German balance of payments in August 2022

Current account surplus down

Germany’s current account recorded a surplus of only €0.6 billion in August 2022, down €4.8 billion on the previous month’s level. This was due to a decrease in the goods account surplus. The deficit on invisible current transactions, which comprise services as well as primary and secondary income, changed only slightly.

In the reporting month, the surplus in the goods account contracted by €5.0 billion to €3.5 billion because receipts fell and expenditure rose sharply.

The deficit on invisible current transactions declined slightly by €0.2 billion to €2.9 billion in August. The increase in the balances of primary and secondary income were almost offset by the expansion of the services account deficit by €1.6 billion to €8.8 billion. Services receipts were down overall, mainly due to lower receipts from charges for the use of intellectual property and other business services. In addition, expenditure rose, largely owing to higher expenditure on transport services and – as is typical for this time of year on travel. By contrast, net receipts on primary income went up by €0.9 billion to €11.6 billion. Total receipts remained virtually unchanged, also because lower receipts from direct investment and higher receipts from portfolio investment broadly balanced each other out. Expenditure fell, however, with declining dividend payments to non-residents from portfolio investment contributing to this decrease. Moreover, the deficit on secondary income narrowed by €0.9 billion to €5.6 billion, chiefly linked to lower general government expenditure on current transfers relating to international cooperation.

Portfolio investment sees net capital imports

In August 2022, the financial markets continued to be shaped by the environment of high inflation rates, with the economic outlook deteriorating at the same time. Germany’s cross-border portfolio investment generated net capital imports of €24.9 billion (July: net capital exports of €5.4 billion). Foreign investors added German securities worth €15.6 billion net to their portfolios, purchasing bonds (€22.9 billion) whilst offloading money market paper (€4.6 billion) and shares (€2.6 billion). By contrast, domestic investors sold foreign securities worth €9.3 billion net. They parted with bonds (€7.0 billion), shares (€2.4 billion) and money market paper (€0.2 billion), whilst acquiring a small volume of mutual fund shares (€0.4 billion).

In August, transactions in financial derivatives recorded outflows of €1.4 billion (July: €4.0 billion).

Direct investment recorded net capital exports of €12.7 billion in August (July: €14.1 billion). The main reason for this was that domestic companies stepped up their investment abroad by €52.5 billion, supplying their business units abroad with additional funds worth €43.7 billion via intra-group lending. In addition, they boosted their equity capital by €8.8 billion, primarily through reinvested earnings. Conversely, foreign enterprises increased their investment in Germany by €39.8 billion, issuing intra-group loans to the tune of €39.6 billion and raising their equity capital by €0.2 billion.

Other statistically recorded investment – which comprises loans and trade credits (where these do not constitute direct investment), bank deposits and other investments – registered net capital exports amounting to €41.1 billion in August (following net capital imports of €34.9 billion in July). The Bundesbank’s net external claims went up by €47.2 billion. This rise was chiefly attributable to the increase in TARGET2 claims (€78.9 billion). At the same time, however, the Bundesbank’s external liabilities also grew, mainly driven by a rise in deposits of non-euro area residents at the Bundesbank. Monetary financial institutions (excluding the Bundesbank) recorded net capital exports (€2.0 billion). By contrast, the transactions by enterprises and households (€5.9 billion) and by general government (€2.2 billion) resulted in net capital imports.

The Bundesbank’s reserve assets rose – at transaction values – by €0.1 billion in August.