Very sharp rise in current account surplus

In June 2020, the German current account recorded a surplus of €22.4 billion [1] putting it €15.4 billion above its level in May. This was due to a sharp increase in the balance for invisible current transactions, which comprises not only services but also primary and secondary income, as well as for the goods account. 

In June, the surplus in the goods account increased by €6.8 billion on the month to €16.1 billion. Following the slump in April as a result of the coronavirus pandemic, economic activity in Germany and many partner countries continued to recover gradually in June, in connection with which both German goods exports and goods imports increased further. Exports of goods grew considerably more strongly than imports.

In June, the balance of invisible current transactions rose by €8.6 billion to a surplus of €6.3 billion. This was mainly due to the fact that the small primary income deficit of €0.1 billion in May experienced a clear turnaround and returned to net receipts, which amounted to €6.4 billion. This was driven, in particular, by a countermovement in dividend payments for portfolio investment to non-residents, which recorded a considerable increase in the previous month, as is usual in May. The resulting reduction in tax payments from non-residents led to a corresponding countermovement in general government revenue from current taxes on income and wealth and decreased the level of income in the secondary income account. On balance, however, the deficit here halved to €1.7 billion due to expenditure falling even more sharply, primarily as a result of lower general government payments to the EU budget made in connection with financing related to gross national income. In addition, the surplus in the services account expanded slightly by €0.4 billion to €1.6 billion. Spending rose, with a major role being played by the fact that travel expenditure went up as coronavirus containment measures were eased. However, income increased to a somewhat greater extent, mainly owing to higher revenue in the area of other business services and IT services.

Inflows in portfolio investment

In June 2020, the sharp rise in the number of COVID-19 infections in many countries continued to shape events in the international financial markets. At the same time, however, the extensive assistance measures adopted to limit the economic repercussions of the pandemic gave rise to hopes of economic recovery in the second half of the year. These developments were also reflected in Germany’s cross-border portfolio investment, which recorded net inflows of €0.3 billion in June (May: €25.6 billion). Foreign investors acquired German securities worth €28.8 billion net, purchasing money market paper (€16.4 billion) and – in particular, public – bonds (€13.3 billion). On a smaller scale, they also purchased investment fund shares (€0.4 billion), but parted with German shares (€1.2 billion). Domestic investors purchased foreign securities worth a total of €28.5 billion net. Bonds accounted for almost half of this figure (€14.1 billion), with euro-denominated bonds proving especially desirable. In addition, domestic investors made net foreign purchases of shares (€7.2 billion), money market paper (€4.4 billion) and investment fund shares (€2.9 billion).

Financial derivatives recorded net capital exports of €12.4 billion in June (May: €5.4 billion).

Direct investment saw net capital exports of €6.1 billion in June (following net capital imports of €0.8 billion in May). Domestic enterprises increased their foreign direct investment by €10.3 billion, boosting the equity capital of foreign branches by €5.9 billion and granting additional loans of €4.4 billion to affiliated enterprises. Foreign enterprises likewise stepped up their direct investment in Germany (€4.2 billion), raising both their intra-group lending (€3.8 billion) as well as their equity capital (€0.4 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 amounting to €9.0 billion in June (following outflows totalling €23.1 billion in May). Cross-border transactions settled via the Bundesbank’s accounts resulted in net capital exports of €75.0 billion; these were attributable to an increase in TARGET2 claims. By contrast, monetary financial institutions (excluding the Bundesbank) recorded net inflows of €43.8 billion. Net inflows of funds from abroad were also received by enterprises and households (€21.3 billion) as well as by general government (€1.0 billion).

The Bundesbank’s reserve assets declined slightly – at transaction values – by €0.7 billion in June.

Footnote

1. Owing to measures taken to contain the coronavirus pandemic, public life has been subject to considerable restrictions since mid-March 2020. These restrictions have not had any noticeable negative impact on the process of preparing the balance of payments and thus on the overall quality of the results. However, the data sources for the “travel” and “income from direct investment” items are very limited or subject to greater uncertainty than usual. These items could therefore potentially.