German balance of payments in September 2022

Clear surplus in current account again

Germany’s current account recorded a surplus of €14.8 billion in September 2022 and was thus up again significantly on the narrow result of €0.9 billion in the previous month. This increase was attributable to a sharp rise in the goods account surplus and a clear reversal in invisible current transactions, which comprise services as well as primary and secondary income.

In September, the surplus in the goods account grew by €9.7 billion on the month to €12.6 billion because receipts increased more strongly than expenditure.

Invisible current transactions shifted from a deficit of €2.0 billion in August into a surplus of €2.2 billion. Net receipts in primary income actually narrowed by €1.0 billion to €11.7 billion. This was mainly due to lower receipts; the decline in income from investment fund shares, which had risen in the previous month, more than offset the growth in residents’ dividend income from portfolio investment abroad. However, the deficit in the services account contracted more sharply by €3.6 billion to €5.3 billion. In this case, receipts were up, largely owing to higher receipts from charges for the use of intellectual property and other business services. Furthermore, expenditure was down, mainly due to lower expenditure on transport services and on travel. On top of this, the deficit in the secondary income account fell by €1.5 billion to €4.2 billion. Receipts rose, not least on account of an upturn in general government revenue from current taxes on income and wealth. Expenditure declined as well, with lower general government expenditure on current transfers relating to international cooperation in particular contributing to this decrease.

Portfolio investment sees net capital imports

In September 2022, financial markets were dominated by the expected monetary policy tightening around the globe. Germany’s cross-border portfolio investment generated net capital imports of €8.4 billion (August: €24.4 billion). Domestic investors sold foreign securities worth €8.7 billion net. They primarily parted with bonds (€5.7 billion) – particularly those denominated in foreign currencies – but also disposed of shares (€1.2 billion), mutual fund shares (€1.0 billion) and money market paper (€0.8 billion). Non-resident investors’ holdings of German securities remained virtually constant (-€0.3billion), although some of these investors made significant shifts between the individual instruments. They reduced, for example, their holdings of debt securities issued in Germany (€11.5 billion), offloading public sector bonds whilst at the same time purchasing instruments issued by the private sector and money market paper (€3.4 billion). However, they mainly added domestic shares worth €11.1 billion to their portfolios.

In September, transactions in financial derivatives recorded outflows of €8.3 billion (August: €0.7 billion).

Direct investment recorded net capital exports of €2.8 billion in September (August: €13.0 billion). The main reason for this was that foreign companies decreased their direct investment in Germany to a somewhat greater extent (€6.5 billion) than domestic enterprises did with their investment abroad (€3.7 billion). On balance, foreign firms scaled back the volume of intra-group loans granted to domestic business units (€8.6 billion), lowering the amount of funds granted through financial loans but lending more funds through trade credits. Furthermore, they injected their affiliates in Germany with additional equity capital (€2.1 billion). Enterprises domiciled in Germany reduced both their cross-border equity capital (€2.3 billion) and their loans to business units abroad (€1.4 billion). In doing so, they decreased their investment via financial loans, but expanded the funds provided through trade credits.

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 €10.8 billion in September (following net capital exports of €41.6 billion in August). Transactions by general government (€10.0 billion) and by enterprises and households (€3.0 billion) resulted in net capital imports. Monetary financial institutions (excluding the Bundesbank) saw net capital imports as well (€34.7 billion). By contrast, Bundesbank accounts recorded net capital exports (€37.0 billion). Its external claims arising from currency and deposits rose by €22.9 billion, which was chiefly attributable to the increase in TARGET2 claims (€21.6 billion). At the same time, the Bundesbank’s external liabilities fell, mainly driven by lower deposits by non-euro area residents.

The Bundesbank’s reserve assets rose – at transaction values – by €1.2 billion in September.