Euro area economic and financial developments by institutional sector: Fourth Quarter 2009

(PresseBox) (Frankfurt am Main, ) In the fourth quarter of 2009, the annual growth rate [1] of net disposable income in the euro area equalled -0.8%, compared with -3.4% in the third quarter of 2009 (see Annex Table 1). Final consumption in the euro area increased in the fourth quarter (0.8% annually, after a decrease, -0.3%, in the previous quarter). The annual growth rate of gross fixed capital formation was -8.6% in the fourth quarter of 2009, against -12.1% in the previous quarter. In the fourth quarter of 2009, the annual growth rate of net saving was -24.9%, up from -47.0% in the third quarter.

The annual growth rate of households' gross disposable income [2] increased to 0.9% in the fourth quarter of 2009, up from -0.3% in the previous quarter (see Table 2). The annual growth of households' consumption expenditure was -0.1% in the fourth quarter compared with -2.0% in the previous quarter. Gross saving of households increased by 6.5% in the fourth quarter (down from 12.9% previously). The households' gross saving rate [3] stood at 15.4%, compared with 13.9% in the fourth quarter of 2008. The annual growth rate of financing of households remained broadly unchanged at 2.6% in the fourth quarter of 2009 compared with 2.5% in the previous quarter, and the annual growth rate of their financial investment was unchanged at 3.2% in the fourth quarter of 2009, compared with the previous quarter. Households' net financial wealth increased by 8.5% in the fourth quarter after 4.1% in the previous quarter. (see Chart 6).

The annual growth rate of gross fixed capital formation of nonfinancial corporations in the euro area increased to -9.9% in the fourth quarter of 2009, up from -14.4% in the previous quarter (see Table 3).

The annual rate of growth of net entrepreneurial income of nonfinancial corporations increased to - 1.0% in the fourth quarter, compared with -9.2% in the previous quarter. The annual growth rate of financing of nonfinancial corporations was 1.2% in the fourth quarter, compared with 2.1% previously, and the annual growth rate of their financial investment was 1.9% in the fourth quarter of 2009, compared with 2.4% in the previous quarter.

Total euro area economy

The annual growth rate of euro area net disposable income has increased to -0.8% in the fourth quarter of 2009 as compared with -3.4% in the previous quarter. The negative growth in net disposable income is due to a drop in net disposable income of general government, not compensated for by increases in nonfinancial corporations' and households' net disposable income (see Chart 1). Euro area gross fixed capital formation decreased by -8.6% annually, compared with -12.1% in the preceding quarter. This negative growth was due to nonfinancial corporations and households (see Chart 2). The growth rate of gross capital formation [4] was -13.9% in the fourth quarter, up from -16.2% in the previous quarter. This negative investment growth coincided with a negative annual growth of euro area net saving of -24.9%, compared to -47.0% in the previous quarter, as decreases in net saving of the government exceeded increases in corporations' and households' saving (see Chart 3).

Households

The annual growth rate of households' gross disposable income [5] increased to 0.9% in the fourth quarter of 2009, up from -0.3% in the previous quarter. This was mainly due to an increase in the annual growth rates of net property income received and operating surplus and mixed income. (see Chart 4).

The annual growth rate of households' consumption expenditure (-0.1%) was below the annual growth rate of their disposable income, which led to a continued but slower growth of households' gross saving, of 6.5% (after 12.9% previously). The annual rate of change of gross fixed capital formation of households increased to -10.5% in the fourth quarter, up from -13.1% in the third quarter. The fourquarter moving average households' gross saving rate increased to 15.4% (compared to 13.9% in the fourth quarter of 2008). The annual growth rate of household sector's net lending [6], was 3.6% in the fourth quarter of 2009, the same as the previous quarter.

The annual growth rate of financing of households stood at 2.6% in the fourth quarter of 2009, up from 2.5% in the third quarter. This coincided with an increase in the annual growth rate of their gross nonfinancial investment to -11.6%, from -14.3% previously (see Chart 5) whilst their financial investment was unchanged at 3.2% from the previous quarter.

