Households and non-financial corporations in the euro area: fourth quarter of 2020

Europe

Households’ financial investment increased at higher annual rate of 4.0% in the fourth quarter of 2020, compared with 3.5% one quarter earlier

Non-financial corporations’ financing increased at broadly unchanged annual rate of 2.1%

Non-financial corporations’ gross operating surplus decreased at lower annual rate (-2.7% compared with -5.7% one quarter earlier)

Households

The annual growth rate of household gross disposable income decreased to 0.8% in the fourth quarter of 2020 (after 1.2% in the previous quarter). Gross operating surplus and mixed income of the self-employed decreased by -2.6% (after -0.2%) and compensation of employees declined by -0.9% (after -1.4%). Household consumption expenditure decreased at a higher rate (-7.5% after -4.2%).

The household gross saving rate (calculated from four-quarter cumulated sums) was 19.6% in the fourth quarter of 2020, compared with 17.8% in the previous quarter.

Household gross non-financial investment (which refers mainly to housing) increased at an annual rate of 0.2% in the fourth quarter of 2020, after -3.4% in the previous quarter. Loans to households, the main component of household financing, increased at a broadly unchanged rate of 3.2%.

The annual growth rate of household financial investment increased to 4.0% in the fourth quarter of 2020, from 3.5% in the previous quarter, driven mainly by a rise in currency and deposits at a rate of 7.9% (after 6.9%). Investment in life insurance and pension schemes grew at a higher rate of 1.9% (after 1.6%), while shares and other equity rose at a broadly unchanged rate of 2.3%. Disinvestment in debt securities continued, at a higher rate (-7.3% after -5.3%).

The annual growth rate of household net worth increased to 5.4% in the fourth quarter of 2020, from 3.8% in the previous quarter. This was due to a rise in the value of housing wealth (5.2%, after 4.8%) and net valuation gains on financial assets, combined with net purchases of financial and non-financial assets, which together exceeded the increase in liabilities. The household debt-to-income ratio continued to increase, to 96.3% in the fourth quarter of 2020 from 93.8% in the fourth quarter of 2019, as loans to households grew faster than disposable income.

Non-financial corporations

Net value added by NFCs decreased at a lower rate in the fourth quarter of 2020 (-5.6% after -6.8% in the previous quarter). Gross operating surplus and net property income (defined in this context as property income receivable minus interest and rent payable) both declined. As a result gross entrepreneurial income (broadly equivalent to cash flow) decreased at a rate of -4.8% (after -5.6% in the previous quarter). [1]

NFC gross non-financial investment decreased at a lower annual rate in the fourth quarter of 2020 (-12.9% after -13.6% in the previous quarter).[2] Financing of NFCs increased at a broadly unchanged rate of 2.1%.  Loan financing [3] grew at 3.6% (after 3.1%), and trade credit financing was broadly unchanged (-0.1%) after decreasing (-2.5%) in the previous quarter. Conversely, equity financing grew at a rate of 1.1% (after 1.3%). The annual growth rate of issuance of debt securities by NFCs stood at an unchanged rate of 9.8%.

NFC’s debt-to-GDP ratio (consolidated measure) increased to 84.2% in the fourth quarter of 2020, from 77.3% in the same quarter of the previous year; the non-consolidated (wider) debt measure increased to 148.3% from 137.3%. The increases in these ratios were due to an increase in the debt of NFCs and a decline in GDP over this period.

NFC financial investment grew at an annual rate of 3.5%, compared with 3.0% in the previous quarter. Among its components, other financial assets, which consist mainly of accounts receivable, increased (after decreasing in the previous quarter). This increase more than compensated a slower growth of investment in currency and deposits (18.6% after 20.3%) as well as shares and other equity (1.8% after 2.0%).

 

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