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

In October 2004 the seasonally adjusted current account of the euro area recorded a small surplus, mainly as a result of surpluses in goods and services, which were partly offset by deficits in income and current transfers. In the financial account, combined direct and portfolio investment recorded net outflows that predominantly reflected net outflows in direct investment in the equity capital and reinvested earnings category.

The seasonally adjusted current account of the euro area recorded a surplus of EUR 0.9 billion in October (corresponding to a EUR 1.1 billion surplus in non-seasonally adjusted terms). This reflected surpluses in goods (EUR 6.0 billion) and services (EUR 1.6 billion) that were partly offset by deficits in income (EUR 2.1 billion) and current transfers (EUR 4.6 billion).

Compared with the revised data for September 2004, the seasonally adjusted current account moved from a deficit of EUR 2.2 billion to a surplus of EUR 0.9 billion, as a result of increases in the surpluses in goods (of EUR 1.2 billion) and services (of EUR 0.5 billion) and reductions in the deficits in income (of EUR 1.1 billion) and current transfers (of EUR 0.4 billion).

The 12-month cumulated surplus of the euro area current account up to October 2004 amounted to EUR 38.8 billion, i.e. around 0.5% of GDP, compared with EUR 30.7 billion a year earlier. This increase essentially resulted from a lower deficit in income, while the surpluses in goods and services and the deficit in current transfers hardly changed.

In the financial account, combined direct and portfolio investment recorded net outflows of EUR 3.7 billion in October 2004, reflecting net outflows in direct investment (EUR 9.7 billion) that were partly offset by net inflows in portfolio investment (EUR 5.9 billion).

The developments in direct investment largely resulted from net outflows in equity capital and reinvested earnings abroad by euro area corporations (EUR 15.8 billion), which were only partially compensated by the net inflows in euro area equity capital and reinvested earnings by non-residents (EUR 4.7 billion).

In portfolio investment, the net inflows of EUR 5.9 billion resulted from net inflows in equity securities (EUR 10.1 billion) that were not fully compensated by net outflows in debt instruments (EUR 4.2 billion), particularly bonds and notes (EUR 3.8 billion).

Other investment recorded net outflows of EUR 16.4 billion, mainly as a result of net outflows by monetary financial institutions (MFIs) excluding the Eurosystem (EUR 10.7 billion) and by non-MFI corporations and households (EUR 9.3 billion), which were only partly counterbalanced by net inflows by the general government (EUR 2.3 billion).

Reserve assets decreased by EUR 0.9 billion (excluding valuation effects). The stock of the Eurosystem’s reserve assets stood at EUR 294.7 billion at the end of October 2004.

In the 12-month period up to October 2004, combined direct and portfolio investment recorded cumulated net outflows of EUR 35.8 billion, compared with net inflows of EUR 81.8 billion a year earlier. This reversal resulted from a shift in direct investment from net inflows (EUR 9.3 billion) to net outflows (EUR 51.0 billion), combined with a decline in net inflows in portfolio investment from EUR 72.5 billion to EUR 15.2 billion. The developments in direct investment were accounted for by higher net outflows in equity and reinvested earnings, which resulted from lower direct investment in the euro area. The decline in net inflows in portfolio investment mostly reflected a shift from net purchases (EUR 41.6 billion) to net sales (EUR 8.5 billion) of euro area money market instruments by foreign residents.

In addition to the balance of payments data for October 2004, this press release incorporates revisions for September 2004.

A complete set of updated statistics on the balance of payments and international investment position of the euro area 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 October 2004 will also be published in the January 2005 issue of the ECB’s Monthly Bulletin. A detailed methodological note is available on the ECB’s website. The press release on the euro area balance of payments in November 2004 will be published on 26 January 2004.

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

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