Monthly developments in October 2001

During the first ten months of 2001 the cumulated current account deficit declined by more than half compared with the same period last year (to EUR 23.0 billion compared with EUR 55.4 billion). This largely reflected an increase of EUR 38.8 billion in the cumulated goods surplus (from EUR 10.8 billion to EUR 49.6 billion), along with a shift in the services item from a deficit of EUR 2.4 billion to a surplus of EUR 2.2 billion, which was only partially offset by an increase of EUR 11.8 billion in the income deficit (from EUR 25.6 billion to EUR 37.4 billion). Meanwhile, the deficit for current transfers remained virtually unchanged. The rising cumulated goods surplus is explained by the faster growth of export values (8.4%) than of import values (3.6%). In the financial account, combined direct and portfolio investment recorded net inflows of EUR 5.6 billion in October 2001. This was due to net inflows in direct investment (EUR 5.3 billion), as portfolio investment was close to a net balanced position (that is, net inflows of EUR 0.3 billion). The net inflows of EUR 0.3 billion in portfolio investment in October were due to net inflows of EUR 19.8 billion in equity portfolio investment, largely driven by the net purchase of euro area equity securities by non-euro area residents (EUR 25.6 billion), and net outflows of EUR 19.5 billion in debt instruments, split into net outflows of EUR 11.6 billion in bonds and notes and of EUR 7.9 billion in money market instruments. The assets side of money market instruments recorded the highest net outflow thus far this year (EUR 10.1 billion), while non-residents invested a net amount of EUR 2.1 billion in the euro area's money market instruments – in line with developments observed prior to September 2001. Financial derivatives registered a net outflow of EUR 3.8 billion and the other investment account of EUR 13.8 billion in October 2001. Reserve assets increased by EUR 2.6 billion (excluding valuation effects), whereas errors and omissions were a positive EUR 14.2 billion.

The current account registered a small surplus of EUR 0.1 billion in October 2001, compared with a deficit of EUR 6.4 billion in October 2000. The move into surplus was mainly due to an increase in the goods surplus (from EUR 2.3 billion to EUR 9.6 billion), combined with a decrease in the deficit for current transfers (from EUR 6.0 billion to EUR 5.4 billion) and a shift in the services account from a deficit of EUR 0.6 billion to a small surplus of EUR 0.2 billion. These developments were partially offset by an increase in the income deficit from EUR 2.1 billion to EUR 4.3 billion. Seasonally adjusted data show that the goods surplus started to increase at the beginning of 2001, primarily owing to a decline in import values (corresponding to a fall in oil prices at the end of last year), while export values remained fairly flat over the same period, largely on account of weak foreign demand. Although exports of goods declined marginally in both September and October, imports fell by a larger amount as economic activity in the euro area remained subdued and oil prices declined further in October. Exports and imports of services have also been on a downward trend in recent months. Net inflows in direct investment were mostly accounted for by net inflows in the category of "other capital", mostly intercompany loans (EUR 6.9 billion). By contrast, equity direct investment registered modest net outflows of EUR 1.6 billion in October. Combined net outflows in direct and portfolio investment in the first ten months of 2001 (EUR 45.7 billion) were less than half the magnitude of those recorded during the same period in 2000 (EUR 104.8 billion). This development is explained primarily by the switch in equity portfolio investment from net outflows of EUR 227.1 billion in the period from January to October 2000 to net inflows of EUR 127.0 billion in the corresponding period in 2001. By contrast, both direct investment and investment in debt instruments shifted from net inflows in 2000 to net outflows in 2001.

Note on balance of payments statistics produced by the Eurosystem

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Annexes

The methodology used was developed in close co-operation with the European Commission (Eurostat), which publishes the Balance of Payments for the European Union (   ). The ECB compiles balance of payments statistics on the basis of the data on extra-euro area transactions reported by euro area Member States. The results for October 2001 will also be published in the January 2002 issue of the . A detailed methodological note is available on the ECB's website.

Annex 1 Annex 2

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- Monthly balance of payments of the euro area for 2000 and 2001 (Euro 12); - Euro area current account - seasonally adjusted data (Euro 12); Reproduction is permitted provided that the source is acknowledged