Comprehensive Restructuring of the U.S. International Economic Accounts

In this release, BEA presents the U.S. international investment position (IIP) statistics for the first quarter of 2014 along with historical revisions and detailed annual statistics for 2013. These statistics include changes in positions resulting from annual financial transactions and other changes in position such as price changes, exchange-rate-changes, and changes in volume and valuation not included elsewhere.

The IIP statistics are revised to reflect newly available and revised source data, changes in estimation methods, and changes in definitions and classifications. BEA also introduces a new presentation of the IIP statistics as part of a comprehensive restructuring of BEA's international economic accounts. This change in presentation, combined with changes in definitions and classifications, enhances the quality and usefulness of the accounts and brings the statistics into closer alignment with international guidelines. In addition, the IIP statistics feature direct investment at market value instead of at current cost (see the box). Additional information on BEA's comprehensive restructuring of the international accounts is published in the March 2014 issue of the Survey of Current Business. A more detailed discussion of the IIP statistics and the revisions to the statistics will be published in the July issue of the Survey.

First Quarter of 2014

The U.S. net international investment position at the end of the first quarter of 2014 was -$5,539.3 billion (preliminary) as the value of U.S. liabilities exceeded the value of U.S. assets (table 1). At the end of the fourth quarter of 2013, the net position was -$5,383.0 billion (revised). The $156.3 billion decrease in the net position reflected a $108.3 billion decrease in the value of U.S. assets and a $48.0 billion increase in the value of U.S. liabilities.

The U.S. net international investment position decreased 2.9 percent in the first quarter, compared with a decrease of 7.8 percent in the fourth quarter and an average quarterly decrease of 7.4 percent from the first quarter of 2011 through the fourth quarter of 2013. The net position was equal to 2.8 percent of the value of all U.S. financial assets at the end of the first quarter, unchanged from the end of the fourth quarter.¹

U.S. assets were $23,601.5 billion at the end of the first quarter compared with $23,709.8 billion at the end of the fourth quarter. The $108.3 billion decrease reflected a $402.0 billion decrease in the value of financial derivatives that was partly offset by a $293.6 billion increase in the value of assets excluding financial derivatives.

U.S. assets excluding financial derivatives were $21,183.6 billion at the end of the first quarter compared with $20,890.0 billion at the end of the fourth quarter. The $293.6 billion increase reflected a $153.1 billion increase resulting from financial transactions and a $140.5 billion increase resulting from other changes in position.² Other changes in position were mostly attributable to an increase in foreign stock and bond prices that raised the value of U.S. portfolio investment assets, and to an increase in the market price of gold that raised the value of U.S. reserve assets.

U.S. liabilities were $29,140.8 billion at the end of the first quarter compared with $29,092.8 billion at the end of the fourth quarter. The $48.0 billion increase reflected a $444.6 billion increase in the value of liabilities excluding financial derivatives that was partly offset by a $396.6 billion decrease in the value of financial derivatives.

U.S. liabilities excluding financial derivatives were $26,791.1 billion at the end of the first quarter compared with $26,346.6 billion at the end of the fourth quarter. The $444.6 billion increase reflected a $231.0 billion increase resulting from financial transactions and a $213.6 billion increase resulting from other changes in position. Other changes in position were mostly attributable to increases in U.S. stock and bond prices that raised the value of foreign portfolio investment in the United States.

Year 2013

The U.S. net international investment position was -$5,383.0 billion (revised) at the end of 2013 compared with -$4,578.2 billion (revised) at the end of 2012. The $804.8 billion decrease in the net position reflected a $1,994.2 billion increase in the value of U.S. liabilities that exceeded a $1,189.5 billion increase in the value of U.S assets (table 2). The U.S. net international investment position decreased 17.6 percent from the end 2012 to the end of 2013, compared with a 2.8 percent decrease from yearend 2011 to yearend 2012.

