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News Release: Foreign Investors' Spending, 2006

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EMBARGOED UNTIL RELEASE AT 8:30AM EDT, TUESDAY, JUNE 5, 2007
Lawrence McNeil: (202) 606-9860 BEA 07-23

Foreign Direct Investors’ Outlays to Acquire or Establish U.S. Businesses Increased in 2006

Outlays by foreign direct investors to acquire or to establish U.S. businesses were $161.5 billion in 2006, up substantially from $91.4 billion in 2005. Outlays in 2006 were the fourth largest recorded and the highest since 2000, when new investment outlays were at a historical peak of $335.6 billion.

Outlays for New Investment in the United States by Foreign Direct Investors, 1980-2006
Bar graph showing Outlays for New Investment in the United States by Foreign Direct Investors, 1980-2006

Outlays increased substantially in manufacturing and finance (except depository institutions) and insurance. Together, these two sectors accounted for half of total investment outlays in 2006. Outlays were also sizable in several other sectors, including real estate and rental and leasing, information, depository institutions, and wholesale trade.

Outlays from investors in most major geographic areas increased. By far the largest increase was attributable to European investors, whose outlays grew by $53 billion. Overall, outlays from Europe accounted for approximately two-thirds of the worldwide total. Investments from the Middle East, Asia and Pacific, and Latin America also rose considerably. Outlays from Canada declined further following a sharp decline in 2005.

Outlays in 2006

In 2006, as in previous years, outlays by foreign direct investors to acquire existing U.S. businesses (at $147.8 billion) were significantly larger than outlays to establish new U.S. businesses (at $13.7 billion). Outlays made by, or through, existing U.S. affiliates of foreign investors were $110.6 billion, more than twice the $50.9 billion in outlays made directly by foreign investors.

Outlays in manufacturing increased to $56.6 billion from $34.0 billion in 2005. The largest increases within manufacturing were in computers and electronic products (mostly for acquisitions of communications equipment manufacturers) and in chemicals (mostly for acquisitions of pharmaceuticals and medicines manufacturers). Outlays in finance (except depository institutions) and insurance increased sharply to $25.3 billion from $5.5 billion in 2005. Outlays in “other industries” more than doubled to $31.2 billion in 2006, the most sizable of which were in transportation and warehousing, mining, and health care and social assistance.

By country of ultimate beneficial owner, outlays by European investors almost doubled, increasing to $109.9 billion from $56.4 billion in 2005. Outlays in manufacturing and the nonbank finance and insurance sectors fueled much of the growth. Expenditures by investors from Germany, France, Switzerland, and Spain grew substantially. German investment of $22.7 billion was the highest among individual countries, followed by British investment of $21.9 billion. Stepped-up investment from Japan and Australia contributed to a rise in overall investment from the Asia and Pacific region, while higher investment from Israel contributed to increased investment from the Middle East.

The ultimate beneficial owner is the investor, proceeding up a U.S. affiliate’s ownership chain, beginning with the foreign parent, that is not owned more than 50 percent by another investor. The data on new investment outlays are classified by country based on the location of the UBO; thus, they are shown against the country of the investor that ultimately owns or controls the affiliate, even though the investor may have channeled the funds for the investment though another country, such as a financial center.

The estimates of outlays for 2006 are preliminary. The estimate of outlays for 2005 has been revised up 5 percent from the preliminary estimate published last year.

Employment and assets of newly acquired or established businesses

Newly acquired or established businesses employed 215,300 people in 2006, down 9 percent from 235,900 in 2005. The movement of employment and outlays in opposite directions occurred as new investments became more concentrated in industries with relatively low employment and relatively high acquisition values. Manufacturing accounted for the largest share of employment, with 91,400 employees. The total assets of newly acquired or established businesses were $356.5 billion, up considerably from $181.8 billion in 2005.

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Estimates in this report are based upon a Bureau of Economic Analysis survey that covers (1) existing U.S. business enterprises in which foreign investors acquired, either directly or through their U.S. affiliates, at least a 10 percent ownership interest and (2) new U.S. business enterprises established by foreign investors or their U.S. affiliates, also using the 10 percent ownership interest threshold.

