Contributions of each sector - Institutional sector accounts

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Contributions of each institutional sector to macroeconomic developments

Chart S1-2 shows the contribution of each sector to the annual nominal growth rate of euro area gross value added (GVA) at basic prices (which is equal to GDP at market prices minus taxes plus subsidies on products). The gross value added of non-financial corporations delivers not only the largest contribution to GDP growth, but is also quite volatile. The contribution of value added generated in the household sector fluctuates less, partly because of the stabilising influence of the imputed rent on owner-occupied dwellings. The contributions of the financial corporations and government sectors are rather small.

Chart S1-3 shows the contributions of sectors to the growth of nominal net disposable income. Households and government are the main contributors due to their shares in total income (see chart S1-1) In the case of government, the contribution is generally lower when GDP grows more slowly, reflecting lower tax receipts and higher net social security payments (especially unemployment benefits).

Chart S1-4 presents the decomposition of euro area GDP growth rates by expenditure components. If domestic demand is met by imports, this indicates lower domestic production and thus a lower GDP. In turn, if imports decline, this provides a positive contribution to GDP growth. Symmetrically, a rise in exports increases GDP whereas a fall lowers GDP growth. Consumption growth provides a relatively stable contribution to GDP growth, whereas the contributions of investment (gross fixed capital formation), changes in inventories and net exports fluctuate over the business cycle.

Chart S1-5 shows the contributions of the individual sectors' total final expenditures (consumption and capital formation) to the growth rate of euro area GDP. Households are the main contributor, mostly through their final consumption. Corporations contribute through capital formation (investments in fixed assets and changes in inventories).

Contributions of sectors to the nominal growth rate of euro area capital formation are plotted on Chart S1-6. Gross capital formation includes mainly investments made in fixed assets (buildings, machinery) but also changes in inventories. The overall growth of gross capital formation is mainly driven by developments in the non-financial corporation sector and, to a lesser extent, by households (dwellings).

Chart S1-7 shows the euro area saving-investment balance, specified by sector. The net capital formation(1) of an economy is financed by the net saving of resident sectors and the rest of the world. In this chart, the current external balance is shown from the viewpoint of the rest of the world, i.e. a positive contribution means that the rest of the world has a surplus on its current account with the euro area and is thus financing the latter economy. Conversely, the euro area then has a deficit on its current account with the rest of the world. In general, the government sector contributes positively when GDP grows faster which increases tax receipts and reduces net social security payments, both effects leading to higher saving. In general, the government sector contributes positively when GDP grows faster which increases tax receipts and reduces net social security payments, both effects leading to higher saving.

The result of the different developments of investment and saving by sector can also be seen in Chart S1-8 (euro area) and Chart S1-9 (EU). The difference between savings plus net capital transfers on the one hand and gross capital formation(2) on the other hand is net lending (if positive) or net borrowing (if negative) of a sector. These charts show whether the euro area / the EU economy is a net lender (line above zero) to the rest of the world or a net borrower (line below zero) and how each sector contributes to this position.

Whereas the charts described above concern flows recorded during a period of four quarters, Chart S1-10 illustrates the contribution of each sector to the accumulated net financial wealth of the euro area economy. The euro area has a negative net financial wealth which means that the amount of financial assets issued by euro area units and held by non residents is higher than financial assets held by euro area residents abroad. Household financial wealth contributes positively to the total whereas non-financial corporations and government contribute negatively.

(1) Plus "acquisitions less disposals of non-produced non-financial assets".

(2) Plus "acquisition less disposal of non-produced non-financial assets".