Decrease in current account surplus

Germany’s current account recorded a surplus of €16.6 billion in August 2023, down €2.2 billion on the previous month’s level. While the balance in invisible current transactions, which comprise services as well as primary and secondary income, moved into positive territory, there was a sharper decline in the surplus in the goods account.

The surplus in the goods account decreased by €4.9 billion to €14.3 billion. This was due to a marked decline in receipts, whereas expenditure remained virtually unchanged from the previous month. 

Invisible current transactions shifted from a deficit of €0.5 billion in July back into a surplus, which amounted to €2.3 billion. The crucial factor here was that net receipts in primary income expanded by €4.0 billion to €17.3 billion. This was primarily the result of residents’ higher income from their investments in investment fund shares. In addition, payments to non-residents for income from portfolio investment declined. On top of this, the deficit in the secondary income account fell by €0.8 billion to €4.7 billion, mainly off the back of lower general government expenditure, including a decrease in payments to the EU budget in connection with financing related to gross national income. By contrast, the deficit in the services account widened by €2.0 billion to €10.3 billion. Here, receipts recorded an overall decline, with receipts from charges for the use of intellectual property and other business services falling in particular. Decreases – especially in these areas and lower expenditure on telecommunication, computer and information services – also depressed the expenditure side. However, the usual seasonal increase in travel expenditure played a major role in keeping expenditure practically unchanged overall. 

Portfolio investment sees net capital imports

In August, the international financial markets were shaped by the anticipated monetary policy decisions on the part of key central banks at their September meetings; at the same time, various economic reports influenced the setting. Germany’s cross-border portfolio investment recorded net capital imports of €7.5 billion (after €23.7 billion in July), with non-resident investors increasing their holdings of German securities by €10.7 billion net. On balance, they added bonds (€7.9 billion), money market paper (€5.8 billion) and a very small volume of mutual fund shares (€0.1 billion) to their portfolios, but disposed of shares (€3.1 billion). Conversely, German investors acquired €3.2 billion net worth of foreign securities, mainly purchasing bonds (€4.3 billion) and, to a lesser extent, mutual fund shares (€0.7 billion). However, they parted with foreign shares (€1.2 billion) and money market paper (€0.7 billion).

In August, transactions in financial derivatives resulted in net outflows of €12.3 billion (after inflows of €1.3 billion in July). 

Direct investment was more or less balanced in August, showing net capital imports of €0.2 billion (after net capital exports of €4.0 billion in July). German enterprises withdrew funds from abroad to the tune of €1.0 billion. They reduced the volume of credit to foreign business units (€9.1 billion). This was largely because both trade credits and financial loans primarily saw redemptions. Conversely, they stepped up their equity capital in affiliates abroad (€8.1 billion). Foreign enterprises also reduced their direct investment in Germany (€0.8 billion). In particular, they scaled back their intra-group lending (€2.3 billion), with repayments of trade credits outweighing the additional funds granted via loans. By contrast, they stepped up their equity capital in German enterprises (€1.5 billion).

Other statistically recorded investment – which comprises loans and trade credits (where these do not constitute direct investment), bank deposits and other investments – registered net outflows of capital amounting to €26.4 billion in August (following €19.7 billion in July). The net external claims of monetary financial institutions excluding the Bundesbank rose by €30.4 billion, while those of the Bundesbank grew by €8.0 billion. TARGET claims on the ECB rose by €4.2 billion, while foreign deposits at the Bundesbank – mainly from non-euro area residents – decreased. Net capital imports were generated by cross-border transactions conducted by enterprises and households (€11.1 billion) and general government (€0.9 billion).

The Bundesbank’s reserve assets fell – at transaction values – by €0.1 billion in August.