Acquisition of financial assets and external financing in Germany in the fourth quarter of 2017 Results of the financial accounts by sector
At the end of 2017, German households’ financial assets amounted to €5,857 billion, up by €78 billion, or 1.4%, on the third quarter of the year. Moreover, growth in financial assets was comparatively strong again in annual terms, at just under 5%. Funds flowed mainly into currency and deposits again in the fourth quarter, with inflows totalling €43 billion, followed by claims on insurance corporations, of which €15 billion worth were acquired. Although investment in shares and investment fund shares also expanded once more, German households still exhibited a preference for liquid investments or investments deemed low-risk. The rise in financial assets stemmed not only from the acquisition of transaction-based financial assets but also from valuation gains. In the fourth quarter of 2017, liabilities also went up by just over €12 billion, causing an overall increase in net financial assets of €66 billion to €4,131 billion. In a year-on-year comparison, net financial assets rose by just under 5.7%, which was roughly in line with the long-term average.
External financing of non-financial corporations in Germany amounted to around €32 billion in the fourth quarter of 2017; this primarily took the form of loans (just over €23 billion). Security-based financing, mainly shares and other equity, also showed a positive net result. The net financial assets of non-financial corporations declined by a total of just under €14 billion in the reporting quarter, placing them around 6.9% lower than the prior-year figure at -€1,820 billion.
Households: robust acquisition of financial assets and persistent upward trend in external financing
In the fourth quarter of 2017, the transaction-related acquisition of financial assets by households remained high, at €48 billion on balance. Here, the build-up of currency and transferable deposits to the tune of €41 billion dominated, while savings deposits and savings certificates were scaled back slightly. In addition, just under €15 billion worth of claims on insurance corporations were acquired. In the low-interest-rate setting, the investment behaviour of households overall indicates a continued marked preference for liquid investments or investments considered to be low-risk.
Measured in terms of the developments seen since the financial and economic crisis, capital market exposure was also high in the period under review, as has been observed for a number of years now. Both listed shares (primarily from abroad) and investment fund shares (€3 billion and €13 billion, respectively) were acquired on a comparatively large scale, as in the preceding quarters. Purchases of investment fund shares represented, amongst other things, shares in mixed securities funds and real estate funds. Whilst a preference for liquid and lower-risk types of investment continues to characterise portfolio behaviour, more recent developments in households’ capital market exposure suggest a heightened yield awareness since the financial and economic crisis, as listed shares and investment fund shares are typically seen to be riskier than currency and deposits or claims on insurance corporations and are therefore acquired in the expectation of higher yields. By contrast, there were once again capital outflows in debt securities, although these were not extraordinarily high, amounting to €3 billion.
As in the preceding quarter, households in Germany again recorded valuation gains in the fourth quarter, which increased holdings of financial assets on top of the transaction-related rise. This was partly due to higher prices for listed shares and investment fund shares. These developments combined resulted in growth in financial assets by €78 billion to €5,857 billion in the reporting quarter, representing a year-on-year increase of just under 5.0%.
In terms of external financing, households raised funds in the amount of around €12 billion. The upward trend observed here since mid-2013 thus continued in the reporting quarter. The funds were principally provided by domestic monetary financial institutions in the form of housing loans. Liabilities rose overall by just over €12 billion (+0.7%) to €1,727 billion. Nominal gross domestic product (GDP) grew more strongly than debt in the reporting quarter. The debt ratio, defined as total liabilities as a percentage of nominal GDP (four-quarter moving sum), therefore declined slightly at the end of the year to 52.9% (53.1% in the same period of the previous year). Overall, this in combination with the growth in financial assets led to a rise in net financial assets of just over €66 billion to €4,131 billion at the end of the reporting quarter, representing an increase of just under 5.7% on the year.
Non-financial corporations: acquisition of financial assets and external financing up again
The transaction-related acquisition of financial assets by non-financial corporations increased again on the quarter in the fourth quarter of 2017, totalling around €67 billion. Besides the accumulation of other accounts receivable, which include trade credits and advances, the corporations included in this sector invested mainly in currency and deposits, at just over €23 billion. To a lesser extent, funds also flowed into shares and other equity (€8 billion). Non-financial corporations also increased their holdings of credit claims (€6 billion), particularly those on domestic enterprises. Conversely, non-financial corporations slightly reduced their stocks of debt securities in net terms (-€3 billion).
In the period under review, external financing by non-financial corporations amounted to roughly €32 billion, representing a further increase on the quarter. Positive contributions were made by loan financing, at just under €23 billion. Loans to non-financial corporations were provided in large part by domestic lenders. Inflows of funds from issuing shares and other equity fell slightly on the quarter, amounting to around €3 billion. The corresponding funding was provided exclusively by domestic sectors. Debt securities also made a slightly positive contribution to funding. Non-financial corporations also increased their other accounts payable, including trade credits and advances, by just under €4 billion.
Taking into account the contribution of valuation changes on top of the transaction related effect, net financial assets thus fell by a total of about €14 billion in the fourth quarter, reaching -€1,820 billion. This represents a decline of around 6.9% on the year. The debt ratio, defined as the sum of debt securities, loans and pension provisions as a percentage of nominal GDP (four-quarter moving sum), rose to 62.7% over the course of the year (61.1% in the same quarter of the previous year) because debt outpaced nominal GDP.
Owing to interim data revisions of the financial accounts and national accounts, the figures stated in this press release are not directly comparable with those shown in earlier press releases.