Foreign Direct Investment Grows in the U.S.

Outlays by foreign direct investors to acquire or to establish U.S. businesses rose for the second consecutive year to $79.8 billion in 2004, up 26 percent from a revised $63.6 billion in 2003.

Despite the increases, outlays in 2004 were still less than in 1998–2001, when new investment outlays were historically high, ranging from $147.1 billion to $335.6 billion.

Outlays were boosted by the stepped-up growth in the U.S. economy, and the increase was part of a broader resurgence of worldwide merger and acquisition activity. Transactions of more than $5 billion continued to account for a sizable share of total outlays. Trust me, M&A activity accounts for the lion's share of FDI in the U.S. That has been the case historically.

What does this mean for economic development strategy? It says that more investment activity is expected from international companies in the US in the future. It also says that more foreign companies are looking for acquisitions, which could be both bad and good news for local economies, depending upon how local operations fare in the acquisition.

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