Households and NPISH - Institutional sector accounts
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Households and non-profit institutions serving households
Chart S1M-1 provides euro area household per-capita values for several main household indicators, starting with consumption and saving (that sum to disposable income). Per capita data for the acquisition of (non financial and financial) assets are also displayed, being equal to saving plus net incurrence of debt. Finally, the outstanding amounts of financial assets per person are shown together with the resulting position called net financial wealth.
Chart S1M-2 shows the growth rate of euro area households' disposable income (in current prices). The main contribution to households' income growth is provided by compensation of employees (that is, wages and salaries plus total social contributions). The contribution from gross operating surplus and mixed income (which accrues to self-employed households and home owners) comes next. Net property income (interest received minus interest paid, dividends, etc) and net social benefits are the most volatile components with the latter affected by the position in the business cycle.
Chart S1M-3 shows the growth rate of euro area households' gross disposable income compared with that of their consumption. If the former exceeds the latter, the household saving rate increases. The saving rate is a key indicator for the household sector. Short term increases in the household saving rate are often linked with pessimistic expectations about the economic future. Variations are generally driven by changes in the labour market or interest rates movements.
Chart S1M-4 compares the growth of gross disposable income with that of investment in fixed assets (gross fixed capital formation), mainly in dwellings, of the euro area households. This information can also be summarised in the gross investment rate defined as gross fixed capital formation divided by households' gross disposable income. The investment rate, which is one of the key indicators for this sector, is provided for the euro area and EU.
The difference between savings and capital transactions is called net lending when positive and net borrowing when negative. If households are net lenders, it means that they have an excess of savings over investment. The balance can be provided (e.g. by making bank deposits or buying shares) to other sectors of the national economy or to non-residents. Conversely, households are net borrowers when they need (considering the sector as a whole) to borrow money from other sectors in order to finance their investment and other capital transactions. Chart S1M-5 shows the net lending/borrowing of households and its components, namely gross saving, gross fixed capital formation and net capital transfers plus other capital transactions, as a share of household gross disposable income.
Chart S1M-6 shows the financial investment of euro area households by type of financial instrument, as well as their incurrence of loans and other liabilities. Traditionally, a large share of the households' acquisitions of financial assets is made up of currency and deposits. Investments in other financial assets, such as the increase in life insurance and pension funds reserves, also represent an important part of the total financial assets.
The households sector is by far the richest sector in the economy. Its wealth is composed of non-financial assets, mainly residential property, and net financial wealth. The latter equals the difference between the market value of their financial assets and their liabilities, such as mortgage loans. Financial wealth is presented in the financial balance sheets. The changes in the net financial wealth of euro area households are predominantly related to their net acquisitions of financial assets, their incurrence less redemption of loans, and changes in the prices of their financial assets (Chart S1M-7). In general, fluctuations of the growth in net financial assets are mainly due to changes in share prices.
Chart S1M-8 shows how variations in the net financial wealth of households translate into the different financial instruments, both on the assets and liabilities sides, all expressed as a percentage of the household disposable income.