In other languages
  • English
Create a book

National accounts and GDP

From Statistics Explained

(Redirected from National accounts – GDP)
Data from September and October 2012. Most recent data: Further Eurostat information, Main tables and Database.
Figure 1: GDP at current market prices, 2001-2011
(EUR 1 000 million) - Source: Eurostat (nama_gdp_c) or (tec00001)
Table 1: GDP at current market prices, 2001, 2010 and 2011 - Source: Eurostat (nama_gdp_c) and (tec00001)
Figure 2: GDP per capita at current market prices, 2001 and 2011
(EU-27=100; based on PPS per inhabitant) - Source: Eurostat (nama_gdp_c) and (tec00001)
Figure 3: Real GDP growth, 2001-2011
(% change compared with the previous year) - Source: Eurostat (nama_gdp_k)
Table 2: Real GDP growth, 2002-2011
(% change compared with the previous year; average 2002-2011) - Source: Eurostat (nama_gdp_k) or (tsieb020)
Table 3: Gross value added at basic prices, 2001 and 2011
(% share of total gross value added) - Source: Eurostat (nama_nace10_c)
Figure 4a: Gross value added, EU-27, 2001-2011
(2005=100) - Source: Eurostat (nama_nace10_k)
Figure 4b: Gross value added, EU-27, 2001-2011
(2005=100) - Source: Eurostat (nama_nace10_k)
Figure 5: Labour productivity, EU-27, 2001 and 2011
(EUR 1 000 per person employed) - Source: Eurostat (nama_nace10_c) and (nama_nace10_e)
Table 4: Labour productivity
(based on PPS), 2001-2011 - Source: Eurostat (tec00116) and (tec00117)
Figure 6: Consumption expenditure and gross capital formation at constant prices, EU-27, 2001-2011
(2005=100) - Source: Eurostat (nama_gdp_k)
Figure 7: Annual rate of change in expenditure components of GDP, EU-27, 2001-2011
(%) - Source: Eurostat (nama_gdp_k)
Figure 8: Expenditure components of GDP, EU-27, 2011 (1)
(% share of GDP) - Source: Eurostat (nama_gdp_c) or (tec00009), (tec00010), (tec00011) and (tec00110)
Table 5: Investment, 2001, 2006 and 2011
(% share of GDP) - Source: Eurostat (nama_gdp_c), (tsdec210) and (tec00022)
Figure 9: Gross fixed capital formation, 2011
(% share of GDP) - Source: Eurostat (nama_gdp_c)
Figure 10: Distribution of income, 2011
(% share of GDP) - Source: Eurostat (nama_gdp_c) or (tec00016), (tec00015) and (tec00013)
Figure 11: Distribution of income, EU-27, 2001-2011
(2005=100) - Source: Eurostat (nama_gdp_c) or (tec00016), (tec00015) and (tec00013)
Table 6: Consumption expenditure of households
(domestic concept), 2001, 2006 and 2011 - Source: Eurostat (nama_fcs_c)
Figure 12: Consumption expenditure of households, EU-27, 2011 (1)
(% of total household consumption expenditure) - Source: Eurostat (nama_co3_c)
Figure 13: Gross national savings, 2001 and 2011 (1)
(% of gross national disposable income) - Source: Eurostat (nama_inc_c)
Table 7: Key ratios of sector accounts, households, 2011 (1) - Source: Eurostat (nasa_ki)
Figure 14: Household saving rate
(gross), 2011 (1)
(%) - Source: Eurostat (nasa_ki)
Figure 15: Household investment rate
(gross), 2011 (1)
(%) - Source: Eurostat (nasa_ki)
Figure 16: Household net financial wealth-to-income ratio, 2011 (1)
(%) - Source: Eurostat (nasa_ki)
Table 8: Key ratios of sector accounts, non-financial corporations, 2011 - Source: Eurostat (nasa_ki)
Figure 17: Investment rate
(gross) of non-financial corporations, 2011 (1)
(%) - Source: Eurostat (nasa_ki)

National accounts are the source for a multitude of well-known economic indicators which are presented in this article. Gross domestic product (GDP) is the most frequently used measure for the overall size of an economy, while derived indicators such as GDP per capita – for example, in euro or adjusted for differences in price levels – are widely used for a comparison of living standards, or to monitor the process of convergence across the European Union (EU).

Moreover, the development of specific GDP components and related indicators, such as those for economic output, imports and exports, domestic (private and public) consumption or investments, as well as data on the distribution of income and savings, can give valuable insights into the driving forces in an economy and thus be the basis for the design, monitoring and evaluation of specific EU policies.

