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News Release: U.S. International Investment Position, 2005

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FOR WIRE TRANSMISSION: 8:30 A.M. EDT, THURSDAY, June 29, 2006
Elena L. Nguyen:                (202) 606-9555                        BEA 06-29
Christopher A. Gohrband:        (202) 606-9564



          U.S. Net International Investment Position at Yearend 2005



      The U.S. net international investment position at yearend 2005 was -$2,693.8
billion (preliminary) with direct investment valued at current cost, as the value
of foreign investments in the United States exceeded the value of U.S. investments
abroad (table 1).  At yearend 2004, the U.S. net international investment position
was -$2,360.8 billion (revised).

      The -$333.0 billion change in the net investment position from yearend 2004
to yearend 2005 was largely due to record private net foreign purchases of U.S.
securities, including U.S. Treasury securities, and to depreciation of most major
foreign currencies against the U.S. dollar, which lowered the dollar value of
U.S.-owned assets abroad.  The impact of these net purchases and exchange-rate
changes was largely offset by price appreciation of U.S.-held foreign stocks that
surpassed by a large amount price appreciation of foreign-held U.S. stocks.

      With direct investment valued at the current stock market value of owners'
equity, the net investment position was -$2,546.2 billion (preliminary) at yearend
2005, compared with -$2,448.7 billion (revised) at yearend 2004.  The -$97.4 billion
change in the net investment position on this basis resulted from the same factors
as above.  Price increases on direct investment were larger on this basis than with
direct investment valued at current cost.  Other highlights include:

      Foreign acquisitions of assets in the United States were $1,212.3 billion
    in 2005, down from $1,450.2 billion in 2004.  Foreign official acquisitions
    were $199.5 billion, down from last year's record $387.8 billion, as a result
    of sharply reduced net purchases of U.S. Treasury securities.  Partly offsetting
    were stronger private net foreign purchases of U.S. securities, including U.S.
    Treasury securities.  Net private foreign purchases of U.S. Treasury securities
    were a record $199.5 billion, up from $102.9 billion.  Net private foreign
    purchases of U.S. securities other than U.S. Treasury securities were a record
    $474.1 billion, up from $381.5 billion in 2004, of which net purchases of U.S.
    bonds were $388.4 billion, up from $321.9 billion, and net purchases of U.S.
    stocks were $85.8 billion, up from $59.5 billion.  U.S. banks' liabilities
    increased $179.8 billion, down from last year's increase of $336.7 billion,
    and U.S. nonbanks' liabilities increased $30.1 billion, down from $93.3 billion.
    Foreign direct investment in the United States increased $109.8 billion, down
    from an increase of $133.2 billion.

      U.S. acquisitions of assets abroad were $426.8 billion in 2005, down from a
    record $867.8 billion in 2004, as U.S. direct investment abroad and U.S. banks'
    and nonbanks' claims slowed sharply from last year's pace.  U.S. direct
    investment abroad increased only $9.1 billion, down from an increase of $244.1
    billion in 2004.  U.S. banks' claims increased $213.0 billion, down from an
    increase of $361.6 billion in 2004, and U.S. nonbanks' claims increased $44.2
    billion, down from an increase of $120.0 billion.  In contrast, net U.S.
    purchases of foreign securities, mostly foreign stocks, increased to $180.1
    billion from $146.5 billion.

      Price appreciation in most foreign stock markets substantially increased the
    value of U.S. holdings of foreign corporate stocks and the value of owners'
    equity of U.S. direct investment abroad on a market-value basis.  Price
    appreciation in the U.S. stock market also increased the value of foreign
    holdings of U.S. corporate stocks, but by a much smaller amount.

      Depreciation of most major foreign currencies against the U.S. dollar from
    yearend 2004 to yearend 2005 lowered the dollar value of U.S.-owned assets
    abroad, especially the value of U.S.-owned foreign corporate stocks and U.S.
    direct investment abroad at market value.
______________________________________________________________________________

                   Valuation Methods for Direct Investment

The current-cost method values the U.S. and foreign parents' share of their
affiliates' investment in plant and equipment using the current cost of capital
equipment, in land using general price indexes, and in inventories using
estimates of their replacement cost.

The market-value method values the owners' equity component of the direct
investment position using indexes of stock market prices.

