The U.S. net international investment position at the end of the third quarter of 2014.

Nguyen, Elena L.

THE U.S. NET INTERNATIONAL investment position at the end of the third quarter of 2014 was-$6,157.9 billion (preliminary) as the value of U.S. liabilities exceeded the value of U.S. assets (chart 1). (1) The negative net international investment position represents a U.S. net liability to the rest of the world. At the end of the second quarter of 2014, the net position was-$5,475.4 billion (revised).

Highlights

* The U.S. net international investment position decreased $682.5 billion, reflecting a $362.4 billion decrease in the value of U.S. assets and a $320.2 billion increase in the value of U.S. liabilities. (2)

* The $682.5 billion decrease in the net position reflected net financial-account transactions of-$15.3 billion and other changes in position--such as price changes, exchange-rate changes, and changes in volume and valuation not included elsewhere (n.i.e.)--of -$667.2 billion.

* The decrease in the net position was mostly attributable to the depreciation of major foreign currencies against the U.S. dollar that lowered the value of U.S. assets in dollar terms; U.S. liabilities mostly denominated in dollars were less affected. (3)

* The U.S. net international investment position decreased 12.5 percent in the third quarter, compared with an increase of 0.7 percent in the second quarter and an average quarterly decrease of 7.0 percent from the first quarter of 2011 through the first quarter of 2014.

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* The net position was equal to 3.1 percent of the value of all U.S. financial assets at the end of the third quarter, up from 2.8 percent at the end of the second quarter. (4)

U. S . a s set s. U.S. assets were $24,614.6 billion at the end of the third quarter, compared with $24,977.0 billion at the end of the second quarter (chart 2). The $362.4 billion decrease reflected a $474.3 billion decrease in the value of assets excluding financial derivatives that was partly offset by a $112.0 billion increase in the value of financial derivatives. (5)

U.S. assets excluding financial derivatives were $21,816.4 billion at the end of the third quarter, compared with $22,290.7 billion at the end of the second quarter. The $474.3 billion decrease reflected an $841.2 billion decrease resulting from other changes in position that was partly offset by a $366.9 billion increase resulting from financial transactions (table A). (6) Other changes in position were mostly attributable to the depreciation of major foreign currencies against the U.S. dollar that lowered the value of U.S. assets in dollar terms.

U.S. liabilities. U.S. liabilities were $30,772.5 billion at the end of the third quarter, compared with $30,452.3 billion at the end of the second quarter (chart 2). The $320.2 billion increase reflected a $227.9 billion increase in the value of liabilities excluding financial derivatives and a $92.3 billion increase in the value of financial derivatives.

U.S. liabilities excluding financial derivatives were $28,028.5 billion at the end of the third quarter, compared with $27,800.6 billion at the end of the second quarter. The $227.9 billion increase reflected a $358.0 billion increase resulting from financial transactions that was partly offset by a $130.1 billion decrease resulting from other changes in position. Other changes in position were mostly attributable to a decrease in the value of U.S. liabilities denominated in foreign currencies as a result of depreciation of major foreign currencies against the U.S. dollar, and to a lesser extent, decreases in U.S. bond prices.

Revisions

The U.S. net international investment position at the end of the second quarter of 2014 was revised to-$5,475.4 billion from the previously published value of -$5,445.1 billion. The $30.3 billion downward revision reflected a $73.9 billion upward revision to U.S. liabilities that exceeded a $43.7 billion upward revision to U.S. assets.

U.S. assets at the end of the second quarter were revised to $24,977.0 billion from $24,933.3 billion; U.S. liabilities were revised to $30,452.3 billion from $30,378.4 billion. These revisions reflect revised source data from the Treasury International Capital (TIC) reporting system and from BEA's quarterly surveys of direct investment.

By Elena L. Nguyen

(1.) For comprehensive international investment position statistics, including annual statistics beginning with 1976 and quarterly statistics beginning with the fourth quarter of 2005, see the detailed statistics on BEA's Web site.