Economic developments in production, income generation and (re)distribution, consumption and investment may be better understood when analysed by institutional sector. In particular, sector accounts provide several key indicators for households and non-financial corporations, like the household saving rate and business profit share.

Main statistical findings

Developments in GDP

Growth in the EU-27’s GDP slowed substantially in 2008 and GDP contracted considerably in 2009 as a result of the global financial and economic crisis. There was a recovery in the level of EU-27 GDP in 2010 and this development continued (albeit at a slower pace) in 2011, as GDP increased to EUR 12 638 000 million – its highest ever level in current price terms (see Figure 1).

The euro area accounted for 74.5 % of this total in 2011, while the sum of the five largest EU Member State economies (Germany, France, the United Kingdom, Italy and Spain) was 71.1 %. However, cross-country comparisons should be made with caution as notably exchange rate fluctuations may significantly influence the development of nominal GDP figures for those EU Member States which have not adopted the euro.

To evaluate standards of living, it is more appropriate to use GDP per capita in purchasing power standards (PPS), in other words adjusted for the size of an economy in terms of population and also for differences in price levels across countries. The average GDP per capita within the EU-27 in 2011 was PPS 25 130, slightly above the peak (PPS 25 020) reached in 2008 prior to the effects of the financial and economic crisis being felt. The relative position of individual countries can be expressed through a comparison with this average, with the EU-27 value set to equal 100. The highest relative value among EU Member States was recorded for Luxembourg, where GDP per capita in PPS was more than 2.7 times the EU-27 average in 2011 (which is partly explained by the importance of cross-border workers from Belgium, France and Germany). On the other hand, GDP per capita was less than half the EU-27 average in Romania and Bulgaria.

Although PPS figures should, in principle, be used for cross-country comparisons in a single year rather than over time, the development of these figures during the past decade suggests that some convergence in living standards took place as Member States that joined the EU in 2004 or 2007 moved closer to the EU average despite some setbacks during the financial and economic crisis. Whereas Luxembourg, Germany, Sweden and Austria moved further ahead of the EU-27 average, comparing the situation in 2011 with that in 2001, several other EU-15 Member States, notably Italy, the United Kingdom, France, Ireland and Belgium, moved closer to the EU-27 average (see Figure 2). From a position below the EU-27 average in 2001, Romania, Slovakia, Estonia, Lithuania, Latvia, Poland and Bulgaria made the greatest moves towards the EU-27 average by 2011, while Greece and Portugal fell back.

The global financial and economic crisis resulted in a severe recession in the EU, Japan and the United States in 2009 (see Figure 3), followed by a recovery in 2010 and 2011. Real GDP fell by 4.3 % in the EU-27 in 2009, while there were contractions of 5.5 % in Japan and 3.1 % in the United States; in both of the other Triad economies the effects of the crisis were already apparent in 2008 when there had been a relatively small reduction in real GDP. The recovery in the EU-27 saw GDP in constant prices increase by 2.0 % in 2010 and this was followed by a further gain of 1.6 % in 2011; in the euro area the corresponding rate was identical in 2010 and was 0.1 percentage points lower in 2011. In Japan and the United States, the recovery in 2010 was more marked than in the EU-27 and while this pattern continued for the United States in 2011, there was a modest contraction in the level of real GDP in Japan (-0.8 %) – reflecting, at least in part, the devastating impact of the Tohoku earthquake and tsunami in March 2011.

Among the EU Member States, real GDP growth varied considerably – both over time and across countries. After a contraction in all of the EU Member States except Poland in 2009, economic growth resumed in 22 countries in 2010, a pattern that was continued in 2011 when real GDP growth was registered in 24 of the EU Member States. The highest growth rates in 2011 were recorded in Estonia (7.6 %), Lithuania (5.9 %) and Latvia (5.5 %). The economies of Slovenia (-0.2 %) and Portugal (-1.7 %) contracted in 2011 – while the recession in Greece deepened, as GDP contracted for the fourth consecutive year (-6.9 % in 2011).

The effects of the financial and economic crisis lowered the overall performance of the EU Member State economies when analysed over the whole of the last decade. The average annual growth rates of the EU-27 and the euro area between 2002 and 2011 were 1.4 % and 1.2 % respectively. The highest growth, by this measure, was recorded for Slovakia and Lithuania (both 4.7 % per annum), followed by Latvia (4.2 %), Estonia (4.1 %), Romania and Poland (both 4.0 %). By contrast, the lowest growth rates for the development of real GDP during the period from 2002 to 2011 were recorded in Italy and Portugal (0.4 % per annum) as well as Denmark (0.6 %).

