Euro area balance of payments (Monthly developments in July 2004)

In July 2004, the seasonally adjusted current account of the euro area was in surplus, mainly as a result of a surplus in goods. In the financial account, the net purchases of foreign debt securities by euro area residents largely accounted for the net outflows in combined direct and portfolio investment.

Current account

The seasonally adjusted current account of the euro area showed a surplus of EUR 1.8 billion in July 2004 (corresponding to a EUR 3.1 billion surplus in non-seasonally adjusted terms). This reflected a surplus in goods (EUR 8.1 billion) that was partly offset by a deficit in current transfers (EUR 5.9 billion). Both the services and income accounts were close to balance.

Compared with the revised data for June 2004, the seasonally adjusted current account surplus increased by EUR 1.4 billion, as a result of a decrease in the income deficit (by EUR 4.2 billion), which was partly offset by a decrease in the services (by EUR 1.2 billion) surplus and an increase in the deficit for current transfers (by EUR 1.3 billion). The goods surplus remained almost unchanged.

 Euro area balance of payments: 12-month cumulated flows (EUR billions) —— current account balance ------ net direct investment —— net portfolio investment

The 12-month cumulated surplus of the euro area current account up to July 2004 amounted to EUR 50.1 billion, i.e. about 0.7% of GDP, compared with EUR 34.3 billion a year earlier (see chart). The increase of EUR 15.8 billion in the cumulated current account resulted from a higher goods surplus (as exports of goods rose faster than imports of goods over this period) and a lower income deficit. This was partly counterbalanced by a lower services surplus and a higher deficit for current transfers.

Financial account

In the financial account, combined direct and portfolio investment recorded net outflows of EUR 38.7 billion in July 2004, reflecting net outflows in both direct and portfolio investment (EUR 8.3 billion and EUR 30.5 billion respectively).

The developments in direct investment were accounted for by net outflows in both equity capital, particularly due to euro area investment abroad (EUR 9.6 billion), and other capital (mostly inter-company loans).

With regard to portfolio investment, the developments mainly reflected net outflows in debt instruments (EUR 36.7 billion), largely as a result of net purchases of both bonds and notes (EUR 12.3 billion) and money market instruments (EUR 17.8 billion) by euro area residents. In addition, net sales of euro area debt instruments by non-residents contributed to these net outflows. In contrast, net purchases of euro area equity by non-residents exceeded the net purchases of non-euro area equity by residents by EUR 6.2 billion.

Net inflows in other investment (EUR 27.2 billion) primarily reflected net inflows by the MFIs excluding the Eurosystem (EUR 35.1 billion), which were partially counterbalanced by net outflows of EUR 8.4 billion by the money-holding sector (other sectors).

Reserve assets decreased by EUR 0.6 billion (excluding valuation effects). The stock of the Eurosystem’s reserve assets stood at EUR 301.3 billion as at the end of July 2004 (http://www.ecb.europa.eu/stats/external/reserves/templates/html/200407eur.en.html).

In the 12-month period up to July 2004, combined direct and portfolio investment recorded cumulated net outflows of EUR 110.1 billion, compared with net inflows of EUR 101.2 billion a year earlier. This reversal mainly stemmed from a switch both in portfolio investment from net inflows of EUR 82.5 billion to net outflows of EUR 35.9 billion and in direct investment from net inflows of EUR 18.7 billion to net outflows of EUR 74.2 billion. The shift in portfolio investment mostly resulted from lower net purchases of euro area debt instruments by non-residents. The net acquisition of equity securities increased on both the asset and the liability side, though at a faster pace for foreign securities bought by euro area residents. The shift in direct investment mainly stems from a decline in foreign net investment in the euro area.

Data revisions

In addition to the monthly balance of payments data for July 2004, this press release incorporates revisions for June 2004. Revisions in the financial account mostly concerned other investment, for which net outflows were revised from EUR 18.5 billion to EUR 21.6 billion.

Additional information on the euro area balance of payments and international investment position

A complete set of updated euro area balance of payments and international investment position statistics is available on the ECB’s website in the “Statistics” section under the heading “Data services”/“Latest monetary, financial markets and balance of payments statistics”. The results up to July 2004 will also be published in the October 2004 issue of the ECB’s Monthly Bulletin.

A detailed methodological note is available on the ECB’s website. The next press release on euro area balance of payments will be published on 26 October 2004.

Annexes

Table 1: Euro area current account – seasonally adjusted data

Table 2: Monthly balance of payments of the euro area – non-seasonally adjusted data