(2.) For information on the valuation of U.S. assets and liabilities and a description of the estimation methods, see "International Investment Position Accounts" in International Economic Accounts: Concepts and Methods.

(3.) According to the Federal Reserve Board's major currencies index, foreign currencies depreciated 7 percent against the U.S. dollar from the end of the second quarter to the end of the third quarter. The major currencies index is a weighted average of the foreign exchange values of the U.S. dollar against a subset of the broad index currencies that circulate widely outside the country of issue. See Foreign Exchange Rates--H10 (weekly release of daily data), Nominal Major Currencies Index on the Web site of the Federal Reserve Board.

(4.) Board of Governors of the Federal Reserve System (FRS), "Table L.5 Total Liabilities and Its Relation to Total Financial Assets," in Financial Accounts of the United States, Third Quarter 2014, Z.1. Statistical Release (Washington, DC: FRS, December 11, 2014): 11. According to the December release, at the end of the third quarter, the value of all U.S. financial assets was $198,456.4 billion. The value of U.S. assets abroad was $24,614.6 billion, or 12.4 percent of all U.S. assets, down from 12.6 percent at the end of the second quarter and down from the 14.1 percent series peak at the end of the first quarter of 2008.

(5.) A derivatives contract with a positive fair value represents the amount that a foreign resident would have to pay to a U.S. counterparty if the contract were terminated or settled. A contract with a negative fair value represents the amount that a U.S. resident would have to pay to a foreign counterparty if the contract were terminated or settled. The gross positive (negative) fair value is the sum of all contracts with positive (negative) fair values. Fair values differ from notional values, which are the underlying amounts used to calculate payments on contracts.

(6.) For statistics on financial transactions, see the financial account in table 1.2 of the U.S. international transactions accounts. The quarterly financial transactions presented in this article are not seasonally adjusted. Detail on other changes in position such as price changes, exchange-rate changes, and changes in volume and valuation n.i.e. is presented only for annual statistics.

Market value the featured measure of direct investment positions.

Investment positions for direct investment are valued at current-period prices based on a revaluation of book values reported on BEA's direct investment surveys. (1) Direct investment at market value became BEA's featured measure of direct investment at current-period prices in the June 2014 comprehensive restructuring of the international economic accounts. (2) The market-value measure values owners' equity at current-period prices using indexes of stock market prices. (3) Direct investment positions at market value are presented on an asset/liability basis according to whether the positions are assets or liabilities. Assets include U.S. parent and U.S. affiliate claims, and liabilities include U.S. affiliate and U.S. parent liabilities.

(1.) BEA publishes direct investment positions at historical cost with owners' equity at the book value reported on BEA's surveys; these statistics are available on BEA's Web site. Historical-cost positions are on a directional basis, according to whether the positions are outward investment (U.S. direct investment abroad) or inward investment (foreign direct investment in the United States). Outward positions include U.S. parent claims less U.S. parent liabilities. Inward positions include U.S. affiliate liabilities less U.S. affiliate claims. Country and industry detail for direct investment positions is available only on a historical-cost basis.

(2.) BEA publishes direct investment at current cost as an alternative current-price measure (table 2.1). The current-cost basis values the U.S. and foreign parent shares of their affiliates' investment in (1) plant and equipment using the current cost of capital equipment, (2) land using general price indexes, and (3) inventories using estimates of their replacement cost.

(3.) For additional information on the market-value and current-cost methods, see "Valuation of the U.S. Net International Investment Position," SURVEY OF CURRENT BUSINESS 71 (May 1991): 40-49.