The historical-cost method values all assets and liabilities at their book value.
Country and industry detail can be shown only under this method.  Data on this
basis are not presented in this release.
______________________________________________________________________________

      U.S.-owned assets abroad increased $822.0 billion to $10,008.7 billion with
U.S. direct investment abroad valued at current cost, and they increased $1,003.9
billion to $11,079.2 billion with U.S. direct investment abroad valued at market value.

      U.S. holdings of foreign securities increased $520.6 billion to $4,074.0
billion.  Holdings of foreign stocks increased as a result of large price
appreciation and record net U.S. purchases, which were partly offset by
exchange-rate depreciation.  Holdings of foreign bonds decreased as a result of
price depreciation and exchange-rate depreciation that more than offset net U.S.
purchases.

      U.S. direct investment abroad valued at current cost increased $54.7 billion
to $2,453.9 billion, mostly as a result of price appreciation.  Financial
transactions increased U.S. direct investment abroad $9.1 billion, down sharply
from last year's increase of $244.1 billion, largely as a result of tax incentives
provided by the American Jobs Creation Act that encouraged the payment of dividends
by foreign affiliates to their U.S. parent companies.  At market value, U.S. direct
investment abroad increased $236.6 billion to $3,524.5 billion, reflecting strong
price appreciation of owners' equity resulting from an increase in foreign stock
prices.  Partly offsetting was exchange-rate depreciation.

      Claims on foreigners reported by U.S. banks increased $202.8 billion to
$2,430.7 billion.

      Claims on unaffiliated foreigners reported by U.S. nonbanking concerns
increased $51.0 billion to $784.5 billion.

      U.S. official reserve assets decreased $1.5 billion to $188.0 billion.

      Foreign-owned assets in the United States increased $1,155.0 billion to
$12,702.5 billion with foreign direct investment in the United States valued at
current cost, and they increased $1,101.3 billion to $13,625.4 billion with
foreign direct investment in the United States valued at market value.

      Foreign official assets in the United States increased $214.7 billion to
$2,216.1 billion.  Net purchases of U.S. Government securities accounted for most
of the increase.

      Foreign holdings of U.S. securities other than U.S. Treasury securities,
excluding official holdings, increased $395.2 billion to $4,390.7 billion.
Foreign holdings of U.S. bonds increased as a result of strong net foreign
purchases, which were partly offset by price depreciation.  Foreign holdings of
U.S. stocks increased as a result of net foreign purchases and price appreciation.

      Foreign holdings of U.S. Treasury securities, excluding official holdings,
increased $142.6 billion to $704.9 billion as a result of strong net foreign
purchases.

      U.S. liabilities to private foreigners and international financial
institutions reported by U.S. banks increased $179.9 billion to $2,600.6 billion.

      Liabilities to unaffiliated foreigners reported by U.S. nonbanking concerns
increased $56.1 billion to $563.7 billion.

      Foreign direct investment in the United States valued at current cost
increased $147.2 billion to $1,874.3 billion, mostly as a result of financial
transactions.  At market value, foreign direct investment in the United States
increased $93.5 billion to $2,797.2 billion.

      U.S. currency held by foreigners increased $19.4 billion to $352.2 billion.


                            *          *          *

                                   Revisions

      The previously published net international investment position in 2004 was
-$2,484.2 billion with direct investment at current cost and -$2,542.2 billion
with direct investment at market value.  This year, the estimates of U.S. holdings
of foreign securities for 2003-2004 were revised to incorporate results from the
U.S. Treasury Department's Annual Survey of U.S. Portfolio Investment Abroad as
of December 31, 2004.  The estimates of foreign holdings of U.S. securities for
2003-2004 were revised to incorporate results from the U.S. Treasury Department's
Annual Survey of Foreign Portfolio Investment in the United States as of
June 30, 2005.  These estimates also included the incorporation of revised results
from the U.S. Treasury Department's Benchmark Survey of Foreign Portfolio
Investment in the United States as of June 30, 2004.  The estimates of short-term
U.S. Treasury securities and other short-term instruments reported by U.S. banks
for 2003-2004 were also revised to incorporate results from the U.S. Treasury
Department's Annual Survey of Foreign Portfolio Investment in the United States as
of June 30, 2005.  The estimates of foreign direct investment in the United States
for 2002-2004 were revised to incorporate results from BEA's benchmark survey of
foreign direct investment in the United States for 2002.

