The annual growth rate of gross fixed capital formation of non-financial corporations in the euro area increased to -13.7% in the third quarter of 2009, up from -17.1% in the previous quarter. The annual rate of growth of net entrepreneurial income of non-financial corporations increased to -7.8% in the third quarter, compared with -15.9% in the previous quarter. The annual growth rate of financing of non-financial corporations was 2.1% in the third quarter, compared with 2.8% previously, and the annual growth rate of their financial investment was 2.4% in the third quarter of 2009, compared with 2.9% previously.
Total euro area economy
The annual growth rate of euro area net disposable income has increased to -3.2% in the third quarter of 2009 as compared with -4.8% in the previous quarter. The negative growth in net disposable income is due to a drop in net disposable income of general government and financial corporations, not compensated for by an increase in non-financial corporations’ net disposable income. The decrease in the annual growth of gross fixed capital formation (-12.0%), compared to the previous quarter (-13.5%), was almost entirely due to negative investment growth by non-financial corporations and households. The growth rate of gross capital formation increased to -15.7% in the third quarter, up from -18.7% in the previous quarter. This negative investment growth coincided with an annual growth rate of euro area net saving of -43.0%, compared to -63.5% in the previous quarter, as decreases in net saving of the government continued to exceed increases in households’ saving.
Households
The households’ adjusted gross disposable income increased by 0.1% in the third quarter of 2009, compared to an increase of 0.6% in the previous quarter. This was mainly due to an increase of household’s receipts of net social benefits and contributions that offset the decline in compensation of employees, property income received and operating and mixed income earned.
The annual growth rate of households’ consumption expenditure (-1.9%) was below the annual growth rate of their disposable income, which led to a continued growth of households’ saving, of 16.0% (after 11.8% previously). The annual rate of change of gross fixed capital formation of households increased to -14.0% in the third quarter, up from -15.1% in the second quarter. The four-quarter moving average households’ gross saving rate increased to 15.5% (compared to 13.8% in the third quarter of 2008). The annual growth rate of household sector's net lending, increased to 3.7% in the third quarter of 2009, from 3.3% in the previous quarter.
The annual growth rate of financing of households via the incurrence of loans stood at 1.7% in the third quarter of 2009, broadly unchanged from 1.8% in the second quarter. This coincided with an increase in the annual growth rate of their gross non-financial investment to -15.0%, from -15.8% previously whilst their financial investment increased by 3.0% from 2.7% in the previous quarter.
Turning to the components of households' financial investment, the annual growth rate of their investment in currency and deposits decreased to 5.3% in the third quarter of 2009, from 5.9% in the previous quarter. The level of their investment in debt securities increased to 0.2% in the third quarter, up from 0.0% in the previous quarter. The growth rate of household’s investment in shares and other equity increased to 0.1% in the third quarter, up from -1.3% previously. The annual growth rate of households’ additions to life insurance and pension fund reserves increased to 3.9% in the third quarter, compared to 3.6% previously.
Developments in households’ financial balance sheet were dominated by valuation changes of their financial assets. Growth of households’ net financial wealth turned positive in the third quarter of 2009 (4.5% annually), after negative growth in the previous quarter (-2.8% annually). The growth rate of the market value of households’ holdings of shares and other equity was -0.3% in the third quarter of 2009, compared with -14.8% previously.
Non-financial corporations
The annual growth rate of net entrepreneurial income of non-financial corporations6 stood at -7.8% in the third quarter of 2009, up from -15.9% in the previous quarter. This improvement largely reflects further cost savings by non-financial corporations as regards interest and rent payable. The decrease in Gross fixed capital formation of non-financial corporations became less pronounced. (Growth was -13.7% annually in the third quarter of 2009, after -17.1% in the previous quarter). The annual growth rate of total gross non-financial investment was -20.1%, compared with -26.6% in the previous quarter, reflecting also decreases in inventories. Non-financial corporations’ net non-financial investment decreased in the third quarter and was broadly matched by a fall in net borrowing.
In the third quarter of 2009, the annual growth rate of financing by non-financial corporations decreased to 2.1%, from 2.8% previously. The growth rate of their loan financing amounted to 1.6%, compared with 4.1% previously. The annual growth rate of their issuance of debt securities increased to 11.9%, from 11.2%. The annual growth rate of their equity financing, via the issuance of quoted and unquoted shares and other equity, increased to 2.6% compared with 2.3%, from the previous quarter.
Financial investment growth of non-financial corporations moderated to 2.4% after 2.9% in the previous quarter, while the annual growth rate of their investment in debt securities decreased to -28.5% (compared to -22.1% previously) and the annual growth rate of investment in currency and deposits increased to 3.3%, from 2.3% previously. The growth rate of loans granted decreased to 6.1% in the third quarter of 2009, after 8.6% previously. The growth rate of their investment in shares and other equity decreased slightly to 4.9%, after 5.0% in the second quarter.
The decline of the outstanding amounts of assets and liabilities in the financial balance sheet of non-financial corporations slowed in the third quarter of 2009, due to a moderate increase in the market value of shares and other equity (held as well as issued). The outstanding amounts of both financial assets and financial liabilities increased in the third quarter (by 1.2% and 1.7% respectively), whereas for the previous quarter the annual growth rates are negative (-4.6% and -5.3% respectively).
Insurance corporations and pension funds
The annual growth rate of insurance technical reserves, the major financing instrument of insurance corporations and pension funds, increased slightly to 3.6% in the third quarter of 2009 compared to 3.4% in the second quarter. The annual growth rate of the issuance of shares and other equity increased by 1.0% after an increase of 0.5% previously. The annual growth rate of their financial investment increased to 3.6% from 3.1% in the previous quarter. The growth rate of their investment in debt securities increased to 2.8%, from 2.5% previously, while that of their investment in shares and other equity increased to 5.2%, from 3.6% previously.
An increase in outstanding amounts of assets and liabilities in the financial balance sheet of insurance corporations and pension funds occurred as the market value of shares and other equity held and issued increased by 2.1 %. This followed a decrease in the preceding period (-9.2 %).
