Statistical Release 7 May 2015

Transcription

1 Statistical Release 7 May 2015 Quarterly Financial Accounts Household net worth now stands at its highest level since Q Household net worth rose to 600.8bn or 130,331 per capita during Q This represented an increase of 4.3 per cent over the quarter. Household net worth now stands at its highest level since Q Household debt continued to decline during Q4 2014, falling to 157bn or 34,069 per capita. This represented a decline of 1.6 per cent over the quarter. Overall debt has fallen by 22.9 per cent since its peak at Q Indicators of household debt sustainability also continued to improve. Debt as a proportion of disposable income declined by 3.7 percentage points, falling to per cent. This was its lowest level since Q Non-financial corporation (NFC) debt as a percentage of GDP continued its downward trend during Q4 2014, falling by 1.6 percentage points to reach 185 per cent. Household Net Worth

2 1. Net Lending/Borrowing of All Sectors 1 The domestic economy continued to be a net lender during Q4 2014, as deleveraging by households and non-financial corporates continued to outstrip the net borrowing of government and financial corporates (Chart 1.1). Net lending by the domestic economy was lower in Q compared to the previous quarter. This largely reflected reduced net lending by households. Chart 1.1 Net Lending/Borrowing of all Sectors (Net lender) (Net borrower) 2. Private Sector Debt Private sector non-consolidated debt 2 to GDP declined for the fourth consecutive quarter during Q4 2014, falling by 4.5 percentage points to per cent of GDP (Chart 2.1). This reflected an increase in annualised GDP which more than offset a net increase in private sector debt of 0.5bn. Household Debt declined by 2.6bn in Q4, however this was outstripped by an increase in NFC debt in the quarter of 3.1bn. Chart 2.1 Private Sector Debt to GDP Private sector indebtedness forms part of the EU Commission s scoreboard of macroeconomic imbalances. The Commission sets an indicative threshold of 160 per cent of GDP for private sector debt sustainability, substantially lower than Ireland s per cent. However, this threshold does not take account of the large Multinational Corporate sector in Ireland. 3 1 A positive value indicates that a sector is a net lender and a negative value indicates that a sector is a net borrower. Overall, the sum of net lending/borrowing of all sectors will sum to zero as, for every lender, there must be a corresponding borrower. 2 Debt is comprised of debt securities and loans. The Private Sector is composed of households and NFCs. 3 The private sector debt indicator is examined in M. Cussen (2014) Deciphering Ireland s Macroeconomic Imbalance Indicators, Central Bank of Ireland Conference Macro to Micro A New Era in Financial Statistics.

3 3. Household Sector Household net worth 4 rose to 600.8bn or 130,331 per capita during Q (Chart 3.1). This represented an increase of 4.3 per cent over the quarter. Household net worth now stands at its highest level since Q The mix of assets is however different than in the past with financial assets accounting for a high share of this wealth. The rise in net worth over the quarter largely reflected increases in housing assets ( 14.8bn) and declining household liabilities ( 2.3bn). Further increases in financial assets ( 7.9bn), largely owing to an increase in the value of insurance technical reserves 5, also contributed towards the increase in net worth. Overall net worth has risen by 33.2 per cent since its lowest level at Q Chart 3.1 Household Net Worth Chart 3.2 Household Debt Household debt continued to decline during Q4 2014, falling to 157bn or 34,069 per capita (Chart 3.2). This represented a decline of 1.6 per cent over the quarter. Overall debt has fallen by 22.9 per cent since its peak at Q Indicators of household debt sustainability also continued to improve (Chart 3.3). Debt as a proportion of disposable income declined by 3.7 percentage points, falling to per cent. This was its lowest level since Q4 2005, however it remains high by international standards 6. The decline in this indicator reflected both further reductions in debt, as well as increases in disposable income. Debt as a proportion of total assets also continued to decline, falling by 1 percentage point to reach 20.4 per cent. This was its lowest level since Q The reduction in this ratio Chart 3.3 Household Debt indicators 4 Household net worth is calculated as the sum of household housing and financial assets minus their liabilities. The Central Bank of Ireland estimate of housing assets is based on the size and value of housing stock. Data on the value of housing is obtained from the CSO s Residential Property Price Index (RPPI). 5 Insurance technical reserves include life assurance policies and pension funds. 6 A cross country comparison for Q is contained in A. Kelly and O Leary B. (2014) Box B: Analysis of Recent Trends of Household Debt Reduction. Central Bank of Ireland, Quarterly Bulletin, Q1.

