The annual growth rate of gross fixed capital formation of non-financial corporations in the euro area amounted to 4.4% in the first quarter of 2008, compared with 8.1% in the previous quarter. The annual growth rate of financing of non-financial corporations decreased to 4.4% in the first quarter, from 4.9% previously, and the annual growth rate of their financialinvestment decreased to 5.3% in the first quarter, from 6.0% previously.
Euro area
In the first quarter of 2008, the annual growth rate of euro area net disposable income decreased to 3.4%, from 4.6% in the previous quarter. The growth of euro area disposable income continued to accrue mainly to households and the government. The annual growth rate of euro area net saving declined to -2.8%, following high growth rates in the previous quarters, due to decreased savings of households and non-financial corporations. The decrease in the annual growth of gross fixed capital formation (3.9%), compared to the previous quarter (5.7%), was due to lower investment growth by households, non-financial corporations and government. The growth rate of total gross capital formation also decreased in the first quarter (to 4.2%, from 7.0%).
Households
The annual growth rate of households’ gross disposable income decreased to 3.6% in the first quarter of 2008, from 3.9% in the previous quarter. This deceleration was on balance driven by a decline in net social benefits receivable. The annual growth rate of the compensation of employees remained unchanged at 4.6%.
The annual growth rate of households’ consumption expenditure (4.3%) was above that of their disposable income and led to a decrease in household saving. The four-quarter average households’ gross saving rate decreased to 13.8% (from 13.9% in the previous quarter) bringing it back down to the level seen in the first quarter of 2007. The growth rate of their non-financial investment decreased to 1.1%, from 2.9% previously.
The annual growth rate of financing of households via the incurrence of loans decreased to 6.0% in the first quarter from 6.8% in the previous quarter. This coincided with a decline in the annual growth of their financial investment to 3.1%, from 3.4%.
Turning to the components of households' financial investment, the annual growth rate of their investment in currency and deposits increased to 6.5%, from 5.8% in the previous quarter. The annual growth rate of their investment in debt securities increased to 5.5%, from 4.7% previously. Their investment in shares and other equity decreased by 1.9%, after a decrease of 0.6% previously. Specifically, the decline was driven by stronger net sales of quoted shares and mutual fund shares compared to the previous quarters. The annual growth rate of households’ investment in unquoted shares and other equity remained positive, but decreased to 0.5%. The annual growth rate of their additions to life insurance and pension fund reserves decreased to 5.0%, from 5.6% in the previous quarter.
Finally, households’ net financial wealth decreased by 4.7%, after having grown by 1.7% in the previous quarter. This decrease is mainly because of negative holding gains on their shares and other equity.
Non-financial corporations
The net entrepreneurial income of non-financial corporations3 grew at an annual rate of 2.2% in the first quarter of 2008, after 4.3% in the previous quarter. This deceleration was mainly due to the weaker growth of net value added by non-financial corporations which decreased to 3.8%, after 4.7% previously.
The annual growth rate of gross fixed capital formation of non-financial corporations decreased to 4.4% in the first quarter of 2008, after 8.1% in the previous quarter. The annual growth rate of total gross non-financial investment decreased as well, but remains higher (5.5%) as it includes inventories which increased in the first quarter of 2008. The increase in non-financial investment was to a lesser extent financed internally as savings (“retained earnings”) decreased. Thus the net borrowing of non-financial corporations increased.
In the first quarter of 2008, the annual growth rate of financing by non-financial corporations decreased to 4.4%, from 4.9% previously. The growth rate of their loan financing decreased to 11.0% from 11.4%, while the annual growth rate of their issuance of debt securities increased to 7.4%, from 7.0%. The annual growth rate of their equity financing, via the issuance of shares and other equity, decreased to 1.6%, from 1.9%.
As regards the financial investment of non-financial corporations, the annual growth rate of their investment in currency and deposits decreased to 6.8%, from 10.8% previously. The growth rate of their investment in shares and other equity increased to 4.5%, from 3.7%
previously.
The financial balance sheet of non-financial corporations grew considerably slower than their financing and financial investment as the market value of both shares and other equity held as well as the outstanding amount of shares and other equity issued by non-financial
corporations declined.
Insurance corporations and pension funds
The annual growth rate of insurance technical reserves, the major financing instrument of insurance corporations and pension funds, decreased to 5.4% in the first quarter of 2008, from 6.1% previously. The annual growth rate of the issuance of quoted shares decreased to 0.2%, from 0.5% previously. The annual growth rate of their financial investment remained broadly unchanged at 4.9%. The growth rate of their investment in debt securities decreased to 6.1%, after 8.2% previously, while that of their investment in shares and other equity increased to 3.4%, after 2.9% previously.
The financial balance sheet of insurance corporations and pension funds grew considerably less than their financing and financial investment as the market value of both shares and other equity held as well as the outstanding amount of the shares and other equity issued by insurance corporations and pension funds declined. In particular the market value of quoted shares issued by this sector declined by 25% between the first quarter 2007 and the first quarter of 2008.
