American investors are diversifying away from the US at the fastest rate in 10 years, according to data released yesterday by the US Treasury.
US investors have bought $146 billion (€118 billion) worth of overseas bonds and equities in the past 12 months - more than at any time since 1994.
In June, the latest month for which figures are available, US accounts bought $9.64 billion worth of foreign equities, up from $4.7 billion in May and taking the 12-month total to $96.2 billion.
The data were the latest example of the long-running trend towards broader geographic diversification by US investors, linked to the dollar's continued weakening trend in the past few years and the mediocre performance of US equities.
"It is partly because of the dollar, partly corporate scandals. Both have been a wake-up call to investors with too much exposure to US equities," said Brian Garvey, strategist at State Street bank.
The bank's indicators have shown weak demand for US equities over recent weeks - from both domestic and foreign accounts - even when good news has lifted stocks.
Despite this, private sector economists have raised their forecasts for US economic growth in 2005 compared with three months ago, a Federal Reserve Bank of Philadelphia survey showed yesterday.
The 53 economists surveyed believe real gross domestic product will grow 3.7 per cent on a year-over-year basis in 2005, up 0.3 percentage points from their previous estimate, the bank said in its quarterly Survey of Professional Forecasters.
Growth for 2006 was forecast at 3.4 per cent compared with 3.3 per cent in the prior survey.
William Hummer, economist at Chicago-based investment firm Wayne Hummer Investments, said it was "almost inevitable" that there would be a rebound in the third quarter after a moderation in economic growth in the second quarter.
"I expect there will be improvements in the trade balance and business investment and in inventories so that the overall pace of activity will accelerate in the third quarter," said Mr Hummer, who forecasts growth of 3.7 per cent in the US this year.
