Sharp rise in current account surplus

Germany’s current account posted a surplus of €22.5 billion in June 2021, up €9.4 billion on the previous month’s level. This was attributable to an increase in the goods account balance and especially in the invisible current transactions balance comprising services as well as primary and secondary income.

In June, the surplus in the goods account increased by €2.3 billion on the month to €16.2 billion, with exports of goods expanding more sharply than imports.

Invisible current transactions shifted back into a surplus again (€6.2 billion) after recording a deficit of €0.8 billion in May. The main reason for this shift was that primary income, which had been broadly balanced in the previous month, recorded net receipts of €8.6 billion. This was primarily driven by a countermovement in dividend payments to non-residents for portfolio investment, which recorded a considerable increase in the previous month, as is usual in May. The associated tax payments from non-residents fell and dampened general government revenue from current taxes on income and wealth, reducing receipts in secondary income. Expenditure fell less strongly, with lower general government payments to the EU budget in connection with financing related to gross national income having a dampening effect in particular. On balance, the deficit in the secondary income account expanded by €1.0 billion to €2.9 billion. The surplus in services declined by €1.2 billion to €0.5 billion. Receipts rose chiefly as a result of higher income from telecommunications, computer and information services and from transport. However, expenditure increased more strongly; the growth in travel spending in particular played a role in this regard, to which the improved pandemic situation likely contributed as well.

Portfolio investment sees outflows

In June 2021, developments in the international financial markets were influenced by a slight decline in bond yields, whilst inflation rates in the United States were surprisingly high, however. It was against this backdrop that Germany’s cross-border portfolio investment recorded net capital exports of €44.3 billion (after €5.5 billion in May). Domestic investors purchased foreign securities worth €37.9 billion. They acquired bonds (€23.1 billion), mutual fund shares (€10.7 billion) and shares (€6.6 billion). At the same time, they disposed of money market paper to the tune of €2.5 billion. Conversely, foreign investors offloaded €6.4 billion net worth of German securities, on balance selling shares (€3.3 billion), bonds (€2.9 billion) and mutual fund shares (€0.8 billion), while purchasing a smaller volume of money market paper (€0.6 billion).

In June, financial derivatives again recorded net capital exports: these amounted to €5.2 billion. 

Direct investment saw net capital exports of €0.7 billion in June (following net capital imports of €0.1 billion in May). Domestic enterprises further expanded their foreign direct investment by €18.0 billion, with outflows of funds totalling €11.0 billion through the intra-group credit channel. Moreover, investors increased their equity capital in foreign enterprises by €7.0 billion, half of which took the form of reinvested earnings. By contrast, non-resident investors injected their affiliated enterprises in Germany with direct investment funds worth €17.3 billion net, issuing loans to the tune of €13.3 billion and boosting their equity capital by €4.0 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 inflows amounting to €20.9 billion in June (following outflows totalling €2.2 billion in May). Bundesbank accounts also recorded net capital imports (€26.9 billion), mainly owing to the €48.6 billion increase in non-residents’ deposits with the Bundesbank. TARGET2 claims on the ECB rose less strongly, at €25.0 billion. Monetary financial institutions (excluding the Bundesbank) recorded net capital exports (€10.6 billion). In contrast, transactions by enterprises and households (€4.6 billion) and by general government (€0.1 billion) led to net inflows of funds from abroad.

The Bundesbank’s reserve assets grew slightly – at transaction values – by €0.1 billion in June.