European sector accounts present a complete and consistent set of data for all resident sectors. They provide comprehensive information not only on the economic activities of households, non-financial corporations, financial corporations and the government, but also on the interactions between these sectors and the rest of the world.

In addition, the euro area accounts link financial and non-financial statistics, thereby allowing for an integrated analysis of non-financial economic activities (such as gross fixed capital formation) and financial transactions (such as the issuance of debt). The euro area accounts also contain consistent financial balance sheets, with the result that quarterly changes in the financial wealth of each euro area sector can now be integrated into business cycle analysis.

Institutional sectors

The institutional sectors combine institutional units with broadly similar characteristics and behaviour: households and non-profit institutions serving households (NPISHs), non-financial corporations, financial corporations, and the government. Transactions with non-residents and the financial claims of residents on non-residents, or vice versa, are recorded in the "rest of the world" account.

The households sector comprises all households and includes household firms. These cover sole proprietorships and most partnerships that do not have an independent legal status. Therefore the households sector, in addition to consumption, also generates output and entrepreneurial income. In the European accounts, non-profit institutions serving households (NPISHs), such as charities and trade unions, are grouped with households. Their economic weight is relatively limited [ESA2010 2.118 to 2.130].

The non-financial corporations sector comprises all private and public corporate enterprises that produce goods or provide non-financial services to the market [ESA2010 2.45 to 2.54].

The government sector excludes public enterprises and comprises central, state (regional) and local government and social security funds [ESA2010 2.111 to 2.117].

The financial corporations sector comprises all private and public entities engaged in financial intermediation such as monetary financial institutions (broadly equivalent to banks), investment funds, insurance corporations and pension funds [ESA2010 2.55 to 2.110].

Complete and consistent quarterly rest of the world accounts for the euro area and the EU have been compiled. This means that cross-border transactions and financial claims among euro area/EU Member States have been removed from the rest-of-the-world accounts and that, in particular, the asymmetries in the bilateral trade statistics have been eliminated. Consequently, imports and exports are much smaller than they would have been if a simple aggregation of the national data had been used; about half of the external trade of the individual Member States is within the euro area/EU [ESA2010 2.131 to 2.134].

Sequence of accounts

European sector accounts record, in principle, every transaction between economic subjects during a certain period and show as well the opening and closing stocks of financial assets and liabilities in financial balance sheets. The transactions are grouped into various categories that have a distinct economic meaning, such as "compensation of employees" (comprising wages and salaries, before taxes and social contributions are deducted, and social contributions paid by the employers).

In turn, these categories of transactions are shown in a sequence of accounts, each of which covers a specific economic process. This ranges from production, income generation and income (re)distribution, through the use of income, for consumption and saving, and the investment, as shown in the capital account, to financial transactions such as borrowing and lending. Each non-financial transaction is recorded as an increase in the "resources" of a certain sector and an increase in the "uses" of another sector. For instance, the resources side of the "interest" transaction category records the amounts of interest receivable by the different sectors of the economy, whereas the uses side shows interest payable. For each type of transaction, total resources of all sectors and the rest of the world equal total uses. Each account leads to a meaningful balancing item, the value of which equals total resources minus total uses. Typically, such balancing items, such as GDP or net saving, are important economic indicators. They are carried over to the next account.

Two main categories: current accounts and accumulation accounts

Transactions are classified in two categories of accounts: current accounts and accumulation accounts.

Current accounts record transactions that do not involve the purchase or sale of financial or non-financial assets. The final balancing item of this set of accounts is saving, that is the part of disposable income that is not spent for consumption purposes but used, besides any capital transfer, to buy assets or reduce liabilities.

The accumulation accounts that show transactions (the capital and financial accounts) record the net acquisition of non-financial and financial assets and the net incurrence of liabilities. The remaining accumulation accounts show other changes in balance sheets, such as revaluations and write-offs of bad debts. Thus the accumulation accounts explain all the changes in the (non-financial and financial) balance sheets. Balance sheets record the value of assets and liabilities at a particular point in time.

Current accounts

The production account shows the transactions relating to the production process. Resources refer to output and taxes less subsidies on products, and uses refer to intermediate consumption. The balancing item of the production account is value added. The sum of gross value added over all domestic sectors plus taxes less subsidies on products is equal to Gross Domestic Product (GDP) of the economy as a whole, at market prices. This gross value added is then carried over as a resource to the generation of income account.