Main GDP aggregates

Looking at GDP from the output side, Table 3 gives an overview of the relative importance of ten activities in terms of their contribution to the EU-27's gross value added. Despite a decline of 2.0 percentage points between 2001 and 2011, industry (19.5 %) remained the largest activity (at this level of detail) in 2011, followed closely by distributive trades, transport, accommodation and food services (19.4 %) and public administration, education and health (19.1 %); the share of the latter was 1.3 percentage points greater than in 2001. The next largest activities in 2011 were real estate activities (10.3 %), followed by professional, scientific, technical, administrative and support services (hereafter, business services) (10.0 %), construction (6.3 %), financial and insurance services (5.7 %) and information and communication services (4.5 %). The smallest contributions came from entertainment and other services (3.5 %) and agriculture, forestry and fishing (1.7 %).

Services contributed 72.5 % of the EU-27’s total gross value added in 2011 compared with 70.2 % in 2001. The relative importance of services was particularly high in Cyprus, Malta, France (2010 data), Greece, Belgium, Denmark and the United Kingdom where they accounted for more than three quarters of total value added.

Structural change is, at least in part, a result of phenomena such as technological change, developments in relative prices, outsourcing and globalisation, often resulting in manufacturing activities being moved to lower labour-cost regions, both within and outside the EU.

Four activities were particularly affected by the financial and economic crisis: industry experienced the deepest contraction, value added falling overall by 13.8 % (in volume terms) between 2007 and 2009; construction experienced the longest contraction, with its output falling by 10.4 % between 2007 and 2010; business services as well as distributive trades, transport, accommodation and food services experienced just one year of falling value added between 2008 and 2009, but the declines were substantial, -7.3 % and -5.7 % respectively. Smaller reductions in value added were experienced for other activities during the crisis, most notably in 2009 and 2010 for agriculture, forestry and fishing and in 2010 and 2011 for financial and insurance services (see Figure 4).

An analysis of labour productivity per person employed over the ten-year period from 2001 to 2011 shows increases (in current prices) for all activities, ranging from 13.8 % for information and communication services to 38.0 % for industry, with business services (4.1 %) and financial and insurance services (51.0 %) lying respectively below and above this range (see Figure 5). To eliminate the effects of inflation, labour productivity per person can also be calculated using constant price output figures. More detailed data on the development of productivity measured either per person employed or per hour worked shows that labour productivity in those Member States that joined the EU in 2004 or 2007 converged towards the EU-27 average during the last decade (see Table 4). Notably, labour productivity per person employed in Romania increased from 26 % to 49 % of the EU-27 average between 2001 and 2011; Estonia, Slovakia, Lithuania, Latvia and Bulgaria also recorded substantial movements towards the EU-27 average. On the other hand, Italy, recorded a considerable decline in its labour productivity per person in relation to the EU-27 average, and this was also true, to a lesser degree, for Belgium, the United Kingdom and France.

Turning to an analysis of the development of GDP components from the expenditure side it can be noted that final consumption expenditure across the EU-27 rose by 13.2 % in volume terms between 2001 and 2011 (see Figure 6), despite a slight fall in 2009; final consumption expenditure of general government rose at a somewhat faster pace, up 17.1 % between 2001 and 2011. The overall growth in gross capital formation during the same period was lower (5.6 %) due, in large part, to a sharp fall in 2009 while the growth in exports significantly exceeded the growth in imports in 2010 and 2011.

After its fall in 2009, consumption expenditure by households and non-profit institutions serving households recovered in 2010 (up 1.1 % in volume terms) and again in 2011 (0.1 %). From 2009, the pace of growth for EU-27 general government expenditure slowed in volume terms and this rate of change turned negative (-0.2 %) in 2011. Despite modest increases in 2010 (0.2 %) and 2011 (1.4 %), EU-27 gross fixed capital formation failed to fully recover from its sharp fall in 2009 (-13.0 %).

In current price terms, consumption expenditure by households and non-profit institutions serving households contributed 58.0 % of the EU-27's GDP in 2011, while the share of general government expenditure was 21.7 % and that of gross fixed capital formation was 18.6 % (see Figure 8).

