Households and non-financial corporations in the euro area: fourth quarter of 2018

Economy

The annual growth rate of loans to households was broadly unchanged at 2.9% in the fourth quarter of 2018 compared with the previous quarter. The financial investment of households increased at an unchanged rate of 1.9% and their gross non-financial investment increased at a higher rate of 8.3% (after 7.9%), while their net worth increased at a lower rate of 2.7% (after 3.8%).

The annual growth rate of the gross operating surplus of non-financial corporations (NFCs) was 1.3% in the fourth quarter of 2018, compared to a slight decline in the previous quarter (-0.3%). Gross entrepreneurial income increased at a higher rate of 2.8% (after 0.9%). The annual growth rate of NFCs’ gross non-financial investment increased to 12.4% (from 8.7%), while their financing increased at a lower rate of 1.4% (after 1.7%).

Households

The annual growth rate of household gross disposable income increased to 3.4% in the fourth quarter of 2018 (after 3.2% in the previous quarter). Gross operating surplus and mixed income of the self-employed increased at an unchanged rate of 2.3%, while the compensation of employees grew at a lower rate of 3.9% (after 4.3%). Household consumption expenditure grew at an unchanged rate of 2.8%.

The household gross saving rate in the fourth quarter of 2018 was 12.1%, compared with 11.8% in the same quarter of the previous year.

The annual growth rate of household gross non-financial investment (which refers mainly to housing) increased to 8.3% in the fourth quarter of 2018, from 7.9% in the previous quarter. Loans to households, the main component of household financing, increased at a broadly unchanged rate of 2.9%.

The annual growth rate of household financial investment stood at an unchanged rate of 1.9% in the fourth quarter of 2018. Among its components, currency and deposits grew at a higher rate of 4.1% (after 3.8%). Investment in life insurance and pension schemes grew at a lower rate of 2.0% (after 2.2%), and shares and other equity grew at a lower rate of 0.3% (after 0.6%). Investment in debt securities continued to decline, albeit at a lower rate of -2.7% (after -4.6%).

The annual growth rate of household net worth decreased to 2.7% in the fourth quarter of 2018, from 3.8% in the previous quarter, driven by higher valuation losses in financial assets. The growth in net worth was due to increases in the value of housing wealth (at a stable rate of 5.0%), which exceeded the increase in liabilities and the net valuation losses on financial assets. The household debt-to-income ratio continued to decrease, to 93.3% in the fourth quarter of 2018 from 94.0% in the fourth quarter of 2017, as disposable income grew faster than loans to households.

Non-financial corporations

Net value added by NFCs increased at a broadly unchanged rate of 3.0% in the fourth quarter of 2018. Gross operating surplus increased to 1.3% year-on-year, from -0.3% in the previous quarter, and net property income (defined in this context as property income receivable minus interest and rent payable) also increased. As a result gross entrepreneurial income (broadly equivalent to cash flow) increased at a higher rate of 2.8% (after 0.9%).[1]

The annual growth rate of NFC gross non-financial investment increased to 12.4% (from 8.7%) partly due to a strong increase in the net acquisition of non-produced assets.[2] Financing of NFCs increased at a lower rate of 1.4% (after 1.7%), as the annual growth rate of issuance of debt securities by NFCs decreased to 4.0% in the fourth quarter of 2018, from 5.8% in the previous quarter, and trade credit financing grew at a lower rate of 2.8% (after 4.7%). Loan financing grew at a broadly unchanged rate of 2.5%[3]. Equity financing also grew at a broadly unchanged rate of 0.8%. Non-financial corporations’ debt-to-GDP ratio decreased to 137.5% in the fourth quarter of 2018, from 138.3% in the fourth quarter of 2017.

NFC financial investment grew at an annual rate of 2.2%, compared with 2.9% in the previous quarter. Among its components, loans granted grew at a lower rate of 0.3% (after 2.4%), while investment in shares and other equity grew at an unchanged rate of 2.2%.

Source: europa.eu

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