Sharp decrease in current account surplus

Germany’s current account posted a surplus of €18.7 billion in July 2023, down €9.7 billion on the previous month’s level. This decrease was due to a narrowing of the surplus in the goods account and a depletion of that in invisible current transactions, which comprise services as well as primary and secondary income.

The surplus in the goods account fell by €5.0 billion to €18.8 billion as receipts recorded a sharper decline than expenditure. 

Invisible current transactions shifted from a surplus of €4.6 billion in June into a slight deficit of €0.1 billion. The expansion of the deficit in the services account by €3.2 billion to €8.1 billion made a considerable contribution to this. Receipts decreased overall, mainly as a result of lower revenue from telecommunications, computer and information services as well as other business services. By contrast, expenditure increased somewhat, also owing to higher spending on charges for the use of intellectual property and, in particular, the rise in travel expenditure typical for this time of year. Moreover, the deficit in the secondary income account widened by €1.2 billion to €5.4 billion. This was mainly attributable to lower receipts, in which reduced general government revenue from current taxes on income and wealth played an essential role. By contrast, at €13.4 billion, net receipts in the primary income account almost matched the previous month’s figure of €13.7 billion.

Portfolio investment sees net capital imports

In July, a foreseeable end to rising policy rates in the United States shaped sentiment in the international financial markets. Germany’s cross-border portfolio investment recorded net capital imports of €15.7 billion (June: net capital exports of €15.0 billion), with non-resident investors increasing their holdings of German securities (€27.9 billion). On balance, they added bonds (€25.5 billion), shares (€2.9 billion) and a small amount of money market paper (€0.4 billion) to their portfolios, but disposed of mutual fund shares (€0.9 billion). Conversely, German investors acquired €12.2 billion net worth of foreign securities, mainly purchasing mutual fund shares (€10.5 billion), shares (€2.2 billion) and, to a very small extent, bonds (€0.1 billion). However, German investors offloaded money market paper (€0.6 billion).

Transactions in financial derivatives resulted in inflows of €1.2 billion in July (June: inflows of €3.6 billion). 

Direct investment generated net capital exports of €3.8 billion in July, compared with €15.9 billion in June. Foreign enterprises reduced their direct investment in Germany by €6.2 billion, with group parents withdrawing equity capital from domestic enterprises (€4.0 billion). They also reduced the amount of funding provided through intra-group lending (€2.2 billion). Additional funding was granted via loans. On balance, however, this was outweighed by repayments of trade credits. In the opposite direction, German enterprises likewise withdrew funds from abroad (€2.4 billion). They reduced the volume of credit to foreign business units (€4.3 billion). Here, too, repayments of trade credits outweighed the additional funds granted via loans. However, domestic enterprises stepped up the equity capital in their foreign affiliates (€1.9 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 €19.8 billion in July (following €31.0 billion in June). Net external claims of monetary financial institutions excluding the Bundesbank declined slightly by €0.1 billion while those of the Bundesbank rose by €10.5 billion. TARGET claims on the ECB went down by €16.5 billion. However, foreign deposits at the Bundesbank, predominantly those from non-euro area residents, fell even more significantly. Enterprises and households recorded net capital exports (€10.6 billion), while general government posted inflows (€1.1 billion).

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