Among the EU Member States there was a wide variation in the overall investment intensity (public and private combined) and this may, in part, reflect the different stages of economic development as well as growth dynamics over recent years (see Table 5 and Figure 9). In 2011 gross fixed capital formation (total investment) as a share of GDP was 18.5 % in the EU-27 and 19.2 % in the euro area. It was highest in Romania (22.7 %), the Czech Republic (23.9 %) and Slovakia (22.4 %) and lowest in Ireland (10.1 %), Greece (14.0 %) and the United Kingdom (14.2 %). The vast majority of investment was made by the private sector: In 2011 private sector investment accounted for 16.1 % of the EU-27's GDP, whereas the equivalent figure for public sector investment was 2.5 %. With 5.7 %and 5.2 %, public investment was highest in Poland and Romania, while private investment was highest in Austria (20.3 %).

An analysis of GDP within the EU-27 from the income side shows that the distribution between the production factors of income resulting from the production process was dominated by the compensation of employees, which accounted for 49.1 % of GDP in 2011. The share of gross operating surplus and mixed income was 39.0 % of GDP, while that for taxes on production and imports less subsidies was 11.8 % (see Figure 10). Figure 11 shows that the respective income aggregates had, by 2011, broadly recovered from their losses experienced during the financial and economic crisis. In 2009 compensation of employees fell by 3.0 %, but by 2011 was 2.2 % higher than its corresponding level recorded in 2008. For the gross operating surplus and mixed income, there was already stagnation in 2008, followed by a fall of 8.5 % in 2009; by 2011 this income aggregate had returned to a level within 0.6 % of its pre-crisis peak (in 2007). The fall in taxes on production and imports less subsidies had already started in 2008 (-2.7 %) and accelerated in 2009 (-8.6 %); these losses had been recovered by 2011 when this income aggregate stood 1.1 % above its previous peak (also 2007).

Household consumption

The consumption expenditure of households accounted for at least half of GDP in the majority of EU Member States in 2011. This share was highest in Greece (76.2 %, 2010 data), Cyprus (72.2 %), and Malta (70.3 %). By contrast, it was lowest in Luxembourg (36.4 %, 2010 data) which had, nevertheless, by far the highest average household consumption expenditure per capita (PPS 24 140, 2010 data) – see Table 6.

More detailed data on the structure of total household consumption expenditure in the EU-27 in 2010 show that nearly a quarter (23.6 %) was devoted to housing, water, electricity, gas and other fuels (see Figure 12). Transport expenditure (13.0 %) and expenditure on food and non-alcoholic beverages (12.9 %) were the next most important expenditure categories. Together, the remaining consumption expenditure categories in Figure 12 accounted for almost half (48.6 %) of total household consumption expenditure.

National savings

Gross national saving as a proportion of gross national disposable income averaged 19.1 % and 19.9 % in the EU-27 and the euro area in 2011. Among the EU Member States this proportion reached its highest level in Estonia (26.7 %), the Netherlands (26.5 %) and Sweden (26.0 %) and its lowest level in Greece (3.3 %). Compared with 2001, there was a relative decline in gross national savings for the EU-27, the euro area and a majority of the EU Member States. The most substantial decreases (in percentage point terms) were recorded in Ireland, Finland, Greece and Portugal where savings as a proportion of disposable income fell by 6.0 percentage points or more, while the largest increases were recorded in Bulgaria and Romania where the relative importance of savings increased by 10.4 percentage points and 6.9 points respectively.

Sector accounts

Table 7 shows that the household saving rate in 2011 was 2.1 percentage points higher in the euro area (13.2 %) than in the EU-27 (11.1 %). This gap is mainly explained by the relatively low saving rate of the United Kingdom (6.0 %) and the relatively high rates in Germany (16.5 %) and France (15.7 %). Among the Member States within the euro area, eight (including one with data from 2009) had household saving rates above the EU-27 average and seven below, with two (Greece and Malta) not available (see Figure 14). The highest household savings rate among the EU Member States not in the euro area was recorded in Sweden (12.9 %).

Having decreased by 1.5 percentage points in 2010, the EU-27 household saving rate fell in 2011 by a further 0.6 percentage points, which was broadly the same as the decrease recorded within the euro area (-0.5 points). The largest reductions in the rate of savings between 2010 and 2011 were observed in Lithuania and Cyprus (both -4.8 points) and Latvia (-4.2 points); changes in the other EU Member States ranged from a decrease of 2.1 points to an increase of 1.6 points.

