The eurozone current account falls into the red in September

The euro zone current account fell into the red during the month of September.

According to European Central BankThe single currency bloc recorded a current account deficit of 8 billion euros for this month, compared to 27 billion euros the previous month.

Over 12 months, the euro zone’s current account rose to €50 billion, or 0.4% of the bloc’s gross domestic product, from a surplus of €336 billion in the year to September 2021 .

The main brake came from international trade in goods, which fell from a surplus of 362 billion euros to a deficit of 41 billion euros, while the surplus in the balance of primary incomes fell from 65 billion euros. euros to 19 billion euros.

In the other direction, the trade surplus in services widened from 75 to 134 billion euros and the deficit in the balance of secondary income from 166 to 162 billion euros.

On the other side of the balance of payments, the financial account of the euro zone has improved.

Direct investment by euro area residents in non-euro area assets increased from €86 billion to €206 billion over the last 12-month period.

Net divestment by non-residents rose from €38 billion to €60 billion.

Portfolio investment in shares, defined as investments of less than 10% in a business, by euro area residents fell from €518 billion to €146 billion, and net sales of Non-euro area debt securities reached €20 billion, compared to net purchases of €475 billion.

For their part, net purchases of shares by non-residents fell from 511 billion euros to 103 billion euros and their net sales of euro zone debt fell from 343 billion euros to 124 billion euros. euros.

Turning to 12-month changes in balance of payments components, the ECB said net foreign assets of euro area MFIs fell by €148 billion, due to net outflows of direct investment, other investments and other flows.

Current account and capital account surpluses, on the other hand, served as a partial offset, as well as net inflows of non-MFIs in portfolio investment in equities and, to a lesser extent, in portfolio investment in the form of debt .

However, for the month of September 2022 alone, the stock of reserve assets of the Eurosystem fell from €1,130.6 billion to €1,135.8 billion.

Commenting on the latest data, Melanie Debono, Senior Economist Europe at Macroeconomics Hall of Fameattributed the fall in the current account balance to what is known as the “J-curve”, whereby a weaker currency initially leads to a wider deficit, with import prices rising faster than rising import volumes depreciation-induced export.