends home to family abroad.