German balance of payments in October 2022

Current account surplus down

Germany’s current account recorded a surplus of €5.9 billion in October 2022, almost half of the previous month’s result. This was caused by the narrower surplus in the goods account and the shift into a deficit in invisible current transactions, which comprise services as well as primary and secondary income.  

In October, the surplus in the goods account fell by €3.7 billion to €6.4 billion because receipts recorded a sharper decrease than expenditure.

Invisible current transactions shifted from a surplus of €1.5 billion in September into a deficit of €0.5 billion. Net receipts in primary income in fact grew by €0.4 billion to €11.3 billion, with expenditure narrowing somewhat more sharply than receipts. Meanwhile, the deficit in the secondary income account widened significantly by €1.3 billion to stand at €5.3 billion. The main reason for this was lower receipts, with reduced government income from current taxes on income and wealth playing a role. In addition, expenditure rose somewhat. Although payments to the EU budget in connection with financing related to gross national income went down, general government expenditure on current transfers relating to international cooperation recorded significant growth. Moreover, the deficit in the services account expanded by €1.2 billion to €6.5 billion. Receipts, in particular, declined, with lower receipts in transport and charges for the use of intellectual property contributing to this contraction. The increase in travel expenditure counteracted the predominantly receding expenditure in other areas.

Portfolio investment sees net capital exports

In October 2022, financial markets were dominated by high global inflation rates and expectations of further monetary policy tightening in the major economies. Germany’s cross-border portfolio investment generated net capital exports of €15.4 billion (September: net capital imports of €7.6 billion). Non-resident investors reduced their holdings of German securities by €19.3 billion, disposing of money market paper in particular (€17.9 billion), but also selling bonds (€3.0 billion) and a small volume of mutual fund shares (€0.8 billion). By contrast, they purchased shares of German enterprises to the tune of €2.4 billion. Resident investors parted with foreign securities (€3.9 billion) on balance, offloading shares (€3.9 billion) and money market paper (€2.4 billion), whilst acquiring bonds (€1.4 billion) and mutual fund shares (€1.0 billion).

In October, transactions in financial derivatives recorded outflows of €5.2 billion (September: €10.5 billion).

Direct investment recorded net capital exports of €10.8 billion in October (September: €2.5 billion). Enterprises domiciled in Germany expanded their direct investment funds abroad by €19.8 billion. They boosted their cross-border equity capital (€23.5 billion), with reinvested profits accounting for around one-third of this capital. By contrast, they reduced the volume of loans to business units abroad (€3.7 billion) – chiefly in the form of financial loans. Conversely, foreign enterprises stepped up their investment in Germany (€9.0 billion), raising their equity capital in affiliated enterprises in Germany by €1.1 billion and granting additional loans to domestic business units (€7.9 billion). On balance, this lending exclusively took the form of financial credits as trade credits were mainly redeemed.

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 €8.2 billion in October (following €13.9 billion in September). The Bundesbank’s net external claims declined by €20.0 billion, with TARGET2 claims falling by €36.6 billion. At the same time, however, deposits from non-euro area residents also decreased. Monetary financial institutions excluding the Bundesbank also registered net capital imports (€4.0 billion). By contrast, the transactions by enterprises and households (€13.0 billion) and by general government (€2.8 billion) resulted in net capital exports.

The Bundesbank’s reserve assets rose – at transaction values – by €0.7 billion in October.