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PRESS RELEASE

Euro area balance of payments (July 2006)

21 September 2006

In July 2006 the seasonally adjusted current account of the euro area recorded a deficit of EUR 4.8 billion, as a result of deficits in goods and in current transfers. In the financial account, combined direct and portfolio investment recorded net outflows of EUR 7 billion, reflecting net outflows in direct investment.

Current account

The seasonally adjusted current account of the euro area recorded a deficit of EUR 4.8 billion in July 2006 (corresponding to a surplus of EUR 1.4 billion in non-seasonally adjusted terms). This reflected deficits in goods (EUR 2.1 billion) and in current transfers (EUR 6.2 billion) that were partly offset by a surplus in services (EUR 3.0 billion). The income account was close to balance.

The 12-month cumulated current account up to July 2006 recorded a deficit of EUR 45.7 billion, i.e. around 0.6% of GDP, compared with a surplus of EUR 21.0 billion a year earlier. This shift mainly resulted from a decline in the goods surplus by EUR 56.2 billion, reflecting an increase in the value of imports that surpassed the increase in the value of exports. To a lesser extent, the deficits in income and current transfers also increased over the same period, but these were partly offset by an increase in the surplus for services.

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Financial account

In the financial account, combined direct and portfolio investment recorded net outflows of EUR 7 billion in July 2006, reflecting net outflows in direct investment (EUR 9 billion) and net inflows in portfolio investment (EUR 2 billion).

Within direct investment, net outflows of EUR 8 billion in equity capital and reinvested earnings added to net outflows of EUR 1 billion in other capital (mostly inter-company loans).

Within portfolio investment, net inflows in equity (EUR 40 billion) were almost offset by net outflows in debt instruments (EUR 37 billion). The net inflows in equity were the result of net purchases of euro area equity securities by non-residents. The net outflows in debt instruments were due to net purchases by euro area residents of non-euro area money market instruments and bonds and notes.

Other investment recorded net inflows of EUR 19 billion, as a result of net inflows in both MFIs excluding the Eurosystem (EUR 22 billion) and general government (EUR 9 billion) that were partly offset by net outflows in other sectors, i.e. non-financial corporations and households (EUR 12 billion).

Reserve assets increased by EUR 1 billion (excluding valuation effects). The stock of the Eurosystem’s reserve assets stood at EUR 330 billion at the end of July 2006.

In the 12-month period to July 2006, combined direct and portfolio investment showed cumulated net inflows of EUR 41 billion, compared with net inflows of EUR 124 billion a year earlier. This development resulted from decreasing net inflows in portfolio investment (from EUR 259 billion to EUR 107 billion) that were only partly counterbalanced by a decrease in net outflows in direct investment (from EUR 135 billion to EUR 66 billion). The decrease in net inflows in portfolio investment was mainly due to a shift from net inflows to net outflows in debt securities, while the net outflows in direct investment decreased on account of a reduction in investment abroad by euro area residents

Data revisions

In addition to the balance of payments for July 2006, this press release incorporates revisions for June 2006. These revisions have not significantly altered the previously published statistics.

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

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 headings “Data services”/“Latest monetary, financial markets and balance of payments statistics”. The results up to July 2006 will also be published in the October 2006 issue of the ECB’s Monthly Bulletin. . A detailed methodological note is available on the ECB’s website. The next press release on the euro area monthly balance of payments will be published on 24 October 2006.

Annexes

Table 1: Current account of the euro area – seasonally adjusted data.

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

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