German balance of payments in October 2021

Current account surplus down

Germany’s current account recorded a surplus of €15.4 billion in October 2021, down €4.6 billion on the previous month’s level. There was a decrease in both the surplus in the goods account and in invisible current transactions, which comprise services as well as primary and secondary income. 

In October, the surplus in the goods account fell by €3.1 billion on the month to €13.5 billion because imports of goods recorded a sharper increase than exports.

The surplus in invisible current transactions declined by €1.6 billion to €1.9 billion in October. Net receipts in the primary income account went down by €0.8 billion to €9.9 billion, chiefly off the back of lower dividend income from portfolio investment abroad. In addition, the secondary income deficit expanded by €0.7 billion to €5.6 billion, to which lower general government revenue from current taxes on income and wealth contributed in particular. The deficit in the services account remained virtually unchanged at €2.4 billion. However, transport services, amongst other things, increased on both sides of the balance sheet, while net expenditure on travel declined. 

Portfolio investment sees outflows

In October 2021, concerns about rising inflation rates and a tightening of monetary policy in the major economies continued to influence the international financial markets. Germany’s cross-border portfolio investment recorded net capital exports of €27.5 billion (after €34.9 billion in September). Domestic investors added, on balance, €12.2 billion worth of securities issued by non-residents to their portfolios, purchasing mutual fund shares (€10.4 billion), shares (€6.3 billion) and money market paper (€0.8 billion), but offloading bonds (€5.3 billion). Foreign investors disposed of German securities to the tune of €15.3 billion net, mainly selling money market paper (€9.6 billion) and shares (€5.0 billion) but also, to a lesser extent, mutual fund shares (€0.5 billion) and bonds (€0.1 billion).

In October, the balance of financial derivatives recorded net outflows (€2.3 billion).

By contrast, direct investment generated net capital imports of €6.3 billion in October (September: net capital exports of €4.6 billion). Foreign enterprises injected their affiliates in Germany with direct investment funds worth €11.1 billion, of which just over half consisted of additional equity capital (€6.3 billion). Furthermore, non-resident firms issued €4.8 billion in new intra-group loans. Overall, domestic enterprises increased their foreign direct investment by €4.8 billion. They boosted their equity capital in non-resident enterprises by €6.1 billion, predominantly in the form of reinvested earnings. By contrast, the outstanding volume of intra-group loans decreased.

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 of capital amounting to €21.3 billion in October (following €35.8 billion in September). The Bundesbank alone saw net capital imports of €37.0 billion. TARGET2 claims on the ECB fell by €48.5 billion, but non-resident counterparty deposits at the Bundesbank receded as well. Monetary financial institutions (excluding the Bundesbank) recorded net capital exports of €20.4 billion. Cross-border transactions in other investment resulted in rising net claims for general government vis-à-vis non-residents (€4.4 billion) as well, whilst enterprises and households saw inflows worth €9.1 billion from abroad.

The Bundesbank’s reserve assets grew slightly – at transaction values – by €0.3 billion in October.