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

In August 2004 the seasonally adjusted current account of the euro area was close to balance, mainly as a result of a surplus in goods that was offset by a deficit in current transfers. In the financial account, combined direct investment and portfolio investment recorded net inflows that predominantly reflected the repayment of inter-company loans by foreign affiliates of euro area companies and net inflows in portfolio equity securities.

The seasonally adjusted current account of the euro area was close to balance in August 2004 (corresponding to a EUR 2.1 billion surplus in non-seasonally adjusted terms). This mainly reflected a surplus in goods (EUR 4.6 billion) that was offset by a deficit in current transfers (EUR 5.1 billion).

Compared with the (revised) data for July 2004, the seasonally adjusted current account surplus switched from a EUR 1.0 billion surplus to a close to balance position, as a result of a decrease in the surplus of goods (by EUR 3.7 billion), partially counterbalanced by a rise in the services surplus (by EUR 1.1 billion) and a reduction in the deficits in both income (by EUR 0.4 billion) and current transfers (by EUR 0.8 billion).

The 12-month cumulated surplus of the euro area current account up to August 2004 amounted to EUR 48.9 billion, i.e. around 0.7% of GDP, as compared with EUR 29.3 billion a year earlier. This increase resulted from a lower deficit in income and a higher surplus in goods. The surplus in services and the deficit in current transfers remained virtually unchanged.

In the financial account, combined direct and portfolio investment recorded net inflows of EUR 9.6 billion in August 2004, reflecting net inflows in both direct investment (EUR 4.4 billion) and portfolio investment (EUR 5.1 billion).

The developments in direct investment were largely accounted for by net inflows in other capital – mostly the repayment of inter-company loans by foreign affiliates of euro area companies (EUR 15.8 billion). These were partially compensated by net outflows in equity capital and reinvested earnings amounting to EUR 11.6 billion.

In portfolio investment , the net inflows of EUR 5.1 billion largely resulted from net purchases of euro area equities by non-residents (EUR 15.1 billion) that were only partly offset by net purchases of foreign equities by euro area residents (EUR 11.1 billion).

Other investment recorded net outflows of EUR 8.6 billion, mainly as a result of net outflows by monetary financial institutions (MFIs) excluding the Eurosystem (EUR 13.2 billion), which were partly counterbalanced by net inflows by other sectors, i.e. households and corporations other than MFIs (EUR 4.9 billion).

Reserve assets decreased by EUR 2.4 billion (excluding valuation effects). The stock of the Eurosystem’s reserve assets stood at EUR 301.7 billion at the end of August 2004 (http://www.ecb.europa.eu/stats/external/reserves/templates/html/200408eur.en.html).

In the 12-month period up to August 2004, combined direct and portfolio investment recorded cumulated net outflows of EUR 52.5 billion, as compared with inflows of EUR 63.8 billion a year earlier. This mainly resulted from a shift in direct investment from net inflows (EUR 9.4 billion) to net outflows (EUR 66.1 billion). The developments in direct investment in the euro area were accounted for by lower inflows in equity and reinvested earnings by non-residents, and by a shift from net inflows to net outflows of inter-company loans to euro area affiliates of foreign companies. The close to balance inflows in portfolio investment over the same period mostly reflected higher net purchases of foreign equities by euro area residents that were only partly offset by higher net purchases of euro area equities by foreign residents. This contrasts with net outflows in portfolio investment observed for the 12-month period ending in July 2004.

In addition to the balance of payments data for August 2004, this press release incorporates revisions for the period from January 2004 to July 2004.

For this period as a whole, the current account surplus was revised slightly, from EUR 25.4 billion to EUR 25.1 billion. This is because the revision of the services surplus, from EUR 5.8 billion to EUR 10.7 billion, counterbalanced the revision of the income deficit, from EUR 25.9 billion to EUR 31.0 billion.

Revisions in the financial account in the period from January 2004 to July 2004 mostly concerned net outflows in portfolio investment, which were revised downwards, from EUR 21.1 billion to EUR 12.7 billion. Most of these revisions are related to an important merger within the resident banking sector in April 2004, which affected the initial reporting of the new institution in May 2004.

The European Central Bank and the European Commission (Eurostat) each issue a press release, on the same day, on the quarterly balance of payments for the euro area and the EU (Eurostat’s Euro-indicators News Releases). In line with the agreed allocation of responsibilities, the European Central Bank compiles and disseminates monthly and quarterly balance of payments statistics for the euro area, whereas the European Commission (Eurostat) focuses on quarterly and annual aggregates of the EU. The data comply with international standards, in particular those set out in the IMF Balance of Payments Manual (5th edition). The aggregates for the euro area and the EU are compiled consistently on the basis of Member States’ transactions with residents of countries outside the euro area and the European Union respectively.

A complete set of updated euro area balance of payments statistics is available in the “Statistics” section of the ECB’s website, under the heading “Data services”/“Latest monetary, financial markets and balance of payments statistics”. The results up to August 2004 will also be published in the November 2004 issue of the ECB’s Monthly Bulletin. A detailed methodological note is available on the ECB’s website. The next press release on the euro area balance of payments (including annual revisions and updates for the euro area international investment position) will be published on 25 November 2004.

Table 1: Euro area current account – seasonally adjusted data.

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

Table 3: Quarterly balance of payments of the euro area.