      In addition to the above improvements, all estimates are revised as a result
of newly available or revised quarterly source data.  Revisions attributable to
these updated source data are for 2002-2004.  The net result of revisions from
all sources raised the value of U.S. assets abroad relative to the value of
foreign assets in the United States for 2002-2004.

      A more detailed discussion of the U.S. net international investment
position in 2005 and revised historical data will appear in the July issue of
the Survey of Current Business.  That issue will also contain an article about
historical-cost direct investment positions, with detail by country and industry,
and revised direct investment historical data.

                            *          *          *

      BEA's national, international, regional, and industry estimates; the Survey
of Current Business; and BEA news releases are available without charge on BEA's
Web site at www.bea.gov.  By visiting the site, you can also subscribe to receive
free e-mail summaries of BEA releases and announcements.



    Table 1. International Investment Position of the United States at Yearend, 2004 and 2005
    [Millions of dollars]



                                                                                                                    Changes in position in 2005 (decrease (-), increase (+))


                                                                                                                    Attributable to:


                                                                                                                                     Valuation adjustments
          Line                         Type of investment
                                                                                                      Position,                                                           Position,
                                                                                                      2004/r/                             Exchange-                       2005/p/
                                                                                                                    Financial   Price       rate       Other
                                                                                                                      flows    changes   changes/1/  changes/2/   Total
                                                                                                                       (a)       (b)         (c)        (d)     (a+b+c+d)


              Net international investment position of the United States:
            1    With direct investment positions at current cost (line 3 less line 24)............   -2,360,785     -785,449    625,441   -226,283     53,277   -333,014 -2,693,799
            2    With direct investment positions at market value (line 4 less line 25)............   -2,448,744     -785,449  1,061,360   -393,614     20,272    -97,431 -2,546,175

               U.S.-owned assets abroad:
            3      With direct investment positions at current cost (lines 5+10+15)................    9,186,661      426,801    608,509   -278,993     65,698    822,015 10,008,676
            4      With direct investment positions at market value (lines 5+10+16)................   10,075,337      426,801    993,566   -444,317     27,815  1,003,865 11,079,202

            5    U.S. official reserve assets......................................................      189,591      -14,096     20,241     -7,680        -13     -1,548    188,043
            6      Gold............................................................................      113,947         ....  /3/20,241       ....     /4/-13     20,228    134,175
            7      Special drawing rights..........................................................       13,628       -4,511       ....       -907       ....     -5,418      8,210
            8      Reserve position in the International Monetary Fund.............................       19,544      -10,200       ....     -1,308       ....    -11,508      8,036
            9      Foreign currencies..............................................................       42,472          615       ....     -5,465       ....     -4,850     37,622

           10    U.S. Government assets, other than official reserve assets........................       83,062       -5,539       ....       ....       ....     -5,539     77,523
           11      U.S. credits and other long-term assets /5/.....................................       80,308       -3,348       ....       ....       ....     -3,348     76,960
           12        Repayable in dollars..........................................................       80,035       -3,348       ....       ....       ....     -3,348     76,687
           13        Other /6/.....................................................................          273         ....       ....       ....       ....       ....        273
           14      U.S. foreign currency holdings and U.S. short-term assets.......................        2,754       -2,191       ....       ....       ....     -2,191        563

                 U.S. private assets:
           15        With direct investment at current cost (lines 17+19+22+23)....................    8,914,008      446,436    588,268   -271,313     65,711    829,102  9,743,110
           16        With direct investment at market value (lines 18+19+22+23)....................    9,802,684      446,436    973,325   -436,637     27,828  1,010,952 10,813,636

                   Direct investment abroad:
           17        At current cost...............................................................    2,399,224        9,072     42,085    -32,112     35,664     54,709  2,453,933
           18        At market value...............................................................    3,287,900        9,072    427,142   -197,436     -2,219    236,559  3,524,459
           19      Foreign securities..............................................................    3,553,387      180,125    546,183   -205,698       ....    520,610  4,073,997
           20        Bonds.........................................................................      992,969       37,991    -20,533    -22,884       ....     -5,426    987,543
           21        Corporate stocks..............................................................    2,560,418      142,134    566,716   -182,814       ....    526,036  3,086,454
           22      U.S. claims on unaffiliated foreigners reported by U.S. nonbanking concerns.....      733,538       44,221       ....    -18,151     24,913     50,983    784,521
           23      U.S. claims reported by U.S. banks, not included elsewhere......................    2,227,859      213,018       ....    -15,352      5,134    202,800  2,430,659

