German balance of payments in July 2022

Current account surplus down sharply

Germany’s current account posted a surplus of €5.0 billion in July 2022, down €9.3 billion on the previous month’s level. This was primarily caused by the shift into a deficit in invisible current transactions, which comprise services as well as primary and secondary income. There was also a smaller surplus in goods trading. 

In July, the surplus in the goods account declined by €3.1 billion on the month to €8.3 billion be-cause receipts recorded a sharper decrease than expenditure. 

Invisible current transactions shifted from a surplus of €2.9 billion in June into a deficit of €3.3 billion in the reporting month, largely because the deficit in the services account expanded by €3.9 billion to €7.4 billion. Telecommunications, computer and information services and other business services made a considerable contribution to the lower overall receipts. In addition, ex-penditure rose, also due to higher expenditure on transport services and charges for the use of in-tellectual property. On top of this, net receipts in primary income dropped by €1.3 billion to €10.7 billion. Although expenditure fell, receipts decreased more sharply. Lower payments to resi-dents of dividends for portfolio investment and income on investment fund shares as well as from direct investment played a role in this. In the secondary income account, the deficit grew by €1.1 billion to €6.7 billion. In this case, too, payments from abroad, in particular, fell compared with the previous month, mainly as a result of lower general government revenue from current taxes on income and wealth.

Portfolio investment sees net capital imports

In July 2022, the financial markets were characterised by high inflation rates, with the economic outlook deteriorating at the same time. Germany’s cross-border portfolio investment generated net capital imports of €1.9 billion (June: net capital exports of €2.0 billion). Domestic investors sold foreign securities worth €16.5 billion net. On balance, they parted with securities in all asset classes, i.e. bonds (€9.3 billion), shares (€4.0 billion) money market paper (€1.6 billion) and mutual fund shares (€1.5 billion). For their part, non-resident investors reduced their holdings of German securities (€14.6 billion). These, too, covered all asset classes. Specifically, non-residents sold German money market paper (€5.8 billion), bonds (€5.2 billion), shares and mutual fund shares (€1.8 billion each).

In July, transactions in financial derivatives recorded outflows (€3.4 billion).

Direct investment recorded net capital exports of €13.8 billion in July (June: €11.2 billion). The main reason for this was that foreign companies reduced their direct investment in Germany by €14.1 billion, scaling back their equity capital by €2.2 billion. In addition, they reduced the volume of intra-group loans granted to business units in Germany by €11.9 billion. Conversely, German enterprises withdrew €0.3 billion worth of direct investment funds from abroad. Although they raised their equity capital by €4.5 billion, intra-group lending was dominated by repayments (€4.9 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 capital imports amounting to €35.8 billion in July (following net capital exports of €29.8 billion in June). The Bundesbank’s net external claims went down by €36.6 billion, chiefly due to the decrease in TARGET2 claims (€50.4 billion). At the same time, however, the Bundesbank’s external liabilities also declined as residents from other euro area countries withdrew their deposits with the Bundesbank and liabilities from the distribution of euro banknotes in circulation within the Eurosystem shrank as well. Monetary financial institutions (excluding the Bundesbank) recorded net capital exports (€6.5 billion). General government likewise recorded outflows of funds (€0.8 billion). By contrast, transactions by enterprises and households resulted in net capital imports of €6.6 billion

The Bundesbank’s reserve assets fell – at transaction values – by €0.5 billion in July.