Gap Between Foreign Assets and Liabilities of US Businesses Increases
Net International Investment Position declines by $2.1 trillion in Q4 2024
The gap between foreign assets and liabilities of US businesses increased in the fourth quarter of 2024, a Bureau of Economic Analysis release said Wednesday. The nation’s Net International Investment Position declined to negative $26.2 trillion from negative $24.1 trillion in the previous quarter.
Their foreign assets amounted to $35.9 trillion, and liabilities $62.1 trillion by the end of December 2024, the report said. The revised net investment position at the end of the third quarter was negative 24.15 trillion (revised).
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The negative $2.1 trillion change in the net investment position from the third quarter to the next quarter came from net financial transactions of negative $411.2 billion and net other changes in position, such as price and exchange-rate changes, of negative $1.67 trillion.
Foreign exchange changes
Exchange-rate changes amounted to negative $1.18 trillion following major foreign currency depreciation against the U.S. dollar.
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Price changes of negative $632 billion reflected price decreases for assets and price increases for liabilities, as foreign stock prices underperformed relative to U.S. stock prices, according to the report. Both foreign and U.S. bond prices decreased in the fourth quarter.
U.S. assets decreased by $1.77 trillion to a total of $35.89 trillion at the end of the fourth quarter, driven by the depreciation of foreign currencies against the U.S. dollar that lowered the value of U.S. assets in dollar terms. All major investment categories of assets decreased, notably portfolio investment and direct investment assets.
The decline in assets included portfolio investment assets (-$734.6 billion) to $15.87 trillion and direct investment assets (-$643.1 billion) to $11.27 trillion.
U.S. liabilities dropped by $306.2 billion to $62.12 trillion by Q4 end, driven by financial transactions of $402.8 billion, notably foreign purchases of U.S. stocks and long-term debt securities. Increases in portfolio investment and direct investment liabilities were partly offset by decreases in financial derivatives and other investment liabilities.
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