               Foreign-owned assets in the United States:
           24      With direct investment at current cost (lines 26+33)............................   11,547,446    1,212,250    -16,932    -52,710     12,421  1,155,029 12,702,475
           25      With direct investment at market value (lines 26+34)............................   12,524,081    1,212,250    -67,794    -50,703      7,543  1,101,296 13,625,377

           26    Foreign official assets in the United States......................................    2,001,407      199,495    -26,059       ....     41,280    214,716  2,216,123
           27      U.S. Government securities......................................................    1,499,293      156,450    -28,661       ....     22,315    150,104  1,649,397
           28        U.S. Treasury securities......................................................    1,241,250       71,749    -21,682       ....     -2,436     47,631  1,288,881
           29        Other.........................................................................      258,043       84,701     -6,979       ....     24,751    102,473    360,516
           30      Other U.S. Government liabilities /7/...........................................       16,488         -488       ....       ....       ....       -488     16,000
           31      U.S. liabilities reported by U.S. banks, not included elsewhere.................      270,387       24,275       ....       ....       ....     24,275    294,662
           32      Other foreign official assets...................................................      215,239       19,258      2,602       ....     18,965     40,825    256,064

                 Other foreign assets:
           33        With direct investment at current cost (lines 35+37+38+41+42+43)..............    9,546,039    1,012,755      9,127    -52,710    -28,859    940,313 10,486,352
           34        With direct investment at market value (lines 36+37+38+41+42+43)..............   10,522,674    1,012,755    -41,735    -50,703    -33,737    886,580 11,409,254

                   Direct investment in the United States:
           35        At current cost...............................................................    1,727,062      109,754     27,950     -2,007     11,504    147,201  1,874,263
           36        At market value...............................................................    2,703,697      109,754    -22,912       ....      6,626     93,468  2,797,165
           37      U.S. Treasury securities........................................................      562,288      199,491     -7,671       ....    -49,233    142,587    704,875
           38      U.S. securities other than U.S. Treasury securities.............................    3,995,506      474,140    -11,152    -29,411    -38,401    395,176  4,390,682
           39        Corporate and other bonds.....................................................    2,035,149      388,357    -72,646    -29,411    -46,252    240,048  2,275,197
           40        Corporate stocks..............................................................    1,960,357       85,783     61,494       ....      7,851    155,128  2,115,485
           41      U.S.currency....................................................................      332,735       19,416       ....       ....       ....     19,416    352,151
           42      U.S. liabilities to unaffiliated foreigners reported by U.S. nonbanking concerns      507,668       30,105       ....    -10,309     36,285     56,081    563,749
           43      U.S. liabilities reported by U.S. banks, not included elsewhere.................    2,420,780      179,849       ....    -10,983     10,986    179,852  2,600,632

    p Preliminary.
    r Revised.
    1. Represents gains or losses on foreign-currency-denominated assets and liabilities due to their revaluation at current exchange rates.
    2. Includes changes in coverage, capital gains and losses of direct investment affiliates, and other adjustments to the value of assets and liabilities.
    3. Reflects changes in the value of the official gold stock due to fluctuations in the market price of gold.
    4. Reflects changes in gold stock from U.S. Treasury sales of gold medallions and commemorative and bullion coins; also reflects replenishment through open market purchases.
       These demonetizations/monetizations are not included in international transactions financial flows.
    5. Also includes paid-in capital subscriptions to international financial institutions and resources provided to foreigners under foreign assistance programs requiring
       repayment over several years.  Excludes World War I debts that are not being serviced.
    6. Includes indebtedness that the borrower may contractually, or at its option, repay with its currency, with a third country's currency, or by delivery of materials or transfer
       of services.
    7. Primarily U.S. Government liabilities associated with military sales contracts and other transactions arranged with or through foreign official agencies.

    Source:  Bureau of Economic Analysis