Financing the U.S. Current Account Deficit — Part II
September 18, 2012
A second table below focuses on the eight components of direct investment and portfolio investment. Changes in each component between 1Q12 and 2Q12 are noted in the right-most column, where a positively signed change indicates an increased net inflow, a reduced net outflow, or a swing from a net outflow to a net inflow. The eight elements of long-term capital are U.S. direct investment abroad, foreign direct investment in the United States, U.S. buying of foreign bonds, U.S. purchases of foreign equities, foreign buying of Treasuries, foreign purchases of U.S. corporate bonds, foreign buying of U.S. agency bonds and foreign purchases of U.S. stocks.
This table is related in the following manner to the one in the previous first part of my coverage of U.S. current account financing: the sum of the quarter-to-quarter changes in the right-most column below equals the $33.2 billion increase in net direct investment and portfolio investment outflows from $42.8 billion in 1Q12 to a sum of $76.0 billion in the second quarter of this year. These figures can be found in the two right-most columns of the row labeled “direct and portfolio investment” in the first table. Five of the eight items below caused aggregated direct and portfolio investment outflows to rise, and the other three mitigated that increase. Two of those three factors involved direct investment, both an increase of such in the United States and a decrease of U.S. flows overseas. The largest deteriorations in U.S. portfolio investment were a $36.4 billion decline in foreign buying of Treasury securities and a $27.5 billion swing from foreign buying of U.S. equities in the first quarter of 2012 to net sales in the spring quarter.
1Q12 | 2Q12 | Change | |
U.S. DI Abroad | +116.1 | +79.2 | +36.9 |
Fgn DI in U.S. | +22.2 | +33.4 | +11.3 |
U.S. + Foreign Bonds | -18.4 | -26.5 | +8.1 |
U.S. + Fgn Stocks | +14.8 | +21.0 | -6.2 |
Fgn + Treasuries | +43.8 | +7.4 | -36.4 |
Fgn + U.S. Corporates | -14.8 | -33.3 | -18.5 |
Fgn + U.S. Agencies | -0.4 | -1.3 | -0.9 |
Fgn + U.S. Equities | +18.9 | -8.6 | -27.5 |
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: U.S. current account