4 reflected both declining debt levels, as well as increased household assets. Chart 3.4 Household Transactions in Financial Assets, Four Quarter Moving Average Household investment in financial assets increased in Q4 2014, totalling 1.24bn. This was its highest level since Q Investment in currency and deposits was 212m during Q4 2014, representing the third consecutive increase in this asset. Investment in shares and other equity fell by 46m while insurance and technical reserves rose by 39m. Household net lending decreased to 2.6bn during Q Chart 3.5 indicates that this is mainly attributable to a rise of 154m in household investment in financial assets being offset by a decrease in repayments of liabilities by households of 404m. Combining household saving and gross capital formation 7 data from the CSO s non-financial accounts with households transactions data from Central Bank of Ireland s Quarterly Financial Accounts allows for a decomposition of how households use their savings 8. When measured as a four-quarter moving average, household savings remained largely unchanged from Q totalling 3.1 billion during Q (Chart 3.6). During Q4 2014, households largely used their savings to reduce debt ( 1.4 billion) and to invest in gross fixed capital formation ( 1.5 billion). The latter includes housing and related improvements. Investment in currency and deposits also contributed towards household savings. Chart 3.5 Household Net Lending/Borrowing, Four- Quarter Moving Average Chart 3.6 Household Saving Decomposed by Use, Four-Quarter Moving Average 7 Gross capital formation consists of acquisitions of fixed assets less disposals. It includes acquisitions of dwellings. 8 The derivation of savings from a non-financial accounts perspective and a financial accounts perspective is elaborated upon further in M. Cussen, O Leary B., Smith D. (2012), The Impact of the Financial Crisis on Households: a Cross Country Comparison, Central Bank of Ireland, Quarterly Bulletin No. 2.

5 4. Non-Financial Corporate Sector Non-financial corporation (NFC) debt as a percentage of GDP continued its downward trend during Q4 2014, falling by 1.6 percentage points to reach 185 per cent (Chart 4.1). This was the fourth consecutive quarter where NFCs showed a decline in debt relative to GDP. The decrease in this debt ratio in Q reflected a further increase in annualised GDP over the quarter. The decline in the ratio occurred despite a rise in NFC debt by 3.08bn over the quarter. When analysing Irish NFC debt trends, it is important to note that Ireland has substantial multinational corporation activities, which can make debt volatile from quarterto-quarter. Chart 4.1 NFC Debt Chart 4.2 NFC Debt Sustainability Ratios NFC debt relative to its financial assets and liabilities declined during Q (Chart 4.2). Both indicators have fallen every quarter since Q Debt as a percentage of financial assets decreased to 36.9 per cent, due to a rise in financial assets of 47.9 billion. Debt relative to total liabilities declined to 31 per cent, due to an increase in total liabilities of 65.1 billion. The latter largely reflected a rise in the value of shares and other equities.

6 5. Further information The full data series for Ireland, quarterly commentary and notes on compilation are available from the Central Bank website at: Pages/releases.aspx AFA published by the CSO and QFA published by the Central Bank show differences for the MFI and government sectors. These arise from the classification and revision practices adopted by each institution following the introduction of ESA These differences are fully explainable and do not draw into question the quality of the respective statistical data. Both institutions are working closely to ensure a consistent approach in future publications. Euro area statistics are available from the ECB website at: For queries contact: Central Bank, Press Office on (01)