The annual growth rate of gross fixed capital formation of non-financial corporations in the euro area decreased to -17.1% in the second quarter of 2009, from -13.4% in the previous quarter. The annual rate of growth of net entrepreneurial income of non-financial corporations declined to -15.6% in the second quarter, compared with -19.9% in the previous quarter. The annual growth rate of financing of non-financial corporations was 2.7% in the second quarter, compared with 3.2% previously, and the annual growth rate of their financial investment was 2.5% in the second quarter of 2009, compared with 2.8% previously.
Total euro area economy
The annual growth rate of euro area net disposable income has declined to -4.6% in the second quarter of 2009 as compared with -4.4% in the previous quarter. This negative growth in net disposable income is almost entirely due to a drop in net disposable income of non-financial corporations and general government. The decrease in the annual growth of gross fixed capital formation (-13.0%), compared to the previous quarter (-10.9%), was mainly due to negative investment growth by non-financial corporations and households. The growth rate of gross capital formation decreased to -17.7% in the second quarter, compared to -12.3% in the previous quarter. This negative investment growth coincided with an annual growth rate of euro area net saving to -58.2%, compared to -64.9% 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 0.4% in the second quarter of 2009, compared to 1.2% in the previous quarter. This increase was mainly driven by an increase of household’s receipts of net social benefits and contributions and a decline in taxes on income and wealth that offset the decrease in 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, if slower, growth of households’ saving, of 11.0% (after 19.2% previously). The annual rate of change of gross fixed capital formation of households declined further to -13.4% in the second quarter, down from -11.3% in the first quarter. The four-quarter moving average households’ gross saving rate increased to 15.4% (compared to 14.1% in the second quarter of 2008). The annual growth rate of household sector's net lending increased to 3.5% in the second quarter of 2009, from 3.0% in the previous quarter.
The annual growth rate of financing of households via the incurrence of loans decreased to 2.0% in the second quarter of 2009, from 2.7% in the first quarter. This coincided with a decline in the annual growth of their gross non-financial investment to -14.2%, from -11.4% previously whilst their financial investment increased to 2.8% from 2.5% 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 5.8% in the second quarter of 2009, from 6.5% in the previous quarter. The annual growth rate of their investment in debt securities decreased to 1.5%, from 4.0% previously. The growth rate of household’s investment in shares and other equity stood at -1.0% in the second quarter, compared to -2.2% previously. The annual growth rate of households’ additions to life insurance and pension fund reserves remained broadly the same at 3.6%.
Developments in households’ financial balance sheet were dominated by valuation changes of their financial assets. Households’ net financial wealth decreased by an annual growth rate of -3.3%, after -9.1% in the previous quarter. The market value of households’ holdings of shares and other equity decreased by 15.1% in the second quarter of 2009, compared with a decrease of 25.5% previously.
Non-financial corporations
The annual growth rate of net entrepreneurial income of non-financial corporations6 stood at -15.6% in the second quarter of 2009, up from -19.9% in the previous quarter. This reflects a decline of net value added generated by non-financial corporations of -8.4%, compared with -6.6% in the previous quarter and a decline in property income receivable of -5.7% compared with -5.9% in the previous quarter, as well as an increase in compensation of employees of 2.3% compared to 1.1% in the first quarter and interest and rent payable of 6.9% compared to 5.9% previously. Gross fixed capital formation of non-financial corporations decreased by 17.1% in the second quarter of 2009, after a decrease of 13.4% in the previous quarter. The annual growth rate of total gross non-financial investment further declined to -25.5%, compared with -15.7% in the previous quarter. Non-financial corporations’ net non-financial investment, decreased noticeably in the second quarter and was broadly matched by a fall in net borrowing.
In the second quarter of 2009, the annual growth rate of financing by non-financial corporations decreased to 2.7%, from 3.2% previously. The growth rate of their loan financing amounted to 3.9%, compared with 6.7% previously. The annual growth rate of their issuance of debt securities increased to 11.9%, from 9.9%. The annual growth rate of their equity financing, via the issuance of quoted and unquoted shares and other equity, increased to 2.1% compared with 1.5%, from the previous quarter.
Financial investment growth of non-financial corporations moderated to 2.5% after 2.8% in the previous quarter, as net disposal of debt securities accelerated further to -20.7% (compared to -8.3% previously) while the annual growth rate of their investment in currency and deposits increased to 2.3%, from 0.5% previously. The growth rate of loans granted decreased to 9.5% in the second quarter of 2009, after 11.6% previously. The growth rate of their investment in shares and other equity decreased to 4.3%, after 4.7% in the first quarter.
The decline of the outstanding amounts of assets and liabilities in the financial balance sheet of non-financial corporations slowed in the second quarter of 2009, due to a more moderate decline in the market value of shares and other equity (held as well as issued). The outstanding amount of financial assets decreased by -5.8% in the second quarter (compared to -9.4% previously), whereas outstanding liabilities decreased by -6.1% compared to -9.5% 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, was broadly unchanged at 3.1% in the second quarter of 2009. The annual growth rate of the issuance of quoted shares decreased to 0.4% from 0.9% previously. The annual growth rate of their financial investment increased to 2.9% from 2.6% in the previous quarter. The growth rate of their investment in debt securities declined to 2.4%, from 4.4% previously, while that of their investment in shares and other equity increased to 3.5%, from 0.9% previously.
The decline in outstanding amounts of assets and liabilities in the financial balance sheet of insurance corporations and pension funds slowed as the market value of shares and other equity held and issued declined less. In particular, the market value of quoted shares held declined by 26.5% (after declining by 35.8% previously) and that of mutual fund shares held declined by 1.7% (after a decline by 9.2% in the previous quarter).