Table A. Change in the U.S. Net International Investment Position
[Billions of dollars, not seasonally adjusted]

                               Change in position in 2014:III

                 Position,             Attributable to:        Position,
                 2014:II     Total  Financial     Other        2014:III
                                    -account      changes
                                    transactions  in position

U.S. net
international
investment
position        -5,475.4    -682.5     -15.3           -667.2   -6,157.9
Net
international
investment
position
excluding
financial
derivatives     -5,509.9    -702.2       8.9           -711.2   -6,212.1
Financial
derivatives
other
than
reserves,
net                 34.5      19.7     -24.3             44.0       54.2
U.S. assets     24,977.0    -362.4       (1)              (1)   24,614.6
Assets
excluding
financial
derivatives     22,290.7    -474.3     366.9           -841.2   21,816.4
Financial
derivatives
other
than
reserves,
gross
positive
fair
value            2,686.3     112.0       (1)              (1)    2,798.3

U.S.
liabilities     30,452.3     320.2       (1)              (1)   30,772.5
Liabilities
excluding
financial
derivatives     27,800.6     227.9     358.0           -130.1   28,028.5
Financial
derivatives
other
than
reserves,
gross
negative
fair
value            2,651.8      92.3       (1)              (1)    2,744.0

(1.) Financial transactions and other changesin financial derivatives
positions are available
only on a net basis, they are not separately available for gross
positive fair values and gross
negative fair values of financial derivatives.

International Investment Position

Table 1. U.S. Net International Investment Position at the End
of the Period
[Millions of dollars, not seasonally adjusted]

                                                 2013

Line Type of Investment           I          II        III        IV

1    U.S. net international
     investment position
     (line 4 less line 35)   -5,110,866 -5,523,614 -4,994,895 -5,382,996
2    Net international
     investment
     position excluding
     financial
     derivatives (line 5
     less line 36)           -5,150,891 -5,582,966 -5,042,858 -5,456,542
3    Financial derivatives
     other than
     reserves, net
     (line 6 less line 37)       40,025     59,352     47,963     73,546
4    U.S. assets             22,650,385 21,904,000 22,954,418 23,709,843
5    Assets excluding
     financial derivatives
     (sum of lines
     7, 10, 21, and 26)      19,402,008 19,078,933 20,193,002 20,890,008
6    Financial derivatives
     other than
     reserves, gross
     positive fair
     value (line 15)          3,248,377  2,825,067  2,761,416  2,819,835
7    By functional category:
     Direct investment at
     market value             6,185,179  6,146,656  6,690,152  7,080,058
8    Equity                   5,237,927  5,162,185  5,699,007  6,070,002
9    Debt instruments           947,252    984,471    991,145  1,010,056
10   Portfolio investment     8,230,586  8,146,302  8,721,240  9,183,060
11   Equity and investment
     fund shares              5,524,329  5,508,752  6,037,266  6,444,232
12   Debt securities          2,706,257  2,637,550  2,683,974  2,738,828
13   Short term                 431,424    451,835    458,953    446,710
14   Long term                2,274,833  2,185,715  2,225,021  2,292,118
15   Financial derivatives
     other than reserves,
     gross positive
     fair value               3,248,377  2,825,067  2,761,416  2,819,835
16   Over-the-counter
     contracts                3,212,569  2,778,730  2,718,224  2,783,047
17   Single-currency
     interest rate contracts  2,616,516  2,205,507  2,171,063  2,207,692
18   Foreign exchange