Highlights for 2013:

• Net U.S. incurrence of liabilities (financial inflows) exceeded net U.S. acquisition of assets (financial outflows) by $370.7 billion.
• Net U.S. incurrence of portfolio investment liabilities was about half of all financial inflows. Net incurrence of direct investment and other investment liabilities were also significant.
• Net U.S. acquisition of portfolio and direct investment assets were partly offset by net U.S. sales of other investment assets.
• The price appreciation of U.S. liabilities exceeded the price appreciation of U.S. assets by $182.7 billion, partly due to the price depreciation of U.S. monetary gold.
• The appreciation of foreign stock prices raised the value of U.S. equity assets in direct investment and portfolio investment, more than accounting for the total price appreciation of U.S. assets. Price appreciation of equity was partly offset by price depreciation of debt securities.
• The appreciation of U.S. stock prices raised the value of U.S. equity liabilities in direct investment and portfolio investment, more than accounting for the total price appreciation of U.S. liabilities. Price appreciation of equity was partly offset by price depreciation of debt securities.
• The depreciation of major foreign currencies against the U.S. dollar reduced the value of U.S. assets and contributed to the decrease in the U.S. net international investment position.
• Other changes in volume and valuation not included elsewhere mostly reflected the incorporation of newly available and revised source data.
• The U.S. net international investment position was equal to 2.8 percent of the value of all U.S. financial assets at the end of 2013, up from 2.6 percent at the end of 2012.

Financial-account transactions

Net financial-account transactions of -$370.7 billion in 2013 resulted from net U.S. acquisitions of assets, excluding financial derivatives, of $644.8 billion, less net U.S. incurrence of liabilities, excluding financial derivatives, of $1,017.7 billion, plus net financial transactions from financial derivatives of $2.2 billion.

Net U.S. acquisition of assets excluding financial derivatives was $644.8 billion, up from $171.4 billion in 2012. In 2013, financial outflows for portfolio and direct investment assets were partly offset by net U.S. sales of other investment and reserve assets.

Net U.S. incurrence of liabilities excluding financial derivatives was $1,017.7 billion, up from $602.0 billion in 2012. In 2013, financial inflows for direct investment and other investment, and net foreign purchases of U.S. debt securities were partly offset by net foreign sales of U.S. equity and investment funds shares.

Price, exchange-rate, and changes in volume and valuation not included elsewhere (n.i.e.)

Other changes in the U.S. net international investment position for 2013 included -$231.3 billion in exchange-rate changes, -$182.7 billion in price changes, and -$33.6 billion in changes in volume and valuation n.i.e.

Price changes led to a decrease of $182.7 billion in the U.S. net international investment position, reflecting price appreciation of U.S. liabilities that exceeded price appreciation of U.S. assets, which was partly reduced by price depreciation of U.S. monetary gold.

Exchange-rate changes led to a decrease of $231.3 billion in the U.S. net international investment position, as reflected in the 3.9 percent depreciation of a trade-weighted index of major foreign currencies.³ Exchange-rate changes lowered the dollar value of U.S. assets more than they lowered the dollar value of U.S. liabilities denominated in foreign currencies.

Changes in volume and valuation n.i.e. led to a decrease of $33.6 billion in the U.S. net international investment position. These changes reflected the incorporation of newly available source data on aggregate holdings of long-term securities by U.S. and foreign residents from the Treasury International Capital reporting system (TIC), more complete TIC reporting of the nonbanking and banking data, capital gains and losses from the sale of direct investment assets, and other adjustments to source data. (See the Annual Revisions section for more information on the TIC source data.)

Investment positions at the end of 2013

U.S. assets were $23,709.8 billion at the end of 2013 compared with $22,520.3 billion at the end of 2012. The $1,189.5 billion increase reflected a $1,989.4 billion increase in the value of assets excluding financial derivatives that was partly offset by a $799.9 billion decrease in the value of financial derivatives.

U.S. assets excluding financial derivatives were $20,890.0 billion at the end of 2013 compared with $18,900.6 billion at the end of 2012. The $1,989.4 billion increase reflected financial outflows of $644.8 billion and other changes in position of $1,344.7 billion. Other changes in position were attributable to a $1,616.5 billion increase in price changes from rising foreign equity prices that was partly offset by a $260.5 billion decrease in exchange-rate changes from the depreciation of major foreign currencies against the dollar, and an $11.4 billion decrease in changes in volume and valuation n.i.e.