Additional details on the new investments by foreign direct investors in 2006 will appear in the June issue of the Survey of Current Business, the monthly journal of the Bureau of Economic Analysis.

* * *

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

 

Table 1. Investment Outlays by Type of Investment and Investor, 1992-2006      
[Millions of dollars]      
  1992 1993 1994 1995 1996 1997 1998 1999 2000  2001 2002  2003  2004 2005/r/ 2006/p/
Total outlays 15,333 26,229 45,626 57,195 79,929 69,708 215,256 274,956 335,629 147,109 54,519 63,591 86,219 91,390 161,533
By type of investment:                              
  U.S. businesses acquired 10,616 21,761 38,753 47,179 68,733 60,733 182,357 265,127 322,703 138,091 43,442 50,212 72,738 73,997 147,827
  U.S. businesses established 4,718 4,468 6,873 10,016 11,196 8,974 32,899 9,829 12,926 9,017 11,077 13,379 13,481 17,393 13,706
By type of investor:                              
  Foreign direct investors 4,058 6,720 13,628 11,927 32,230 13,899 120,828 120,878 105,151 23,134 13,650 27,866 34,184 40,304 50,906
  U.S. affiliates 11,275 19,509 31,999 45,268 47,699 55,809 94,428 154,078 230,478 123,975 40,869 35,725 52,035 51,086 110,627
                             
   p Preliminary                              
   r Revised                              
Source: U.S. Bureau of Economic Analysis                              

 

Table 2. Distribution of Investment Outlays by Size, 1992-2006      
[Percent]      
  1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002  2003 2004  2005/r/ 2006/p/
Total outlays 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
  $5 billion or more 0 0 0 (D) 0 0 55 55 48 30 (D) (D) (D) 0 19
  $2 billion - $4.999 billion 0 (D) 27 18 29 12 11 16 20 22 18 (D) 13 28 23
  $100 million - $1.999 billion 42 51 51 48 55 67 27 24 27 40 45 43 47 59 54
  Less than $100 million 58 (D) 22 (D) 16 21 7 5 5 9 (D) 12 (D) 13 4
                             
   p Preliminary                              
   r Revised                              
  D  Suppressed to avoid disclosure of data of individual companies.                        
Source: U.S. Bureau of Economic Analysis                            

 

Table 3. Investment Outlays by Industry of U.S. Business Enterprise, 2003-2006
[Millions of dollars]
  2003 2004 2005/r/ 2006/p/
All industries 63,591 86,219 91,390 161,533
         
Manufacturing 10,750 18,251 34,036 56,582
Food 2,516 2,146 1,646 683
Beverages and tobacco products            (D)             (D)             (D)  1,366
Textiles, apparel, and leather products            (D)             (D)             (D)  4,387
Paper            (D)  120            (D)  226
Printing and related support activities            (D)             (D)             (D)             (D) 
Petroleum and coal products            (D)             (D)  225 0
Chemicals 1,164 4,751 9,598 14,783
Plastics and rubber products 498 84 1,636            (D) 
Nonmetallic mineral products            (D)  153 388 1,012
Primary metals 91            (D)  4,877 2,448
Fabricated metal products 123            (D)  111 952
Machinery 122 642 382 1,629
Computers and electronic products 2,125 2,934 3,596 17,950
Electrical equipment, appliances, and components 139            (D)  747 2,222
Transportation equipment 225 1,199 5,942 1,446
Other 462 969 4,663 7,047
Wholesale trade 1,086            (D)  3,489 8,002
Retail trade 941 3,073 1,262 1,158
Information 9,236 4,315 8,487 9,503
Publishing industries 1,431 1,274 2,555 3,834
Motion picture and sound recording industries 278            (D)             (D)             (D) 
Telecommunications            (D)             (D)             (D)  4,680
Other            (D)  2,783 2,085            (D) 
Depository institutions 4,864            (D)  7,973 9,270
Finance (except depository institutions) and insurance 23,511 26,234 5,529 25,347
Real estate and rental and leasing 2,817 6,335 8,756 15,669
Professional, scientific, and technical services 1,955            (D)  6,407 4,821
Other industries 8,429 10,121 15,453 31,181
       
   p Preliminary        
   r Revised        
  D  Suppressed to avoid disclosure of data of individual companies.        
Source: U.S. Bureau of Economic Analysis        