     contracts                  276,419    268,643    258,064    291,934
19   Other contracts            319,634    304,580    289,097    283,421
20   Exchange-traded
     contracts                   35,808     46,337     43,192     36,788
21   Other investment         4,433,184  4,339,768  4,298,183  4,178,557
22   Currency and deposits    2,056,381  2,021,105  1,977,487  1,972,149
23   Loans                    2,321,889  2,259,549  2,276,647  2,161,123
24   Insurance technical
     reserves                      n.a.       n.a.       n.a.       n.a.
25   Trade credit and
     advances                    54,915     59,115     44,049     45,286
26   Reserve assets             553,058    446,207    483,426    448,333
27   Monetary gold              417,941    311,707    346,878    314,975
28   Special drawing rights      53,704     53,881     54,966     55,184
29   Reserve position
     in the International
     Monetary Fund               34,039     33,860     33,462     30,750
30   Other reserve assets        47,374     46,759     48,120     47,424
31   Currency and deposits       23,039     21,351     21,575     20,889
32   Securities                  22,152     21,570     22,078     21,436
33   Financial derivatives
34   Other claims                 2,183      3,838      4,467      5,099
35   U.S. liabilities        27,761,250 27,427,614 27,949,313 29,092,840
36   Liabilities excluding
     financial derivatives
     (sum of lines 38, 41,
     and 56)                 24,552,898 24,661,899 25,235,860 26,346,551
37   Financial derivatives
     other than reserves,
     gross negative fair
     value (line 50)          3,208,352  2,765,715  2,713,453  2,746,289
38   By functional category:
     Direct investment
     at market value          5,018,930  5,131,714  5,342,443  5,790,551
39   Equity                   3,753,276  3,845,433  4,041,326  4,461,978
40   Debt instruments         1,265,654  1,286,281  1,301,117  1,328,573
41   Portfolio investment    14,569,596 14,432,860 14,882,136 15,503,192
42   Equity and investment
     fund shares              5,000,428  5,076,621  5,376,543  5,821,487
43   Debt securities          9,569,168  9,356,239  9,505,593  9,681,705
44   Short term                 914,503    882,452    829,577      2,655
45   Treasury bills
     and certificates           720,235    675,367    645,114      6,036
46   Other short-term
     securities                 194,268    207,085    184,463      6,619
47   Long term                8,654,665  8,473,787  8,676,016  8,789,050
48   Treasury bonds
     and notes                5,001,076  4,919,659  5,009,541  5,108,856
49   Other long-term
     securities               3,653,589  3,554,128  3,666,475  3,680,194
50   Financial derivatives
     other than
     reserves, gross
     negative fair value      3,208,352  2,765,715  2,713,453  2,746,289
51   Over-the-counter
     contracts                3,173,044  2,717,685  2,667,187  2,709,746
52   Single-currency
     interest rate
     contracts                2,563,709  2,152,279  2,114,023  2,142,859
53   Foreign exchange
     contracts                  300,138    272,150    270,744      0,790
54   Other contracts            309,197    293,256    282,420      6,097
55   Exchange-traded
     contracts                   35,308     48,030     46,266        543
56   Other investment         4,964,372  5,097,325  5,011,281  5,052,808
57   Currency and deposits    2,598,915  2,702,344  2,677,595  2,758,129
58   Loans                    2,168,736  2,193,088  2,138,770  2,095,860
59   Insurance technical
     reserves                      n.a.       n.a.       n.a.       n.a.
60   Trade credit and
     advances                   143,776    148,780    140,739      4,433
61   Special drawing
     rights allocations          52,945     53,113     54,177        386

