International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Thursday, July 2, 2020

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).

U.S. Net International Investment Position
U.S. Assets and Liabilities: Quarterly, not seasonally adjusted

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.

U.S. Assets: Quarterly, not seasonally adjusted
U.S. Liabilities: Quarterly, not seasonally adjusted

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.

https://lawprofessors.typepad.com/intfinlaw/2020/07/us-international-investment-position-first-quarter-2020-year-2019-and-annual-update.html

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