Consumer Confidence About Economy Might Be Low, But Foreign Investor Confidence is High
According to data released today by the BEA, foreign investors pumped $276.8 billion into the U.S. economy in 2007 to acquire U.S. businesses ($255 billion) or to establish new U.S. businesses ($22 billion). This investment activity by foreign investors represents a 5X increase since 2002, when FDI was only $54.5 billion (see chart above, click to enlarge).
Certainly some of the increase could be explained by the 17% depreciation of the USD between 2002-2007 (data here), but that has to be a relatively insignificant factor in the +400% FDI increase.
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, threats of a recession in 2007, and comparisons to the Great Depression, foreigners almost doubled their investments in U.S. businesses in 2007 ($277 billion), compared to 2006 ($165 billion). Consumer confidence might be low, but foreign investor confidence in the U.S. economy is close to an all-time high.