German balance of payments in July 2021

Current account surplus down

Germany’s current account posted a surplus of €17.6 billion in July 2021, down €5.0 billion on the previous month’s level. Although the surplus in the goods account rose, the surplus in invisible current transactions, which comprise primary and secondary income as well as services, declined significantly.

In July, the surplus in the goods account increased by €1.1 billion on the month to €17.5 billion, with imports of goods contracting more sharply than exports.

The surplus in invisible current transactions narrowed by €6.1 billion to €0.1 billion in July, with both services and primary and secondary income contributing to this decrease. The services account recorded a shift from a surplus of €0.4 billion in June to a deficit of €2.4 billion in July. The main reason for this was the sharp rise in expenditure by residents on services abroad. This affected travel expenditure in particular, as the improved pandemic conditions increased the opportunities for travelling abroad again. As for the secondary income account, the deficit widened by €2.8 billion to €5.7 billion. Here, too, it was mainly payments abroad, which were primarily linked to increased general government expenditure on current transfers relating to international cooperation, which rose compared with the previous month. The surplus in primary income decreased slightly by €0.5 billion to €8.2 billion, largely on account of a decline in receipts from portfolio investment.

Portfolio investment sees outflows

International financial markets saw a higher level of volatility in July 2021 on the back of temporary concerns about growth due to rising coronavirus infection numbers in various regions. It was against this backdrop that Germany’s cross-border portfolio investment recorded net capital exports of €31.0 billion (after €38.1 billion in June). Domestic investors acquired foreign securities worth €14.8 billion, purchasing mutual fund shares (€5.2 billion), shares (€4.4 billion), bonds (€3.2 billion) and money market paper (€1.9 billion). Conversely, foreign investors disposed of €16.2 billion worth of German securities, which encompassed bonds (€14.1 billion), money market paper (€3.5 billion) and mutual fund shares (€0.8 billion). By contrast, they added shares issued in Germany to their portfolios (€2.2 billion).

In July, the balance of financial derivatives recorded net outflows (€2.0 billion).

Direct investment recorded net capital exports of €6.5 billion in July (June: €3.9 billion). Domestic enterprises increased their foreign direct investment by €4.9 billion. They raised their equity capital in foreign enterprises by €7.1 billion, of which just under half took the form of reinvested earnings. By contrast, they recorded outflows of funds totalling €2.2 billion through intra-group lending. Foreign firms reduced the direct investment funds of their subsidiaries domiciled in Germany by €1.6 billion. This was mainly due to capital outflows in intra-group lending (€3.5 billion), primarily attributable to the repayment of loans that foreign affiliates had previously granted to their domestic parent companies. Conversely, the branches of foreign enterprises in Germany saw inflows of equity capital (€1.9 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 inflows amounting to €46.6 billion in July (following €17.9 billion in June). In this context, the Bundesbank attracted net inflows of funds from abroad (€60.7 billion). This was chiefly because TARGET2 claims on the ECB fell considerably (€76.9 billion). On the other hand, there was a decline in the Bundesbank’s liabilities vis-à-vis non-residents (€12.7 billion), especially non-euro area residents. Monetary financial institutions (excluding the Bundesbank) recorded net capital exports (€26.6 billion). Transactions by enterprises and households (€12.4 billion) and by general government (€0.1 billion) each led, on balance, to net capital inflows.

The Bundesbank’s reserve assets grew slightly – at transaction values – by €0.1 billion in July.