Direct investment assets at market value were $7,080.1 billion at the end of 2013 compared with $5,938.3 billion at the end of 2012. The $1,141.7 billion increase reflected financial outflows of $408.2 billion, mostly from net equity investment that was primarily attributable to reinvestment of earnings, and price changes of $775.0 billion. These increases were partly offset by a $15.8 billion decrease in exchange-rate changes and a $25.7 billion decrease in changes in volume and valuation n.i.e.

Portfolio investment assets were $9,183.1 billion at the end of 2013 compared with $7,967.0 billion at the end of 2012. The $1,216.0 billion increase reflected financial outflows of $489.9 billion, a $960.1 billion increase in price changes, and a $3.7 billion increase in changes in volume and valuation n.i.e. These increases were partly offset by a $237.6 billion decrease in exchange-rate changes.

Financial derivatives other than reserves held as assets (gross positive fair value) were $2,819.8 billion at the end of 2013 compared with $3,619.8 billion at the end of 2012.⁴ The $799.9 billion decrease was mostly attributable to decreases in the value of single-currency interest rate contracts, in part, reflecting declining market volatility.⁵

Other investment assets (currency and deposits, loans, insurance technical reserves, and trade credit and advances) were $4,178.6 billion at the end of 2013 compared with $4,422.9 billion at the end of 2012. The $244.3 billion decrease was more than accounted for by net sales of $250.3 billion in assets.

Reserve assets were $448.3 billion at the end of 2013 compared with $572.4 billion at the end of 2012. The $124.0 decrease was mostly attributable to the $118.5 billion decrease in the market price of gold.

U.S. liabilities were $29,092.8 billion at the end of 2013 compared with $27,098.6 billion at the end of 2012. The $1,994.2 billion increase reflected a $2,809.9 billion increase in the value of liabilities excluding financial derivatives that was partly offset by a $815.7 billion decrease in the value of financial derivatives.

U.S. liabilities excluding financial derivatives were $26,346.6 billion at the end of 2013 compared with $23,536.6 billion at the end of 2012. The $2,809.9 billion increase reflected financial inflows of $1,017.7 billion, a $1,799.3 billion increase in price changes, and a $22.2 billion in changes in volume and valuation n.i.e. These increases were partly offset by a $29.2 billion decrease in exchange-rate changes.

Direct investment liabilities at market value were $5,790.6 billion at the end of 2013 compared with $4,670.9 billion at the end of 2012. The $1,119.6 billion increase reflected financial inflows of $295.0 billion, mostly from net equity investment, and an $871.1 billion increase in price changes. These increases were partly offset by a $46.5 billion decrease in changes in volume and valuation n.i.e.

Portfolio investment liabilities were $15,503.2 billion at the end of 2013 compared with $13,978.9 billion at the end of 2012. The $1,524.3 billion increase reflected 1) financial inflows of $490.9 billion resulting from net foreign purchases of U.S. debt securities that were partly offset by net foreign sales of U.S. stocks, 2) a $928.2 billion increase in price changes resulting from the appreciation of U.S stock prices that was partly offset by the depreciation of U.S. bond prices, and 3) a $131.5 billion increase from changes in volume and valuation n.i.e. These increases were partly offset by a $26.3 billion decrease in exchange- rate changes of U.S. debt securities denominated in foreign currencies.

Financial derivatives other than reserves held as liabilities (gross negative fair value) were $2,746.3 billion at the end of 2013 compared with $3,562.0 billion at the end of 2012. The $815.7 billion decrease was mostly attributable to decreases in the value of single- currency interest rate contracts, in part, reflecting declining market volatility.

Other investment liabilities (currency and deposits, loans, insurance technical reserves, and trade credit and advances) were $5,052.8 billion at the end of 2013 compared with $4,886.8 billion at the end of 2012. The $166.0 billion increase was more than accounted for by financial inflows of $231.8 billion that was partly offset by a $62.9 billion decrease in other changes and a $2.9 billion decrease in exchange-rate changes.

