Euro area balance of payments (Monthly developments in May 2004)

In May 2004 the seasonally adjusted current account of the euro area recorded a surplus of EUR 5.8 billion, largely resulting from a surplus in the goods balance. In the financial account, net purchases of foreign bonds and notes by euro area residents and net sales of euro area money market instruments by non-residents mainly accounted for the net outflows in combined direct and portfolio investment.

This press release is the first to include a more detailed breakdown of the figures for the “other investment” assets of the financial account.

Current account

The seasonally adjusted current account of the euro area showed a surplus of EUR 5.8 billion in May 2004 (corresponding to a surplus of EUR 3.2 billion in non-seasonally adjusted terms). This reflected surpluses in goods (EUR 12.4 billion) and services (EUR 2.1 billion) that were partly offset by deficits in income (EUR 3.5 billion) and current transfers (EUR 5.2 billion).

Compared with the revised data for April 2004, the seasonally adjusted current account surplus decreased by EUR 3.0 billion in May. While the surplus in goods remained virtually the same and the surplus in services increased by EUR 1.5 billion over this period, this development was more than counterbalanced by a rise in the deficits in income and current transfers (by EUR 1.7 billion and EUR 2.6 billion, respectively).

 Euro area balance of payments: 12-month cumulated flows (EUR billions) —— current account balance ------ net direct investment —— net portfolio investment

The 12-month cumulated surplus of the euro area current account up to May 2004 amounted to EUR 48.1 billion, i.e. about 0.7% of GDP, compared with a surplus of EUR 44.0 billion a year earlier. The EUR 4.1 billion increase in the current account surplus resulted from a higher goods surplus and a lower income deficit, partially counterbalanced by a lower services surplus and a higher deficit for current transfers.

Financial account

In the financial account, combined direct and portfolio investment recorded net outflows of EUR 26.6 billion, essentially reflecting net outflows in portfolio investment (EUR 25.8 billion), as net direct investment was almost balanced.

The developments in direct investment resulted from net outflows of EUR 3.9 billion in equity capital being almost completely offset by net inflows of EUR 3.2 billion in other capital (mostly inter-company loans).

The net outflows in portfolio investment were accounted for by net outflows mainly in debt instruments (EUR 20.8 billion) and, to a lesser extent, in equity securities (EUR 5.0 billion). The developments in debt instruments principally stemmed from net purchases of foreign bonds and notes by euro area residents (EUR 16.4 billion) and net sales of euro area money market instruments by non-residents (EUR 18.3 billion).

Net inflows in other investment (EUR 18.7 billion) mainly resulted from net inflows by MFIs excluding the Eurosystem (EUR 27.1 billion), which were partially counterbalanced by net outflows of EUR 9.1 billion by the money-holding sectors (non-MFI corporations and households).

Reserve assets decreased by EUR 0.7 billion (excluding valuation effects). The stock of the Eurosystem’s reserve assets stood at EUR 298.9 billion at the end of May 2004 (http://www.ecb.europa.eu/stats/external/reserves/templates/html/200405eur.en.html).

In the 12-month period up to May 2004, combined direct and portfolio investment recorded cumulated net outflows of EUR 94.9 billion, compared with net inflows of EUR 115.9 billion a year earlier. This reversal mainly arose from a switch in net portfolio investment from net inflows (EUR 129.7 billion) to net outflows (EUR 47.2 billion) and, to a smaller extent, from an increase in net direct investment outflows (from EUR 13.8 billion to EUR 47.7 billion). The shift in portfolio investment resulted especially from the net purchases of euro area money market instruments by non-residents turning into net sales. For the rest, the net purchases of foreign securities by euro area residents increased, in particular equity securities, while the net purchases of euro area bonds and notes by non-residents declined.

Data revisions

In addition to the monthly balance of payments data for May 2004, this press release incorporates revisions for April 2004, as well as revised and more detailed statistics for the last quarter of 2003 and the first quarter of 2004. Whereas the revisions for April 2004 were not significant, the revisions for the last quarter of 2003 and for the first quarter of 2004 resulted in a lower current account surplus (non-seasonally adjusted), mainly as imports of services were revised upwards more than exports. In the same periods, revisions in the financial account mostly concerned the financial derivatives item, resulting in a total increase of recorded net inflows of EUR 5.5 billion.

Introduction of a more detailed breakdown of “other investment” figures

This euro area balance of payments press release is the first to separate “loans” from “currency and deposits” for the assets of euro area non-MFIs. This split is based on the sector of the non-resident counterpart, i.e. euro area assets vis-à-vis non-resident banks are classified as deposits, whereas assets vis-à-vis other non-resident sectors are classified as loans.

The new series comprise data from January 2004 onwards. The quarterly data reported in Table 3 contain the full instrument breakdown of the “other investment” category into “trade credits”, “loans” and “currency and deposits”. Furthermore, the monthly data in Table 2 include “currency and deposits” as a memo item within the “other investment” category for the general government sector and the ‘other’ sectors.

Additional information on the euro area balance of payments and international investment position

The European Central Bank and the European Commission (Eurostat) each issue a same-day press release on the quarterly balance of payments for the euro area and the EU15 (Eurostat’s Euro-indicators News Releases). In line with the agreed allocation of responsibilities, the European Central Bank compiles and disseminates the monthly and quarterly balance of payments statistics for the euro area, whereas the European Commission (Eurostat) focuses on the quarterly and annual aggregates of the EU15. The data comply with international standards, in particular those set out in the IMF Balance of Payments Manual (5th edition). The aggregates for the euro area and the EU15 are compiled consistently on the basis of Member States’ transactions with residents of countries outside the euro area and the European Union, respectively.

A complete set of updated euro area balance of payments and international investment position statistics is available on the ECB’s website in the “Statistics” section under the heading “Data services” / “Latest monetary, financial markets and balance of payments statistics”. The results up to May 2004 will also be published in the August 2004 issue of the ECB’s Monthly Bulletin. A detailed methodological note is available on the ECB’s website. The next press release on euro area balance of payments will be published on 20 August 2004.

Annexes

Table 1: Euro area current account – seasonally adjusted data.

Table 2: Monthly balance of payments of the euro area – non-seasonally adjusted data.

Table 3: Quarterly balance of payments of the euro area