The annual growth rate of gross fixed capital formation of non-financial corporations in the euro area decreased to -12.8% in the first quarter of 2009, from -4.9% in the previous quarter. The annual rate of growth of net entrepreneurial income of non-financial corporations declined to -23.0% in the first quarter, compared with a growth rate of -10.9% in the previous quarter. The annual growth rate of financing of non-financial corporations was 3.1% in the first quarter, compared with 3.5% previously, and the annual growth rate of their financial investment was 2.8% in the first quarter of 2009, compared with 3.6% previously.
Total euro area economy
The annual growth rate of euro area net disposable income has declined to -5.2% in the first quarter of 2009 as compared with -0.8% in the previous quarter. This negative growth in net disposable income is mainly due to a drop in net disposable income of non-financial corporations and general government that was not compensated by the positive growth in the household sector.
The decrease in the annual growth of gross fixed capital formation (-10.6%), compared to the previous quarter (-3.3%), was mainly due to negative investment growth by non-financial corporations and households. The growth rate of gross capital formation decreased to -12.2% in the first quarter, compared to -1.0% in the previous quarter. This negative investment growth coincided with a decline in the annual growth rate of euro area net saving to -68.2%, down from -28.2% in the previous quarter as decreases in net saving of the government and the non-financial and financial corporate sectors exceeded increases in households’ saving.
Households
The households’ adjusted gross disposable income increased by 1.2% in the first quarter of 2009, compared to 2.8% in the previous quarter. This increase was mainly driven by a growth in household’s receipts of net social benefits less contributions (increased 1.0% in the first quarter of 2009, compared with 0.1% in the previous quarter.
The annual growth rate of households’ consumption expenditure (-1.0%) was below the annual growth rate of their disposable income, which led to a continued high growth of households’ saving, by 16.3% (after 12.5% previously). The annual rate of change of gross fixed capital formation of households further declined to -11.6% in the fourth quarter, down from -6.9% in the previous quarter. The four-quarter moving average households’ gross saving rate increased to 14.8% (from 13.8% in the corresponding quarter of 2008). The annual growth rate of household sector's net lending,4 increased to 2.7% in the first quarter of 2009, from 2.2% in the previous quarter.
The annual growth rate of financing of households via the incurrence of loans decreased to 2.6% in the first quarter of 2009, from 3.7% in the third quarter. This coincided with a decline in the annual growth of their gross non-financial investment to -11.4%, from -5.7% previously whilst their financial investment was broadly unchanged at 2.4%.
Turning to the components of households' financial investment, the annual growth rate of their investment in currency and deposits decreased to 6.6% in the first quarter of 2009, from 7.1% in the previous quarter. The annual growth rate of their investment in debt securities decreased to 3.1%, from 4.4% previously. The growth rate of household’s investment in shares and other equity increased to -2.5% in the first quarter, from -3.2% previously. This further decline was driven by net sales of mutual fund shares and quoted shares. The annual growth rate of their additions to life insurance and pension fund reserves decreased to 3.3%, from 3.6% in the previous quarter.
Developments in the households’ financial balance sheet were dominated by valuation changes of their financial assets. Households’ net financial wealth decreased further by an annual growth rate of -9.9%, after -12.9% in the previous quarter. The decline is mainly due to valuation losses. The market value of households’ holdings of shares and other equity decreased by 25.9% in the first quarter of 2009 compared with a decrease of 29.4 previously.
Non-financial corporations
The annual growth rate of net entrepreneurial income of non-financial corporations5 declined to -23.0% in the first quarter of 2009, from -10.9% in the previous quarter. This corresponds to a decline of net value added generated by non-financial corporations of -6.8%, compared with -0.6% in the previous quarter and a decline in property income receivable of -17.0% compared with an increase of 3.0% in the previous quarter, whereas compensation of employees and interest and rent payable by this sector decreased only slightly. Gross fixed capital formation of non-financial corporations decreased by 12.8% in the first quarter of 2009, after a decrease of 4.9% in the previous quarter. The annual growth rate of total gross non-financial investment declined to -15.6%, compared with -1.2% in the previous quarter.
Non-financial corporations’ net non-financial investment is predominantly financed by net borrowing, which increased in the first quarter.
In the first quarter of 2009, the annual growth rate of financing by non-financial corporations decreased to 3.1%, from 3.5% previously. The growth rate of their loan financing amounted to 6.5%, compared with 8.3% previously. The annual growth rate of their issuance of debt securities increased to 7.5%, from 6.1%. The annual growth rate of their equity financing, via the issuance of quoted and unquoted shares and other equity, was broadly unchanged at 1.8%, from the previous quarter.
Financial investment growth of non-financial corporations moderated to 2.8% after 3.6% in the previous quarter, as the annual growth rate of their investment in currency and deposits decreased to 0.3%, from 1.5% previously. The growth rate of loans granted decreased to 12.7% in the first quarter of 2009, after 14.1% previously. The growth rate of their investment in shares and other equity remained broadly unchanged at 4.6%.
The outstanding amounts of assets and liabilities in the financial balance sheet of non-financial corporations declined further in the first quarter of 2009, due to decreases in the market value of both debt securities and shares and other equity (held as well as issued) decreased. The annual growth rate of financial assets increased to -9.8% in the first quarter from -11.3% previously. The annual growth rate of financing increased to -9.5%, from -11.5% in the previous quarter.
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 3.1% in the first quarter of 2009, from 3.7% previously. The annual growth rate of the issuance of quoted shares remained broadly unchanged at 0.9%. The annual growth rate of their financial investment decreased to 2.9% from 4.1% previously. The growth rate of their investment in debt securities amounted to 3.9%, from 4.3% previously, while that of their investment in shares and other equity amounted to 1.6%, from 2.3% previously.
The outstanding amounts of assets and liabilities in the financial balance sheet of insurance corporations and pension funds declined further as the market value of shares and other equity held and issued declined. In particular, the market value of quoted shares held declined by 36.0% (after declining by 39.9% previously) and that of mutual fund shares held declined by 9.5% (after a decline by 10.9% in the previous quarter).
