Eurozone current account surplus drops sharply in July

The Eurozone´s current account surplus decreased in July, amid sharp drops in the currency bloc´s trade balance.

The total current account surplus shrank from €15.2bn in June to €8.4bn in July, according to Eurostat.

July´s surplus on the goods account fell from €12.3bn to €7.2bn, while that on the services balace dropped from €12.5bn to €10.9bn.

Both the primary and secondary income accounts remained in deficit, with the shortfall on the former slipping from -€3.2bn to -€3.0bn and that on the latter decreased from -€6.6bn to -€6.4bn.

Over the past 12 months, the current account recorded a surplus of €145.4bn, in comparison to €140.1bn for the prior 12 months.

During that timeframe, the surplus on the goods account increased to €129.7bn compared with €84.3bn over the prior 12 months, while the surplus on the services account declined to €139.7bn from €145.8bn.

The 12-month surplus increased from 3.0% of gross domestic product to 3.2%.

Looking at the financial and capital accounts, Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, pointed out how the euro area´s so-called international investment position incerased by €72.0bn, driven by purchases of foreign assets of €58.0bn.

As regards short-term portfolio flows, these continued to be driven by relative interest rates, with investors from the bloc picking up €50.0bn of foreign long-term debt as foreigners sold €32.0bn.

Foreign equity inflows on the other hand had picked up.

"Overall, a falling trade surplus with the U.K. likely will dent the EZ CA surplus soon, but we think it will remain at about 2.5%-to-3.0% in the next six-to-12 months. Finally, with respect to capital flows, we see little change in the underlying trend of substantial outflows," Vistesen said in a research note sent to clients.