Turning to the components of households' financial investment, the annual growth rate of their investment in currency and deposits decreased to 3.4% in the fourth quarter of 2009, from 5.2% in the previous quarter. The growth of their investment in debt securities was -2.1% in the fourth quarter, compared with -0.9% in the previous quarter. The growth rate of household's investment in shares and other equity increased to 1.4% in the fourth quarter, up from 0.1% previously. The annual growth rate of households' additions to life insurance and pension fund reserves increased to 5.3% in the fourth quarter, compared to 4.0% previously.

Developments in households' financial balance sheet were dominated by valuation changes of their financial assets. Growth of households' net financial wealth was 8.5% in the fourth quarter of 2009, after 4.1% in the previous quarter (see Chart 6). The growth rate of the market value of households' holdings of shares and other equity was 10.3% in the fourth quarter of 2009, compared with -1.3% previously (see Table 2).

Nonfinancial corporations

The annual growth rate of net entrepreneurial income of nonfinancial corporations [7] stood at -1.0% in the fourth quarter of 2009, up from -9.2% in the previous quarter (see Table 3). This largely reflects a higher growth rate of net value added of -3.0% (up from -5.9% in the previous quarter). (see Chart 7 and Table 3). The decrease in gross fixed capital formation of nonfinancial corporations became less pronounced (growth was -9.9% annually in the fourth quarter of 2009, after -14.4% in the previous quarter) (see Chart 8). The annual growth rate of total gross nonfinancial investment, which also includes inventories, was -20.0%, compared with -21.6% in the previous quarter.

In the fourth quarter of 2009, the annual growth rate of financing by nonfinancial corporations decreased to 1.2%, from 2.1% previously. The growth rate of their loan financing amounted to 0.0%, compared with 1.7% in the previous quarter. The annual growth rate of their issuance of debt securities decreased to 10.4%, from 12.9%. The annual growth rate of their equity financing, via the issuance of quoted and unquoted shares and other equity, decreased to 1.9%, compared with 2.5% in the previous quarter.

Financial investment growth of nonfinancial corporations moderated to 1.9% after 2.4% in the previous quarter. The annual growth rate of their investment in debt securities decreased to -7.0% (compared with -1.6% previously), while the annual growth rate of investment in currency and deposits increased to 5.1%, from 2.9% previously. The growth rate of loans granted decreased to 2.7% in the fourth quarter of 2009, after 4.5% previously. The growth rate of their investment in shares and other equity decreased to 2.8%, after 4.6% in the third quarter.

The outstanding amounts of both financial assets and financial liabilities increased in the fourth quarter (by 7.9% and 6.8% respectively), whereas for the previous quarter the annual growth rates were 1.1% and 1.4% respectively. (see Table 3).

Insurance corporations and pension funds

The annual growth rate of insurance technical reserves, the major financing instrument of insurance corporations and pension funds, increased to 5.1% in the fourth quarter of 2009 compared to 3.4% in the third quarter (see Table 6). The annual growth rate of the issuance of shares and other equity increased by 0.9% after an increase of 0.8% previously. The annual growth rate of their financial investment increased to 3.6% from 2.7% in the previous quarter. The growth rate of their investment in debt securities increased to 4.2%, from 2.1% previously, while that of their investment in shares and other equity increased to 6.1%, from 3.8% in the previous quarter. An increase in outstanding amounts of assets in the financial balance sheet of insurance corporations and pension funds occurred as the market value of shares and other equity held increased by 15.2 % following an increase of 1.1% in the preceding period.

[1] The euro area accounts are expressed in current prices and they are not seasonally adjusted. The (nominal) growth rates are presented as yearonyear changes (see the notes).
[2] Adjusted for the change in net equity of households in pension fund reserves (receivables - payables)..
[3] The households' saving rate is based on fourquarter cumulated sums of both their saving and their gross disposable income.
[4] This also includes changes in inventories and net acquisitions of nonproduced, non financial assets.
[5] Adjusted for the change in net equity of households in pension fund reserves (receivables - payables).
[6] For the sectors households and nonfinancial corporations, the figures for net lending / net borrowing derived from the nonfinancial accounts differ somewhat from those derived from the financial accounts, due to remaining statistical discrepancies.
[7] Net entrepreneurial income is broadly equivalent to current profits in business accounting (after the receipt and payment of interest and including the profits of foreign subsidiaries, but before the payment of income taxes and dividends).

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