Annual Revisions

The U.S. international investment position (IIP) statistics released today have been revised from the fourth quarter of 2009 to the fourth quarter of 2013 to reflect newly available and revised data from BEA’s surveys of direct investment and data from three Treasury International Capital (TIC) surveys conducted by the Federal Reserve Board and the U.S. Department of the Treasury: Aggregate Holdings of Long-Term Securities by U.S. and Foreign Residents (SLT), the Annual Survey of U.S. Ownership of Foreign Securities (SHCA) at end- December 2012, and the Annual Survey of Foreign Portfolio Holdings of U.S. Securities (SHLA) at end-June 2013.

These annual revisions also reflect changes in definitions and classifications and improved estimation methodology for the quarterly IIP statistics from the fourth quarter of 2005 to the fourth quarter of 2013 and for the annual statistics from yearend 1976 to yearend 2013. In addition, new presentations of the IIP statistics reflecting a comprehensive restructuring of the IIP accounts are available on the BEA Web site. The previous table presentations are also available with statistics through the first quarter of 2014. This is the final quarter for which presentations based on previous format will be provided.

Revisions to the quarterly U.S. net international investment position are negligible for 2009, 2010, and 2012, and average less than 1 percent for 2011 and 2013.

On a yearend basis, the U.S. net international investment position is revised upward by $0.1 billion for 2009, $1.1 billion for 2010, $60.8 billion for 2011, and $12.2 billion for 2013. It is revised downward by $3.2 billion for 2012.

• The upward revisions to the net investment position for 2009 and 2010 reflect downward revisions to other investment liabilities incurred by the U.S. government; no other accounts were revised for these years.
• U.S. assets are revised downward by $42.6 billion for 2011, $82.7 billion for 2012, and $49.9 billion for 2013. U.S. liabilities are revised downward by $103.4 billion for 2011, $79.5 billion for 2012, and $62.1 billion for 2013. These revisions are mostly attributable to the incorporation of additional data from BEA’s annual surveys of inward and outward direct investment.

The July Survey of Current Business will contain an article with a more detailed discussion of the international investment position statistics for the first quarter of 2014, annual statistics for 2013, and revised historical data. That issue will also contain an article about direct investment positions valued at historical-cost and revised historical data on direct investment with detail by country and industry.

Changes in presentation, definition, and classification

• The presentation of the international investment position accounts is significantly restructured. The two major categories of holdings are renamed. U.S. assets replaces U.S.-owned assets abroad, and U.S. liabilities replaces foreign-owned assets in the United States.
• U.S. assets and liabilities are classified into five functional categories: direct investment, portfolio investment, other investment, reserve assets (assets only), and financial derivatives other than reserves.

• Direct investment on a market value basis is now the featured measure in the U.S. international investment position statistics. The market value basis values owners’ equity at current-period price using indexes of stock market prices. In the previous presentation, direct investment was presented on a current cost basis that 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. ⁶ In addition, direct investment is now presented on a gross basis according to whether the investment reflects an asset or a liability. In the previous presentation, direct investment was classified on a directional basis by whether the investment was outward or inward, that is, whether the direct investor was a domestic or foreign resident. The directional basis will continue to be used to compute direct investment statistics by country and area.
• Portfolio and other investment assets each include positions from the previous categories of U.S. government assets other than official reserve assets and U.S. private assets.
  • Portfolio investment assets include equity and short- and long-term debt securities issued by foreign residents. In the previous presentation, foreign stocks and long-term debt were presented under foreign securities and short-term debt securities were commingled under U.S. banks’ and nonbanks’ claims.
  • Other investment assets include currency and deposits, loans, insurance technical reserves, and trade credit and advances that are debts of foreign residents to U.S. residents. In the previous presentation, these assets were categorized among banks’ and nonbanks’ claims and U.S. government assets other than reserve assets.

