The business investment rate remained stable in the Eurozone and fell only slightly in the EU27 in the first quarter of 2012, according to data released by Eurostat and the European Central Bank, but since then economic sentiment has deteriorated as confirmed by the latest sentiment index published by Eurostat itself.
In the first quarter of 2012, the seasonally-adjusted investment rate of non-financial corporations was 20.7 percent in the Eurozone and 19.9 percent in the EU27.
On the other hand, the business profit share rose slightly to 38.3 percent in the Eurozone, as wage costs remained stable, value added recorded a moderate increase, and total stocks fell slightly for the second quarter in a row. In the EU27, the gross profit share was 38.1 percent, pushed up slightly by higher value added whilst compensation of employees plus taxes less subsidies on production remained stable.
Other figures released by Eurostat show that the seasonally-adjusted household saving rate and investment rate mirrored the business investment rate. In fact, the gross saving rate of households remained nearly stable at 13.3 percent in the Eurozone and at 11.6 percent in the EU27. This stability resulted from the fact that real final consumption expenditure increased at the same pace as real gross disposable income. The growth rate was a mere 0.2 percent.
The small growth in real disposable income was due to nominal income increasing more than consumption prices. Households earned more from property income and other transfers, compensation of employees and social benefits, but suffered a little from higher taxes and social contributions.
The gross investment rate was also stable, at 8.3 percent in the EU27 and 9.0 percent in the Eurozone. This was because, though there was a small rise in nominal disposable income, there was a slight decrease in household investment in dwellings.
It is only natural that, during a recession, households should save more than they invest. Apart from the effects of the austerity programmes being followed by various governments, households feel less secure about the future as they succumb to fears about their income and employment prospects. It is rather a vicious circle which governments are trying to break, albeit not so successfully so far.
Eurostat did not release individual country figures.