Euro area balance of payments (May 2006)

In May 2006 the seasonally adjusted current account of the euro area recorded a deficit of EUR 8.2 billion, mainly as a result of deficits in income and current transfers. In the financial account, combined direct and portfolio investment recorded net inflows of EUR 48 billion, predominantly reflecting net purchases of euro-area long-term debt instruments by non-residents.

The seasonally adjusted current account of the euro area recorded a deficit of EUR 8.2 billion in May 2006 (corresponding to a deficit of EUR 11.9 billion in non-seasonally adjusted terms). This largely reflected deficits in income (EUR 4.7 billion) and current transfers (EUR 5.2 billion) that were only partly offset by a surplus in services (EUR 2.3 billion). The goods item was close to balance.

The 12-month cumulated current account up to May 2006 recorded a deficit of EUR 47.6 billion, i.e. around 0.6% of GDP, compared with a surplus of EUR 28.8 billion a year earlier. This shift resulted mainly from a decline of EUR 54.5 billion in the goods surplus, reflecting an increase in the value of imports higher than the increase in the value of exports. The deficits in income and current transfers and the surplus in services also increased over the same period.

In the financial account, combined direct and portfolio investment recorded net inflows of EUR 48 billion in May 2006, reflecting net inflows in portfolio investment (EUR 49 billion) while direct investment was close to balance.

Within direct investment, net outflows of EUR 5 billion in equity capital and reinvested earnings were almost offset by net inflows of EUR 4 billion in other capital (mostly inter-company loans).

Within portfolio investment, net inflows were recorded in debt instruments (EUR 44 billion) and equity (EUR 5 billion). The net inflows in equity were accounted for by net sales of foreign securities by euro area residents that were only partly offset by net sales of euro area equity by non-residents. The net inflows in debt instruments were mostly due to net purchases of euro area bonds and notes, as net purchases of euro area securities by non-residents by far exceeded net purchases of foreign securities by euro area residents.

Other investment recorded net outflows of EUR 12 billion, resulting from net outflows in all sectors, with the exception of the Eurosystem.

Reserve assets increased by EUR 2 billion (excluding valuation effects). The stock of the Eurosystem’s reserve assets stood at EUR 333.2 billion at the end of May 2006.

In the 12-month period up to May 2006, combined direct and portfolio investment showed cumulated net inflows of EUR 69 billion, compared with net inflows of EUR 36 billion a year earlier. This development resulted from higher net inflows in portfolio investment (increasing from EUR 84 billion to EUR 212 billion) that were only partly offset by rising net outflows in direct investment (increasing from EUR 47 billion to EUR 143 billion). While the increase in net inflows in portfolio investment mainly reflected higher net purchases of euro area equities by non-residents, net outflows in direct investment increased mainly on account of higher investment abroad by euro area residents. Euro area residents increased their net purchases of foreign equities (combined direct and portfolio investment) from EUR 244 billion to EUR 371 billion.

In addition to the balance of payments for May 2006, this press release incorporates revisions for April 2006. These revisions have not significantly altered the previously published statistics.

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 May 2006 will also be published in the August 2006 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 monthly balance of payments will be published on 22 August 2006.

Table 1: Current account of the euro area – seasonally adjusted data.

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