Current account surplus down

Germany’s current account recorded a surplus of €21.4 billion in October 2023, down €6.6 billion on the previous month’s level. The surplus in the goods account increased slightly, but this was significantly outweighed by the fact that the balance in invisible current transactions, which comprise services as well as primary and secondary income, moved into negative territory. 

In October, the surplus in the goods account grew by €0.6 billion on the month to €23.1 billion because receipts outpaced expenditure. 

Invisible current transactions shifted from a surplus of €5.5 billion in September into a deficit of €1.7 billion, a contributing factor being the expansion of the deficit in the services account by €3.0 billion to €9.2 billion. This was mainly due to rising expenditure, primarily owing to higher expenditure on travel as well as on charges for the use of intellectual property. In addition, the declines recorded in several items dominated the revenue side overall. Moreover, the deficit in the secondary income account expanded by €2.2 billion to €6.3 billion. Receipts fell, with declining government revenue from current taxes on income and wealth making a contribution. In addition, expenditure grew, with higher general government expenditure on current transfers relating to international cooperation playing a prominent role. Furthermore, net receipts in primary income contracted by €2.0 billion to €13.8 billion. This figure was likewise dampened by lower revenue, mainly as a result of residents’ reduced receipts from direct investment, and higher expenditure, primarily owing to higher payments of other investment income to non-residents.

Portfolio investment sees net capital exports

In October, the international financial markets were influenced by the conflict in the Middle East; on balance, however, differences in the economic outlook in the United States and Europe had the largest impact on German capital flows. Germany’s cross-border portfolio investment recorded net capital exports of €7.9 billion, after net capital imports of €23.0 billion in September. The crucial factor here was that foreign investors reduced their holdings of German securities more sharply than German investors scaled back their holdings of foreign paper. For example, foreign investors sold German instruments to the tune of €10.9 billion net. In particular, they reduced their holdings of German money market paper (€17.3 billion), but added bonds to their portfolios (€9.0 billion). They also parted with shares issued in Germany (€2.7 billion), but left their holdings of mutual fund shares virtually unchanged on balance (+€0.1 billion). Domestic investors parted with foreign securities in the amount of €3.0 billion in October. In particular, they reduced the volume of foreign bonds in their portfolios (€3.3 billion), but barely adjusted their holdings of money market paper overall (+€0.1 billion). Domestic investors also sold foreign shares (€0.6 billion), but acquired additional mutual fund shares (€0.7 billion). 

In October, transactions in financial derivatives resulted in net outflows of €11.7 billion (after outflows of €1.5 billion in September). 

Direct investment generated net capital exports of €2.7 billion in October (following net capital exports of €19.3 billion in September). Enterprises domiciled in Germany invested €12.0 billion abroad in October. They provided affiliated enterprises abroad with €7.9 billion via intra-group credit transactions, mainly in the form of trade credits. They boosted their equity capital by €4.1 billion. In the reverse direction, foreign enterprises invested €9.3 billion in their affiliates in Germany, providing funds primarily through intra-group lending (€7.1 billion). They stepped up their equity capital in enterprises in Germany by €2.1 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 €1.2 billion in October (following €25.0 billion in September). The Bundesbank’s net claims on non-residents went up by €35.0 billion. A decline in the Bundesbank’s liabilities owing to lower deposits from foreign counterparties and a €10.9 billion increase in TARGET claims on the ECB contributed to this. In October, transactions in the other sectors resulted in net inflows of funds amounting to €21.0 billion for monetary financial institutions excluding the Bundesbank, €3.1 billion for government and €9.7 billion for enterprises and individuals.

The Bundesbank’s reserve assets rose – at transaction values – by €0.9 billion in October.