U.S. Net International Investment Position: Second Quarter 2018
The U.S. net international investment position decreased to −$8,638.5 billion (preliminary) at the end of the second quarter of 2018 from −$7,747.3 billion (revised) at the end of the first quarter, according to statistics released by the Bureau of Economic Analysis (BEA). The $891.2 billion decrease reflected a $587.8 billion decrease in U.S. assets and a $303.4 billion increase in U.S. liabilities (table A).
The $891.2 billion decrease in the net investment position reflected net financial transactions of −$126.0 billion and net other changes in position, such as price and exchange-rate changes, of −$765.1 billion (table A).
The net investment position decreased 11.5 percent in the second quarter, compared with a decrease of 0.3 percent in the first quarter and an average quarterly decrease of 4.6 percent from the first quarter of 2011 through the fourth quarter of 2017.
U.S. assets decreased $587.8 billion to $27,063.6 billion at the end of the second quarter, reflecting decreases in all major categories of assets, led by portfolio investment assets.
- Assets excluding financial derivatives decreased $575.2 billion to $25,485.2 billion. The decrease resulted from financial transactions of −$163.6 billion and other changes in position of −$411.6 billion (table A).
- Financial transactions were driven by net U.S. liquidation of other investment assets, mostly reflecting net foreign repayment of loans.
- Financial transactions also reflected net U.S. withdrawal of direct investment assets as a result of U.S. parent repatriation of previously reinvested earnings. For more information, see the box "Effects of the 2017 Tax Cuts and Jobs Act on U.S. Direct Investment Assets."
- Other changes in position were driven by exchange-rate changes, as major foreign currencies depreciated against the U.S. dollar, lowering the value of foreign-currency-denominated assets in dollar terms. The decrease from exchange-rate changes was partly offset by foreign equity price increases that raised the equity value of portfolio investment and direct investment assets.
- Financial derivatives decreased $12.6 billion to $1,578.5 billion, mostly reflecting a decrease in single-currency interest rate contracts that was partly offset by an increase in foreign-exchange contracts.
Table A. Quarterly Change in the U.S. Net International Investment Position
Billions of dollars, not seasonally adjusted
|Change in position in 2018:II||Position,
in position 1
|U.S. net international investment position||-7,747.3||-891.2||-126.0||-765.1||-8,638.5|
|Net position excluding financial derivatives||-7,794.9||-906.2||-109.0||-797.1||-8,701.1|
|Financial derivatives other than reserves, net||47.6||15.0||-17.0||32.0||62.6|
|Assets excluding financial derivatives||26,060.3||-575.2||-163.6||-411.6||25,485.2|
|Financial derivatives other than reserves||1,591.1||-12.6||(2)||(2)||1,578.5|
|Liabilities excluding financial derivatives||33,855.2||331.0||-54.6||385.6||34,186.2|
|Financial derivatives other than reserves||1,543.6||-27.7||(2)||(2)||1,515.9|
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 released in June each year.
U.S. liabilities increased $303.4 billion to $35,702.1 billion at the end of the second quarter, reflecting increases in all major categories of liabilities, except financial derivatives.
- Liabilities excluding financial derivatives increased $331.0 billion to $34,186.2 billion. The increase resulted from financial transactions of −$54.6 billion and other changes in position of $385.6 billion (table A).
- Financial transactions were driven by net U.S. repayment of other investment liabilities, mostly reflecting net U.S. repayment of loans.
- Other changes in position mostly reflected U.S. equity price increases that raised the equity value of direct investment and portfolio investment liabilities. These equity price increases were partly offset by decreases in prices of U.S. long-term debt securities.
- Financial derivatives decreased $27.7 billion to $1,515.9 billion, mostly reflecting a decrease in single-currency interest rate contracts that was partly offset by an increase in foreign-exchange contracts.
Effects of the 2017 Tax Cuts and Jobs Act on U.S. Direct Investment Assets
The earnings of foreign affiliates of U.S. multinational enterprises consist of repatriated earnings to the parent company in the United States in the form of dividends and reinvested earnings in foreign affiliates. When dividends exceed earnings in a given period, there is a net withdrawal of direct investment equity assets. The net withdrawal in the first and second quarters of 2018 reflects the repatriation of accumulated earnings by foreign affiliates to their U.S. parent companies in response to the 2017 Tax Cuts and Jobs Act (TCJA). The TCJA requires U.S. parent companies to pay a one-time tax on their accumulated earnings held abroad, but generally eliminates taxes on repatriated earnings.
The financial transactions highlighted in this release and related income transactions are reflected in the U.S. international transactions accounts. For more information about how the TCJA affected direct investment asset and income transactions, see "U.S. International Transactions: Second Quarter 2018," which was released on September 19, 2018, and two BEA FAQs "How are the international transactions accounts affected by an increase in direct investment dividend receipts?" and "How does the 2017 Tax Cuts and Jobs Act affect BEA's business income statistics?"
Updates to First Quarter 2018 International Investment Position Aggregates
Billions of dollars, not seasonally adjusted
|Preliminary estimate||Revised estimate|
|U.S. net international investment position||-7,888.1||-7,747.3|
|Direct investment at market value||8,541.7||8,518.6|
|Financial derivatives other than reserves||1,611.6||1,591.1|
|Direct investment at market value||8,871.8||8,833.6|
|Financial derivatives other than reserves||1,561.0||1,543.6|
Next release: December 27, 2018, at 8:30 A.M. EST
U.S. Net International Investment Position, Third Quarter 2018