Foreign Investors Pumped More Than a Quarter Trillion Dollars in the U.S. in 2008

According to data released earlier this month by the BEA, foreign investors pumped $260.4 billion into the U.S. economy in 2008 to acquire U.S. businesses ($242.8 billion) or to establish new U.S. businesses ($17.6 billion), the highest level of foreign investment in eight years, and a 3% increase from 2007. This investment activity in the U.S. by foreign investors represents almost a 5X increase since 2002, when FDI was only $54.5 billion (see chart above, click to enlarge).

The BEA reported that:

Among major industries, there was a substantial increase in outlays in manufacturing, which accounted for the majority of the spending by investors in 2008. Outlays were also large in information and in finance. Outlays in real estate fell sharply. Outlays increased from investors in Europe, Latin America and Other Western Hemisphere and in the Asia and Pacific region. As in previous years, the largest share of outlays was from European investors. Outlays by investors from Canada and the Middle East fell.

In 2008, U.S. businesses that were newly acquired or established by foreign direct investors had 368,500 employees, compared with 496,600 employees in 2007. Employment at newly acquired or established firms was largest in manufacturing (146,600) followed by finance (except depository institutions) and insurance (95,700).

Bottom Line: Americans might have lost confidence in their economy over the last few years, but foreign investors apparently haven’t, and in fact, are increasingly bullish about the U.S. economy and its businesses. Despite subprime mortgage problems, a housing slump, a recession compared frequently to the Great Depression, an auto sector on government life support, and a manufacturing industry in serious decline, foreigners invested more than a quarter trillion dollars in the U.S. in 2008, mostly in the ailing American manufacturing sector.

About Mark J. Perry 262 Articles

Affiliation: University of Michigan

Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.

He holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University in Washington, D.C. and an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota.

Since 1997, Professor Perry has been a member of the Board of Scholars for the Mackinac Center for Public Policy, a nonpartisan research and public policy institute in Michigan.

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