The generation of income account shows how the proceeds of this accrue to various income categories, such as the compensation of employees. The balancing item consists of mixed income, which accrues to self-employed households, and gross operating surplus, which mainly accrues to corporations.

Subsequently, this income generated in production is distributed. The allocation of primary income account also records receipts and expenses relating to various forms of property income, such as interest, dividends and (land) rent, and includes an income imputed to households on their reserves with (life) insurance corporations and pension funds. The balancing item is the balance of primary incomes. For the economy as a whole, this adds up to Gross National Income. It is equal to GDP plus net primary income from abroad (the balance of compensation of employees, taxes less subsidies and property income receivable from and payable to abroad). Net national income excludes the consumption of fixed capital ("depreciation").

The entrepreneurial income account is a sub-account of the allocation of primary income account. Its purpose is to derive entrepreneurial income (as a balancing item), which corresponds to operating surplus/mixed income plus property income received, minus interest and (land) rents paid. Corporate taxes and dividends distributed to other sectors and retained earnings on foreign direct investment of non-residents are included in this balancing item.

The secondary distribution of income account shows how the primary income of an institutional sector changes because of current taxes on income and wealth, social contributions and benefits, and other current transfers. The balancing item is disposable income.

The use of disposable income account shows how disposable income is spent on consumption or saved. The balancing item is saving (for corporations, net saving is a close proxy for retained earnings).

Balancing items are often expressed in gross terms. However, capital goods deteriorate over time. Capital consumption may be deducted from gross value added, operating surplus/mixed income, national income, disposable income and savings to yield net amounts. These amounts better reflect that at some stage the capital goods used in production will need to be replaced.

The external account brings together all transactions involving both euro area/EU residents and non-residents, viewed from the perspective of the non-residents. The current external account records imports (as resources) and exports (as uses) of goods and services, compensation of employees to and from abroad, payments of property income and taxes to and from abroad, and other transfers to and from abroad.

Accumulation accounts

The capital account is the last in the sequence of non-financial accounts. It is divided into a change in net worth due to saving and capital transfers account and an acquisition of non-financial assets account. The first adds any net receipts of capital transfers to net saving. The balancing item is the change in net worth due to transactions. The acquisition of non-financial assets account records gross fixed capital formation (investment in non-financial assets), changes in inventories, and any net acquisition of valuables and other non-produced, non-financial assets (e.g. land). The balancing item of the capital account is net lending/net borrowing. If saving plus net capital transfers received exceeds non-financial investment, a sector has a surplus of funds and becomes a net lender to other sectors and/or the rest of the world.

The link between the non-financial accounts and the financial accounts is established by the balancing item "net lending/net borrowing", which can be derived both from the final non-financial account (capital account) and from the financial transactions account (see below).

The financial account records the net acquisition (purchases minus sales) of financial assets and the net incurrence (issues minus redemptions) of liabilities. As each non-financial transaction is mirrored by a financial transaction, the balancing item of the financial account conceptually equals the net lending / net borrowing calculated in the capital account. A negative balance between all receipts and expenses of a sector must be financed, by borrowing and/or by a sale of financial assets. Conversely, a positive balance implies an investment in financial assets and/or redemption of liabilities.

Financial accounts can be consolidated or non-consolidated. In this context, consolidation means the elimination of all transactions within a sector. That is, if, for example, a bond is issued by Central Government and bought by State Government, this transaction is recorded in non-consolidated accounts while it is not recorded in consolidated accounts of General Government. 

"Other changes" in financial assets and liabilities account records the changes in financial balance sheets that are not due to financial transactions. These are mainly revaluations (holding gains and losses) due to changes in the market prices of financial assets or liabilities, but this account also includes other changes in volume (items such as write-offs of bad debts). The balancing item is the change in net worth due to other changes in financial assets and liabilities. The consistent derivation of holding gains and losses by sector and by financial instrument allows for comprehensive analyses into the effects of these changes on the economic behaviour, for instance of households and non-financial corporations.

Financial balance sheets

European sector accounts also provide opening and closing financial balance sheets, which show the stocks of financial assets and liabilities (such as deposits, loans and shares) valued at market prices at the beginning and at the end of the quarter, respectively. The balancing item is net financial wealth. Net financial wealth changes as a result of a) the accumulated flows recorded in parallel in the financial and non-financial accounts and b) price and volume changes in financial assets and liabilities as recorded in the "other changes" account.

Net wealth is calculated as net financial wealth plus the value of non-financial assets. However, balance sheets for non-financial assets, such as residential housing, machinery and land, are generally not available.

Sequence of Accounts