Euro area economic and financial developments by institutional sector: first quarter of 2018

• Euro area net saving was higher in the first quarter of 2018, compared to the first quarter of the previous year. Total euro area non-financial investment (net) increased to 4.3% of net disposable income (compared with 3.8% a year ago), as increased investment by households and non-financial corporations was only partly offset by negative net investment of government. Euro area net lending to the rest of the world stayed broadly unchanged compared to a year ago.
• Household debt was lower compared to a year ago, both with respect to GDP and disposable income (the respective ratios decreased to 58.0% and to 93.7%).
• Non-financial corporation debt declined to 133.7% of GDP, from 136.6% one year ago.

Total euro area economy

Euro area net saving, that is the sum of the savings of households, corporations and the government sector after deducting the consumption of fixed capital, increased to 8.5% of euro area net disposable income, in the year up to the first quarter of 2018 (compared with 7.9% a year ago). Euro area net non-financial investment increased to 4.3% of net disposable income (compared with 3.8% a year ago), due to increased investment by households and non-financial corporations. Net investment by financial corporations was unchanged at 0.1%, while government net investment remained negative. As a result of the growth of non-financial investment and the growth of saving, euro area net lending to the rest of the world stayed broadly unchanged at 4.3% of net disposable income. While net lending by households and financial corporations decreased (2.4%, after 2.6% for households; 0.7%, after 0.9% for financial corporations), net lending of non-financial corporations stood broadly unchanged at 2.1%.The overall decrease of private sector net lending was compensated by a reduction in net borrowing by the government sector (-0.9%, after -1.5%).

Households

The annual growth rate of household gross disposable income increased to 3.1% in the first quarter of 2018, from 2.9% the previous quarter. Household consumption expenditure grew at the broadly unchanged rate of 2.9%.

The household gross saving rate was 12.0% of household gross disposable income (adjusted for the change in the net equity of households in pension funds reserves) in the first quarter of 2018, compared with 12.1% in the same quarter of the previous year.

The annual growth rate of household gross non-financial investment (which refers mainly to housing) decreased to 5.7% in the first quarter of 2018, from 6.5% in the previous quarter. Loans to households, the main component of household financing, increased at an unchanged rate of 3.0%.

The annual growth rate of household financial investment stood at a broadly unchanged rate of 1.9% in the first quarter of 2018. Among its components, currency and deposits grew at an unchanged rate of 3.3%. Investment in life insurance and pension schemes grew at broadly unchanged rate of 2.2%, and shares and other equity grew at a higher rate of 1.8% (after 1.6%). However, households were net sellers of listed shares, in particular issued by MFIs and NFCs, while purchasing shares issued by the rest of the world on a net basis. Holdings of investment fund shares grew at a lower rate of 6.7% (after 7.2%), and households continued to sell debt securities (in net terms), at a rate of -11.7% (after -11.6%). The latter development is in particular due to a reduction of household holdings of debt securities issued by MFIs.

The annual growth rate of household net worth decreased to 4.6% in the first quarter of 2018, from 5.0% in the previous quarter, as larger valuation gains on non-financial assets, and to a lesser extent lower incurrence of liabilities, were offset by lower holding gains in financial assets. The value of housing wealth increased at a higher rate of 6.4% (after 6.0%), mainly driven by higher housing prices. The household debt-to-income ratio continued to decrease, to 93.7% in the first quarter of 2018 from 94.0% in the first quarter of 2017, as disposable income grew faster than the outstanding amount of loans to households. Similarly the household debt-to-GDP ratio continued to decrease, to 58.0% in the first quarter of 2018 from 58.6% in the first quarter of 2017.

Non-financial corporations

The annual growth rate of non-financial corporations' gross operating surplus increased to 4.1% in the first quarter of 2018, from 3.6% in the previous quarter, and net property income (defined in this context as property income receivable minus interest and rent payable) also increased. As a result, gross entrepreneurial income (broadly equivalent to the corporate cash flow) grew by 4.3% year-on-year, after 6.2% in the previous quarter. The annual growth rate of gross non-financial investment decreased to 1.6% (from 3.6%).

In the first quarter of 2018 the annual growth of financing of non-financial corporations declined to 1.4%, after 2.0% in the previous quarter, reflecting a growth reduction in all types of financing. Loan financing grew at an annual rate of 2.0% compared with 2.8% in the last quarter of 2017. This reflects a decrease in the annual growth rate of loans received from resident sectors other than MFIs and a net reduction in loans from the rest of the world, while the annual growth rate of loans received from MFIs increased.^[1] The annual growth rate of issuance of debt securities decreased to 4.9% in the first quarter of 2018, from 5.1% in the previous quarter, and trade credit financing grew at 4.0% year-on-year after 4.5% in the last quarter of 2017. Equity financing grew at a lower yearly rate of 0.8% (after 1.1%).

In the first quarter of 2018, financial investment by non-financial corporations grew at a yearly rate of 2.8%, compared with 3.6% in the previous quarter. Among its components, loans granted grew at a lower rate of 3.3% (after 4.6%), while investment in shares and other equity grew at an unchanged rate of 1.7%.Non-financial corporations' debt-to-GDP ratio decreased to 133.7% in the first quarter of 2018, from 136.6% in the first quarter of 2017.

Annexes to the press release on euro area economic and financial developments by institutional sector

• Tables
• Charts

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Notes

• These data come from a second release of quarterly euro area sector accounts from the European Central Bank (ECB) and Eurostat, the statistical office of the European Union. This release incorporates revisions and completed data for all sectors compared with the first quarterly release on "Euro area households and non-financial corporations" of 4 July 2018.
• The debt-to-GDP (or debt-to-income) ratios are calculated as the outstanding amount of debt in the reference quarter divided by the sum of GDP (or income) in the four quarters to the reference quarter. The ratio of non-financial transactions (e.g. savings) as a percentage of income or GDP is calculated as sum of the four quarters to the reference quarter for both numerator and denominator.
• The annual growth rate of non-financial transactions and of outstanding assets and liabilities (stocks) is calculated as the percentage change between the value for a given quarter and that value recorded four quarters earlier. The annual growth rates used for financial transactions refer to the total value of transactions during the year in relation to the outstanding stock a year before.
• The next release of the Household Sector Report containing results for the euro area and all EU countries is scheduled for 7 August 2018.
• The hyperlinks in the main body of the press release are dynamic. The data they lead to may therefore change with subsequent data releases as a result of revisions. Links to tables provided in the annex refer to a snapshot of the data as at the time of the current release.