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Acquisition of financial assets and external financing in Germany in the fourth quarter of 2018

Acquisition of financial assets and external financing in Germany in the fourth quarter of 2018 Results of the financial accounts by sector

16.04.2019 | Deutsche Bundesbank DE

At the end of the fourth quarter of 2018, the financial assets of households in Germany stood at €6,016 billion. Compared with the third quarter of 2018, this represents a decrease of just over €28 billion. This first decline in wealth in three years was attributable to significant valuation losses in the amount of around €88 billion, which more than offset the transaction-based acquisition of financial assets totalling just under €60 billion. Currency and deposits, in particular, recorded the largest inflows along with claims on insurance corporations. This meant that households’ preference for investment perceived to be liquid and/or low risk persisted. Net financial assets fell by a total of €44 billion as liabilities grew by around €16 billion over the same period.

Non-financial corporations’ external financing  – which had been consistently positive over the past five years – dropped to -€7 billion. This was due, in particular, to non-financial corporations scaling back their other liabilities, including trade credits and advances, by just over €21 billion. By contrast, over the same period, loan-based financing was positive on balance. The net financial assets of non-financial corporations increased markedly to -€1,531 billion.

Households: considerable valuation losses on financial assets

In the fourth quarter of 2018, the acquisition­ of financial assets by households remained high, at €60 billion on balance, with currency and transferable deposits growing by €56 billion and claims on insurance corporations rising by €18 billion. This was down to a sustained clear preference for liquid investments and/or forms of investment that are perceived to be low risk. By contrast, claims stemming from savings deposits and certificates were reduced once again.

What had been a heightened capital market exposure since 2014 was substantially weaker at the end of 2018. Inflows to shares and other equity in the fourth quarter of 2018, amounting to just under €2 billion, were distinctly lower than just a quarter earlier. A large share of these inflows (€1 billion) was accounted for by foreign listed shares. Compared with the preceding quarters, investment in investment fund shares grew only marginally by €0.1 billion. By contrast, debt securities were purchased in net terms for the third consecutive quarter, this time in the amount of €0.6 billion, after households had previously been selling them on balance for seven years. Households’ all in all muted investment in the capital markets during the final quarter is not least likely to have been driven by the negative price movements in the stock markets and the associated heightened level of uncertainty.

The transaction-related increase in households’ financial asset holdings contrasted with pronounced valuation losses, which occurred, above all, in connection with a decline in prices for investment fund shares and domestic listed shares. Overall, households’ financial assets contracted by just over €28 billion to €6,016 billion in the reporting quarter.

At just under €17 billion in the fourth quarter, external financing of households in Germany was again very robust. This continued an upward trend that has been ongoing since mid-2013. Borrowed funds consisted mainly of housing loans provided by domestic monetary financial institutions. Overall, liabilities rose by just under €16 billion, or 0.9%, reaching €1,792 billion at the end of the fourth quarter. As debt and nominal gross domestic product (GDP) increased by almost the same extent in the reporting quarter, the debt ratio – defined as total liabilities as a percentage of nominal GDP (four-quarter moving sum) – remained essentially unchanged at the end of the quarter, at 52.9%. The trajectory of financial assets and liabilities pushed total net financial assets down by just over €44 billion to stand at €4,224 billion at the end of the reporting quarter.

Non-financial corporations: acquisition of financial­ assets less dynamic while external financing negative

Compared with the preceding quarter, non-financial corporations acquired fewer financial assets in the fourth quarter of 2018 (€34 billion). This involved scaling back credit claims by around €11 billion on balance – especially vis-à-vis non-resident borrowers. Investment fund shares and other accounts receivable, which include trade credits and advances, were also reduced. By contrast, non-financial corporations expanded their holdings of currency and deposits by €29 billion and acquired unlisted shares and other equity to the tune of just over €9 billion.

Non-financial corporations’ external financing  – which had been continuously positive over the past five years – dropped to -€7 billion. Above all, non-financial corporations scaled back their other liabilities, including trade credits and advances, by just over €21 billion. However, inflows of just under €15 billion were recorded through loan-based financing. These borrowed funds were chiefly provided by domestic non-banks as well as by non-residents. A slightly positive impulse also emanated from debt securities and from financing based on the issuance of shares and other equity.

Taking valuation effects into account, non-financial corporations’ total net financial assets rose perceptibly by €141 billion at year-end, reaching -€1,531 billion. The debt ratio, defined as the sum of issued debt securities, loans and pension provisions as a percentage of nominal GDP (four-quarter moving sum), remained virtually unchanged at 64.9% over the quarter under review because debt grew at around the same rate as 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.

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