Monthly developments in August 2001 and revisions from 1997 up to the second quarter of 2001

In the first eight months of 2001, the cumulated current account deficit declined to EUR 21.8 billion compared with a deficit of EUR 45.6 billion for the same period last year. This mostly reflects a strong increase in the goods surplus from EUR 7.8 billion to EUR 35.0 billion, along with an EUR 2.4 billion decrease in the current transfers deficit and a shift in the services item from a deficit of EUR 2.1 billion to a surplus of EUR 2.9 billion. These developments were only partially offset by the EUR 10.8 billion increase in the income deficit. The rising cumulated goods surplus is explained by the faster growth of exports (10.9%) than of imports (6.6%). In the financial account, combined direct and portfolio investment of the euro area registered a net inflow of EUR 11.8 billion in August. This combined net inflow in the financial account is explained by net portfolio investment inflows of EUR 17.8 billion, which more than offset net direct investment outflows of EUR 6.0 billion. The net inflows of EUR 17.8 billion in the portfolio investment account of the euro area are mainly due to net inflows of EUR 12.7 billion in equity portfolio investment. Debt instruments registered net inflows of EUR 5.1 billion, which are explained by net inflows in bonds and notes of EUR 3.1 billion and by net inflows in money market instruments of EUR 2.0 billion. Financial derivatives registered net outflows of EUR 3.1 billion and the other investment account recorded net outflows of EUR 12.6 billion. Reserve assets, excluding valuation effects, decreased by EUR 4.1 billion, while net errors and omissions amounted to EUR -5.1 billion. In addition to the key items for August 2001, this press release incorporates a revised and more detailed set of balance of payments (b.o.p.) statistics for 1997-2000, as well as for the first and second quarters of 2001. There are also some substantial revisions to the direct investment account for 2000. Instead of registering net outflows of EUR 25.2 billion, as reported previously, the euro area recorded net inflows of EUR 15.2 billion in this account in 2000. For the fourth quarter of 2000, net direct investment outflows were revised downwards from EUR 58.9 billion to EUR 14.1 billion. This revision results essentially from additional information relating to industrial restructuring. By contrast, for the first and second quarters of 2001 there were no major revisions to the financial account data, except for May 2001 for which net portfolio investment inflows in portfolio investment have been revised downwards from EUR 24.9 billion to EUR 16.0 billion.

The current account recorded a surplus of EUR 4.2 billion in August 2001 compared with a deficit of EUR 6.3 billion in August 2000. This was mainly due to an increase in the goods surplus (from EUR 0.2 billion to EUR 6.0 billion), combined with a shift in the income balance from a deficit of EUR 1.5 billion to a surplus of EUR 0.3 billion and a decrease in the current transfers deficit (from EUR 5.5 billion to EUR 2.9 billion). Meanwhile, the services surplus remained virtually unchanged. Seasonally adjusted data show that the increase in the goods surplus since the beginning of 2001 is mainly attributable to a fall in the value of imports largely resulting from lower import prices, while export values have flattened out in line with weak foreign demand. In the direct investment account, the net outflows of EUR 6.0 billion in August are mainly accounted for by net outflows of EUR 4.8 billion in the form of other capital, mostly intercompany loans, while equity direct investment recorded net outflows of EUR 1.1 billion. It should be noted that the net inflows in the financial account in August are explained by the liability side of direct and portfolio investment, which recorded net inflows of EUR 6.2 billion and EUR 35.9 billion, respectively. In parallel, euro area residents' investment abroad was limited compared to previous months as the asset side of direct and portfolio investment registered net outflows of EUR 12.2 billion and EUR 18.0 billion, respectively. In the first eight months of 2001, the euro area financial account registered a combined net outflow of EUR 81.2 billion in direct and portfolio investment, which is higher than the net outflow of EUR 51.9 billion recorded during the same period in 2000. However, the data for August 2001 confirm the change in the composition of capital flows in 2001. Net direct investment inflows of EUR 61.8 billion between January and August 2000 have turned into net outflows of EUR 89.9 billion over the corresponding period in 2001. By contrast, net portfolio investment outflows of EUR 113.7 billion in the first eight months of 2000 have become net inflows of EUR 8.7 billion in the same period in 2001. It may be worth recalling, however, that the significant net inflows in direct investment and the large net outflows in portfolio investment in the first eight months of 2000 were influenced substantially by a company merger, settled via an exchange of shares. This transaction was recorded as direct investment in the euro area and as a portfolio equity net outflow from the euro area. Moreover, equity portfolio investment has recorded net inflows since May 2001 after registering net outflows for most of 2000. In particular, the revisions result in a larger current account deficit, primarily due to a lower goods surplus and a higher income deficit than previously reported. The goods surplus has been revised downwards by EUR 7.8 billion in 1999, EUR 16.6 billion in 2000 and EUR 5.7 billion in the first half of 2001, while the income deficit has been revised upwards by EUR 3.3 billion in 1999, EUR 6.5 billion in 2000 and EUR 7.4 billion in the first half of 2001. Overall, after revisions, the current account deficits for 1999, 2000 and the first half of 2001 now stand at EUR 26.3 billion, EUR 70.1 billion and EUR 21.8 billion, respectively (compared with EUR 13.8 billion, EUR 45.0 billion and EUR 11.2 billion previously). The revisions to the goods balance reflect a more accurate split of intra and extra-euro area trade for one large Member State and a new compilation method applied by two other Member States based on information derived from customs declarations. There were also some minor revisions to the current account in 1997 and 1998.

Note on balance of payments statistics produced by the Eurosystem

Economy and Finance News Releases

Annexes

The European Central Bank and the European Commission (Eurostat) simultaneously disseminate press releases on the quarterly b.o.p. for the euro area and the EU15 (   ). In line with the agreed allocation of responsibilities, the European Central Bank is in charge of compiling and disseminating the euro area monthly and quarterly b.o.p. statistics, whereas the European Commission (Eurostat) focuses on the quarterly and annual aggregates of the EU15. The data comply with international standards, in particular those set out in the IMF's Balance of Payments Manual (5th edition). The aggregates for the euro area and the EU15 are compiled consistently on the basis of Member States' transactions with residents of countries outside the euro area and the European Union, respectively.

Annex 1 Annex 2 Annex 3 The results for August 2001 will also be published in the November 2001 issue of the

to this press release contains statistics produced by the Eurosystem for the monthly b.o.p. of the euro area for 2000 and 2001 (Euro 12 data). contains the seasonally adjusted current account data for the Euro 12. shows more detailed quarterly b.o.p. data for the Euro 12.

ECB Monthly Bulletin

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. A detailed methodological note on euro area b.o.p. statistics is also available on the ECB's website. Reproduction is permitted provided that the source is acknowledged