• Portfolio and other investment liabilities each include positions from the old categories of foreign official assets in the United States and other foreign assets in the United States.
  • Portfolio investment liabilities include equity and short- and long-term debt securities issued by U.S. residents. In the previous presentation, these liabilities were categorized between foreign official holdings and foreign private holdings of Treasuries securities, U.S. stocks, and U.S. long-term corporate and agency debt securities. Foreign holdings of U.S. short-term debt securities were commingled under U.S. banks’ and nonbanks’ liabilities.
  • Other investment liabilities include currency and deposits, loans, insurance technical reserves, and trade credit and advances that are debts of U.S. residents to foreign residents. In the previous presentation, these liabilities were categorized between banks’ and nonbanks’ liabilities to foreign official and private residents.
  • U.S. portfolio and other investment liabilities to foreign official agencies (foreign official assets in the United States) will continue to be presented in a supplemental table.

• Investment assets and liabilities are also classified by instrument (e.g., equity and investment fund shares, short- and long-term debt securities, currency and deposits, loans, insurance technical reserves, and trade credit and advances) within each functional category in the new presentation.

The Featured Measure of Direct Investment Positions

Direct investment at market value is now the featured measure of direct investment in the U.S. international investment position statistics (IIP). The market value basis values owners' equity at current-period prices using indexes of stock market prices.¹ In addition, direct investment is now presented on an asset/liability basis.² In the previous presentation of the IIP, the featured measure of direct investment was at current cost and on a directional basis.³(Current-cost and historical-cost positions will continue to be available on BEA's Web site.⁴)

Market-value positions are on a directional basis from 1976 to 1981 and on an asset/liability basis starting in 1982 when source data became available. The shift to an asset/liability basis in 1982 increases direct investment assets and liabilities but has no effect on the net direct investment position. The change to feature direct investment positions at market value affects the IIP statistics beginning in 1976; direct investment positions for 2009-2013 are shown in table A.

¹ For additional information on the market-value and current-cost methods, see J. Steven Landefeld and Ann M. Lawson, "Valuation of the U.S. Net International Investment Position," Survey of Current Business 71 (May 1991): 40-49.

² Positions on an asset/liability basis are organized 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.

³ Positions on a directional basis are organized according to whether the positions are for outward investment (U.S. direct investment abroad) or inward investment (foreign direct investment in the United States). The outward direct investment position includes U.S. parent claims less U.S. parent liabilities. The inward direct investment position includes U.S. affiliate liabilities less U.S. affiliate claims.

⁴ BEA publishes direct investment positions at historical cost with owners' equity at the book value reported on BEA's surveys. Historical-cost positions are on a directional basis. Country and industry detail for direct investment are available only on a historical-cost basis (see /iTable/index_MNC.cfm).

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Release dates in 2014

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

NOTE: This news release is available on BEA’s Web site along with Quarterly Highlights and Annual Highlights related to this release, the latest detailed statistics for the U.S. international investment position, and a description of the estimation methods used to compile them. The first-quarter statistics for 2014 in this release are preliminary and will be revised on September 25, 2014.

¹ 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, First Quarter 2014, Z.1. Statistical Release (Washington, DC: FRS, June 5, 2014): 11. According to the June release, at the end of the first quarter, the value of all U.S. financial assets was $197,226.3 billion. The value of U.S. assets abroad was $23,601.5 billion, or 12.0 percent of all U.S. assets, down from 12.1 percent at the end of the fourth quarter and down from the 13.9 percent series peak at the end of the first quarter of 2008.

² For statistics on financial transactions, see the financial account in table 1.2 of the U.S. International Transactions Accounts. Quarterly financial transactions discussed in this release are not seasonally adjusted. Detail on other changes in position such as price changes, exchange-rate changes, and other changes in volume and valuation are available only for annual statistics.

³ Federal Reserve Board (FRB), Foreign Exchange Rates—H10 (weekly release of daily data), Nominal Major Currencies Index at www.federalreserve.gov. The major currencies index is the weighted average of the foreign exchange value of the U.S. dollar against a subset of the broad index currencies that circulate widely outside the country of issue.

⁴ 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.

⁵ The Chicago Board of Exchange Volatility Index (VIX) fell 24 percent from the end of 2012 to the end of 2013.

⁶ BEA will continue to report direct investment on a current cost basis as supplemental data.