                                              2014              Change:
                                                              2014:II to
Line Type of Investment         I         II(r)        III(p)   2014:III

1    U.S. net international
     investment position
     (line 4 less line 35)   -5,511,678 -5,475,364 -6,157,895   -682,531
2    Net international
     investment
     position excluding
     financial
     derivatives (line 5
     less line 36)           -5,581,501 -5,509,876 -6,212,109   -702,233
3    Financial derivatives
     other than
     reserves, net
     (line 6 less line 37)       69,823     34,512     54,214     19,702
4    U.S. assets             24,020,053 24,976,981 24,614,629   -362,352
5    Assets excluding
     financial derivatives
     (sum of lines
     7, 10, 21, and 26)      21,365,676 22,290,695 21,816,373   -474,322
6    Financial derivatives
     other than
     reserves, gross
     positive fair
     value (line 15)          2,654,377  2,686,286  2,798,256    111,970
7    By functional category:
     Direct investment at
     market value             7,117,452  7,488,612  7,235,389   -253,223
8    Equity                   6,135,437  6,428,797  6,170,296   -258,501
9    Debt instruments           982,015  1,059,815  1,065,093      5,278
10   Portfolio investment     9,387,778  9,981,018  9,691,701   -289,317
11   Equity and investment
     fund shares              6,593,895  7,027,230  6,768,553   -258,677
12   Debt securities          2,793,883  2,953,788  2,923,148    -30,640
13   Short term                 437,064    483,366    474,640     -8,726
14   Long term                2,356,820  2,470,422  2,448,507    -21,915
15   Financial derivatives
     other than reserves,
     gross positive
     fair value               2,654,377  2,686,286  2,798,256    111,970
16   Over-the-counter
     contracts                2,618,573  2,651,879  2,754,529    102,650
17   Single-currency
     interest rate contracts  2,074,456  2,170,053  2,103,877    -66,176
18   Foreign exchange
     contracts                  271,566    229,408    412,123    182,715
19   Other contracts            272,551    252,418    238,529    -13,889
20   Exchange-traded
     contracts                   35,804     34,407     43,727      9,320
21   Other investment         4,389,562  4,343,200  4,445,297    102,097
22   Currency and deposits    1,949,267  1,921,206  1,941,724     20,518
23   Loans                    2,401,733  2,382,089  2,462,309     80,220
24   Insurance technical
     reserves                      n.a.       n.a.       n.a.       n.a.
25   Trade credit and
     advances                    38,562     39,905     41,264      1,359
26   Reserve assets             470,884    477,865    443,987    -33,878
27   Monetary gold              337,791    343,871    318,113    -25,758
28   Special drawing rights      55,394     55,411     53,148     -2,263
29   Reserve position
     in the International
     Monetary Fund               29,820     30,535     28,358     -2,177
30   Other reserve assets        47,879     48,048     44,368     -3,680
31   Currency and deposits       20,930     24,777     22,143     -2,634
32   Securities                  21,727     21,866     22,225        359
33   Financial derivatives
34   Other claims                 5,222      1,405          0     -1,405
35   U.S. liabilities        29,531,731 30,452,345 30,772,525    320,180
36   Liabilities excluding
     financial derivatives
     (sum of lines 38, 41,
     and 56)                 26,947,177 27,800,571 28,028,483    227,912
37   Financial derivatives
     other than reserves,
     gross negative fair
     value (line 50)          2,584,554  2,651,774  2,744,042     92,268
38   By functional category:
     Direct investment
     at market value          5,688,887  5,999,708  6,044,171     44,463
39   Equity                   4,387,205  4,623,555  4,669,125     45,570
40   Debt instruments         1,301,682  1,376,153  1,375,046     -1,107
41   Portfolio investment    15,904,348 16,310,118 16,478,914    168,796
42   Equity and investment
     fund shares              5,993,925  6,253,926  6,350,547     96,621
43   Debt securities          9,910,423 10,056,192 10,128,367     72,175
44   Short term                 904,771    877,460    870,787     -6,673
45   Treasury bills
     and certificates           689,327    626,830    614,053    -12,777
46   Other short-term
     securities                 215,444    250,630    256,734      6,104
47   Long term                9,005,652  9,178,732  9,257,580     78,848
48   Treasury bonds
     and notes                5,262,471  5,385,706  5,454,276     68,570
49   Other long-term
     securities               3,743,181  3,793,026  3,803,304     10,278
50   Financial derivatives
     other than
     reserves, gross
     negative fair value      2,584,554  2,651,774  2,744,042     92,268
51   Over-the-counter
     contracts                2,551,372  2,618,113  2,700,422     82,309
52   Single-currency
     interest rate
     contracts                2,013,740  2,110,959  2,049,195    -61,764
53   Foreign exchange
     contracts                  270,895    256,358    414,990    158,632
54   Other contracts            266,737    250,796    236,237    -14,559
55   Exchange-traded
     contracts                   33,182     33,661     43,620      9,959
56   Other investment         5,353,942  5,490,745  5,505,398     14,653
57   Currency and deposits    2,681,963  2,787,408  2,826,043     38,635
58   Loans                    2,457,106  2,485,327  2,466,017    -19,310
59   Insurance technical
     reserves                      n.a.      n.a.        n.a.       n.a.
60   Trade credit and
     advances                   160,288    163,416    160,980     -2,436
61   Special drawing
     rights allocations          54,585     54,594     52,358     -2,236

(p) Preliminary
(r) Revised
n.a. Not available
..... Not applicable
NOTE. Details may not add to totals because of rounding.
Source: U. S. Bureau of Economic Analysis