Monthly developments in July 2000

During the first seven months of 2000, the current account of the euro area recorded a deficit of EUR 14.0 billion, compared with a surplus of EUR 21.4 billion for the same period last year. This was primarily due to a lower goods surplus (EUR 35.5 billion, down from EUR 60.9 billion) as well as to higher deficits for services, income and current transfers. In July 2000, the balance on the capital account declined to EUR 0.5 billion, compared with EUR 0.7 billion in July 1999. Between January and July 2000, the capital account recorded a surplus of EUR 5.9 billion, compared with EUR 6.9 billion for the same period last year. Elsewhere in the financial account, net outflows in financial derivatives reached EUR 3.2 billion in July 2000. Net inflows to other investment amounted to EUR 28.0 billion, mainly as a reflection of short-term MFI activities. Transactions added EUR 0.5 billion to the Eurosystem reserve assets in July 2000. Errors and omissions amounted to a negative EUR 5.3 billion in July 2000, and to a negative EUR 42.9 billion in the first seven months of 2000.

In July 2000, the current account of the euro area recorded a deficit of EUR 2.2 billion, compared with a surplus of EUR 6.4 billion for the same month last year. As in previous months, this was due mainly to a decline in the goods surplus (down from EUR 14.6 billion, to EUR 8.4 billion), combined with higher deficits for both income and current transfers, while the balance for services shifted from a small deficit to a slight surplus. Strong import growth - primarily due to higher import prices - was the driving force behind the declining goods surplus during the first seven months of this year as the value of imports rose by approximately 32%, compared with 21.9% for exports. The considerable increase in oil prices, along with the depreciation of the euro, accounts for most of the rise in import values. By contrast, strong export volume growth - reflecting gains in price competitiveness and robust foreign demand - primarily explains the rise in exports (although euro area export prices have also risen somewhat). In July, the financial account recorded net outflows in both direct investment (EUR 11.3 billion) and portfolio investment (EUR 5.9 billion). Net direct investment outflows mainly reflected investment abroad by euro area residents (EUR 9.9 billion), but also disinvestment of EUR 1.5 billion by foreign investors in the euro area. The latter was caused by outflows in "other capital" (EUR 10.7 billion), indicating the redemption of intercompany loans, which more than offset inflows to the euro area in equity capital and reinvested earnings. Net portfolio investment outflows in July resulted from net equity investment abroad (EUR 14.5 billion), while net inflows in debt instruments continued (EUR 8.5 billion), notably reflecting ongoing substantial purchases of long-term euro area debt instruments by international investors (EUR 25.6 billion). The first seven months of 2000 direct investment exhibited a swing to net inflows (EUR 117.3), from net outflows in the first seven months of 1999 (EUR 78.0 billion), in connection in particular with a large transaction recorded in the first quarter of 2000. The latter was settled through an exchange of shares, contributing to the cumulative net equity outflows in portfolio investment of EUR 255.3 billion in January-July. Bonds and notes recorded substantial inflows (EUR 56.9 billion), in contrast to substantial net outflows (EUR 71.2 billion) in the same period of 1999. Overall, combined net direct and portfolio investment outflows declined to EUR 50.9 billion in the first seven months of 2000, from EUR 142.9 billion in the same period of 1999.

Annex 1 ECB Monthly Bulletin

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to this press release contains statistics produced by the Eurosystem in respect of the balance of payments (b.o.p.) of the euro area; the methodology has been developed in close co-operation with the European Commission (Eurostat) which publishes the b.o.p. for the European Union. The ECB compiles these statistics on the basis of the data on extra-euro area transactions reported by euro area countries. The results for July 2000 will also be published in the October 2000 issue of the . A detailed methodological note on euro area b.o.p. statistics is available on the ECB's website in the section Euro area statistics - download. Reproduction is permitted provided that the source is acknowledged