Households and non-financial corporations in the euro area: first quarter of 2021

Europe
  • Households’ financial investment increased at higher annual rate of 4.8% (after 4.1%) in the first quarter of 2021
  • Non-financial corporations’ financing increased at higher annual rate of 2.2% (after 2.0%)
  • Non-financial corporations’ gross operating surplus increased at annual rate of 8.0% compared to slight decrease in the previous quarter (-0.7%)

Households

The annual growth rate of household gross disposable income increased to 1.3% in the first quarter of 2021 (after 0.7% in the previous quarter). Gross operating surplus and mixed income of the self-employed increased at a rate of 1.1% compared to a decrease in the previous quarter (-2.2%) and compensation of employees grew at a rate of 0.2% (after -0.9%). Household consumption expenditure decreased at a lower rate (-4.5% after -7.1%).

The household gross saving rate (calculated from four-quarter sums) in the first quarter of 2021 was 20.8%, compared with 19.6% in the previous quarter.

The annual growth rate of household gross non-financial investment (which refers mainly to housing) increased to 6.5% in the first quarter of 2021, from 0.2% in the previous quarter. Loans to households, the main component of household financing, increased at a higher rate of 3.4% (after 3.1%).

The annual growth rate of household financial investment increased to 4.8% in the first quarter of 2021, from 4.1% in the previous quarter, driven mainly by shares and other equity growing at a higher rate of 3.8% (after 2.3%). Currency and deposits grew at a higher rate of 8.2% (after 7.9%). Investment in life insurance and pension schemes grew at a rate of 1.5% (after 1.8%). Disinvestment in debt securities continued (-6.3% after -7.6%).

The annual growth rate of household net worth increased to 7.5% in the first quarter of 2021, from 5.0% in the previous quarter, driven mainly by higher valuation gains in financial assets and continued high valuation gains in non-financial assets. The valuation gains in financial assets were driven by shares and other equity, and those in non-financial assets were due to housing wealth. The household debt-to-income ratio continued to increase, to 96.3% in the first quarter of 2021 from 93.5% in the first quarter of 2020, as disposable income grew slower than loans to households.

Non-financial corporations

Net value added by NFCs increased at an annual rate of 1.1% in the first quarter of 2021 after decreasing (-4.7%) in the previous quarter. Gross operating surplus grew at a rate of 8.0% (after -0.7% 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 cash flow) increased at a rate of 9.1% (after -3.0%).[1]

NFC gross non-financial investment decreased at a lower annual rate in the first quarter of 2021 (-3.2% after -15.0% in the previous quarter).[2] NFC financial investment grew at an annual rate of 3.9%, compared with 3.2% in the previous quarter. Among its components, loans granted grew at a higher rate of 1.1% (after 0.1%), while investment in shares and other equity grew at a broadly unchanged rate of 1.7%.

Financing of NFCs increased at a higher rate of 2.2% (after 2.0%), as trade credit financing grew at a rate of 2.4% compared to a slight decline in the previous quarter (-0.1%). Issuance of debt securities by NFCs increased at a broadly unchanged rate of 9.6% in the first quarter of 2021. Loan financing grew at a lower rate of 3.1% (after 3.4%)[3], while equity financing grew at a higher rate of 1.2% (after 1.0%).

NFCs’ debt-to-GDP ratio (consolidated measure) increased to 84.8% in the first quarter of 2021, from 77.3% in the same quarter of the previous year; the non-consolidated, wider debt measure grew to 148.5% from 137.1%. The increases in these ratios were due to an increase in the debt of NFCs and a decline in GDP over this period.

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