The annual growth rate of gross fixed capital formation of non-financial corporations in the euro area amounted to 9.9% in the first quarter of 2007, compared with 10.0% in the previous quarter. The annual growth rate of financing of non-financial corporations decreased slightly to 5.0% in the first quarter, from 5.1% in the previous quarter and the annual growth rate of their financial investment increased from 5.6% to 5.8%.
In the first quarter of 2007, the annual growth rate of euro area net disposable income was almost unchanged to the previous quarter and equalled 5.7%. The growth of euro area disposable income continued to accrue mainly to households and government and also to the financial corporations sector. Net euro area saving continued to grow at a high annual rate (29.3%), but somewhat down from the previous quarter (33.2%). While household savings contributed strongly, the contributions from corporations and government moderated. The continued increase in the annual growth of gross fixed capital formation (10.5%) compared to the previous quarter (10.3%) was largely driven by accelerating investment of non-financial corporations and households. The growth rate of total capital formation in the first quarter was lower (8.6%), due to lower additions to inventories. These developments were reflected in a growing current account surplus of the euro area with the rest of the world, or negative foreign saving.
The annual growth rate of households’ gross disposable income increased to 4.5% in the first quarter of 2007, from 3.3% in the previous quarter (see Table 2). This accelerationwas mainly driven by an increase in the annual growth rate of compensation of employees, which increased to 4.5% from 3.2% in the previous quarter, and a continued strong growth of the gross operating surplus and mixed income mainly from unincorporated enterprises classified in the household sector (6.4% after 7.4%). The effect from households’tax payments on disposable income was less dampening than in the previous quarter.
The annual growth rate of households’ consumption expenditure (3.8%) was lower than that of their disposable income. Hence, the household gross saving rate increased, compared to the previous quarter, to 14.1%. The net lending of households increased only slightly as the increase in households’ saving was almost completely matched by the increase of households’ non-financial investment. In particular, the growth rate of their gross fixed capital formation increased to 11.1%, from 10.5% previously. The broadly unchanged net lending of households is also reflected in the parallel movements of financing and financial investment, as for both the growth rates moderated.
The annual growth rate of financing of households via the incurrence of loans in the euro area decreased to 8.3% in the first quarter, from 8.7% in the previous quarter. This coincided with a slightly lower growth of their financial investment (3.7% per year, as compared to 4.0% previously). Turning to the components of households' financial investments, the annual growth rate of their holdings of currency and deposits equalled 5.5% in the first quarter, almost unchanged compared with the previous quarter. The annual growth rate of their investment in debt securities decreased to 4.8%, from 6.4% previously. The growth rate of their investment in shares and other equity recovered somewhat (-0.0%, after -0.5%). Households remained net sellers of quoted shares and mutual fund shares, while investment in unquoted shares and other equity was positive. The annual growth rate of their additions to life insurance and pension fund reserves decreased to 5.8%, from 6.4% previously.
All in all, the annual growth rate of households’ net financial wealth decreased to 5.3%, from 6.5% in the previous quarter but households continued to benefit from positive holding gains on financial assets, in particular quoted shares and investment fund shares.
The net entrepreneurial income of non-financial corporations4 grew at an annual rate of 5.5% in the first quarter of 2007 after an exceptionally high rate of growth in the previous quarter (15.5%). This decrease of the growth rate can be partly explained by a moderation in the growth in their net value added to 5.3%, from 6.3% in the previous quarter.
The annual growth rate of gross fixed capital formation of non-financial corporationsremained broadly unchanged at 9.9% in the first quarter of 2007 (after 10.0% in the previous quarter), whereas the annual growth rate of total non-financial investment increased to 6.4% from 5.8% as changes in inventories had a less dampening effect. Since their non-financial investment grew stronger than their saving (“retained earnings”), the net lending of non-financial corporations became more negative. This is also reflected in the net lending derived from the financial accounts as the borrowing from other sectors and the rest-of-the-world exceeded financial investment by a larger amount.
In the first quarter of 2007, the annual growth rate of financing by non-financial corporations remained broadly unchanged at 5.0%. The growth rate of their loan financing was also broadly unchanged at 10.6% while the annual growth rate of their issuance of debt securities increased to 6.3% from 6.0%. The annual growth rate of their equity financing via shares issues and other equity remained unchanged at 2.0%.
As regards the financial investment of non-financial corporations, the annual growth rate of investment in currency and deposits increased to 13.2% from 12.4% previously. The growth rate of investment in shares and other equity increased to 3.5% from 3.3%. The annual growth rate of insurance technical reserves, the major financing instrument of insurance corporations and pension funds, decreased to 6.3% in the first quarter of 2007, from 6.7% in the previous quarter. The annual growth rate of the issuance of quoted shares by this sector increased to 1.6% from 1.2% previously. The annual growth rate of their financial investment in debt securities increased to 7.1% from 6.3%, and that in shares and other equity decreased to 4.9% from 6.6%.