 

Table 4. Investment Outlays by Country of Ultimate Beneficial Owner, 2003-2006 
[Millions of dollars]
  2003 2004 2005/r/ 2006/p/
All countries 63,591 86,219 91,390 161,533
         
Canada 9,157 31,502 13,640 12,012
Europe 39,024 43,815 56,416 109,858
France 2,955 6,415 5,608 19,682
Germany 8,830 4,788 7,239 22,683
Netherlands 1,077 461 2,609 5,463
Switzerland 649 6,505 2,332 14,625
United Kingdom 20,373 23,288 30,420 21,880
Other Europe 5,140 2,358 8,206 25,524
Latin America and Other Western Hemisphere 1,607 2,629 5,042 9,130
South and Central America 182 1,382 980 1,215
Other Western Hemisphere 1,425 1,247 4,062 7,916
Africa          (D)           (D)           (D)           (D) 
Middle East 1,738 1,318 5,068 12,436
Asia and Pacific 11,469 6,015 10,924 17,526
Australia 9,032 3,850 4,713 6,866
Japan 1,544 1,027 4,245 8,719
Other Asia and Pacific 893 1,139 1,966 1,942
United States/1/          (D)           (D)           (D)           (D) 
       
   p Preliminary        
   r Revised        
  D Suppressed to avoid disclosure of data of individual companies.      
   1. The United States is the country of ultimate beneficial owner for businesses newly acquired or     
established by foreign investors that are ultimately owned by persons located in the United States.    
   Note. For investments in which more than one investor participated, each investor and each investor's    
outlays are classified by the country of each individual ultimate beneficial owner.      
Source: U.S. Bureau of Economic Analysis        

 

Table 5. Selected Operating Data of U.S. Business Enterprises Acquired or Established, by Industry of U.S. Business Enterprise, 2005-2006
                     
  2005/r/ 2006/p/
Millions of dollars Thousands of employees Hectares of land/1/ Millions of dollars Thousands of employees Hectares of land/1/
Total assets Sales Net income Total assets Sales Net income
All industries 181,846 67,141 3,060 235.9 34,471 356,541 79,264 3,137 215.3 1,389,995
                     
Manufacturing 47,529 36,348 1,911 96.3 13,790 74,153 34,573 1,187 91.4 9,692
Wholesale trade 5,095 7,307 160 19.6 200 5,330 5,166 494 10.9 10,718
Retail trade 1,907 2,154 61 10.3 94 1,487 2,167 16 6.3      (D) 
Information 12,086 4,881 -103 8.5      (D)  12,163 3,420 133 11.7      (D) 
Depository institutions 48,950 2,660 348 14.2 255 104,628 4,386 876 18.4 332
Finance (except depository institutions) and insurance 21,828 1,632 232 5.7 3 99,898 10,590 -570 12.9 65
Real estate and rental and leasing 16,577 1,389 161 2.3 7,847 14,859 2,720 79 0.9 7,761
Professional, scientific, and technical services 6,382 2,531 -36 16.1      (D)  4,880 405 -22 2.4      (D) 
Other industries 21,491 8,239 325 62.9 12,276 39,142 15,836 943 60.3 1,360,464
                   
   p Preliminary                    
   r Revised                    
   D Suppressed to avoid disclosure of data of individual companies.                    
  1.  One hectare equals 2.471 acres.  Thus, for all industries, acres of land owned in 2005 were 85,178, and in 2006 were 3,434,678.          
   Note. For newly acquired businesses, the data cover the most recent financial reporting year preceding acquisition.  For newly established businesses, the data are projections for the first full year of operations.
Source: U.S. Bureau of Economic Analysis