In 2011, the household investment rate was 8.3 % in the EU-27. This rate ranged from 10 % or more in Belgium, Italy, the Netherlands and Finland to 5.1 % in Hungary, with Latvia (4.2 %) and Lithuania (3.4 %) below this range (see Figure 15). The household investment rate was relatively unchanged in the EU-27 and the euro area in 2011, when compared with the year before. It fell by 1 percentage point or more in the Czech Republic, Cyprus, Hungary and Luxembourg (2009 data). By contrast, the household investment rate increased by 1.0 percentage point in Latvia and by 1.1 percentage points in Estonia.

In 2011, the household debt-to-income ratio varied considerably between EU Member States. While it was below 50 % in Slovenia, Slovakia and Lithuania, it exceeded 200 % in Ireland, the Netherlands and Denmark – a rate of 200 % indicates that it would take two years of disposable income for households to repay their debt. A comparatively high debt-to-income ratio was recorded in several northern European Member States and the Iberian peninsula. By contrast, in central and eastern Europe, the debt-to-income ratio was comparatively low with household debt never greater than annual disposable income. It should be borne in mind that high household debt may to some extent mirror high levels of financial assets, as shown in the analysis of the household net financial wealth-to-income ratio. It may also mirror the ownership of non-financial assets, such as dwellings, or be impacted by national provisions that foster borrowing (for example, the deduction of interest from taxes).

In 2011, the household debt-to-income ratio decreased (compared with 2010) most notably in Latvia (-9.0 points) and to a lesser degree in the United Kingdom (-4.6 points), while it increased most in Belgium (4.0 points) – a larger increase was recorded for Luxembourg (5.6 points), but the latest data is for 2009 (compared with 2008).

Like the debt-to-income ratio, the household net financial wealth-to-income ratio differed considerably between EU Member States. The Netherlands and Belgium recorded the highest ratios in 2011 at around 325 %, and relatively high values were also observed in the United Kingdom, as well as in Switzerland. Latvia had a remarkably low net financial assets-to-income ratio, as did Norway (see Figure 16).

Figure 17 shows the business investment rate in 2011 was 20.2 % in the EU-27. The highest rates among the EU Member States were recorded in Slovakia, Austria and the Czech Republic, all above 25 %; the lowest rate, by far, was recorded in Ireland (8.1 %). The business investment rates of the five largest EU-27 economies diverged quite significantly: in Spain and Italy the rates were clearly above the EU-27 average; in France the rate was in line with the average; while in Germany and the United Kingdom the rates were clearly below the average. The business investment rate rose in the majority of the EU Member States (with 2010 and 2011 data available), most notably in the Baltic Member States and Slovakia, and on average by 0.5 percentage points across the EU-27 as a whole. The business investment rate fell by in excess of 2 percentage points in Poland (2010 compared with 2009), Cyprus and Luxembourg (2009 compared with 2008) – see Table 8.

The profit share of non-financial corporations was 38.2 % in the EU-27 in 2011. The lowest shares were recorded in France and Slovenia, around 30 %, while profit shares above 50 % were posted in Latvia, Slovakia, Ireland and Lithuania, as well as in Norway. Profit shares remained unchanged in the EU-27 as a whole between 2010 and 2011. Ireland and Estonia recorded the highest percentage point increases between 2010 and 2011, up by 3.2 points and 3.1 points respectively, while Lithuania and Spain recorded increases of more than 2 points; Switzerland also recorded a large increase (up 3.9 percentage points). Nine EU Member States with data available for 2010 and 2011 experienced reductions in their profit shares in 2011, most notably France (-1.5 percentage points).

Data sources and availability

The European system of national and regional accounts (ESA) provides the methodology for national accounts in the EU. The current version, ESA95, was fully consistent with worldwide guidelines for national accounts, the 1993 SNA. Following international agreement on an updated version of the SNA in 2008, a respective update of the ESA – ESA2010 – is, at the time of writing, close to finalisation.

GDP and main components

The main aggregates of national accounts are compiled from institutional units, namely non-financial or financial corporations, general government, households, and non-profit institutions serving households (NPISH).

Data within the national accounts domain encompasses information on GDP components, employment, final consumption aggregates and savings. Many of these variables are calculated on an annual and on a quarterly basis.

GDP is the central measure of national accounts, which summarises the economic position of a country (or region). It can be calculated using different approaches: the output approach; the expenditure approach; and the income approach.

An analysis of GDP per capita removes the influence of the absolute size of the population, making comparisons between different countries easier. GDP per capita is a broad economic indicator of living standards. GDP data in national currencies can be converted into purchasing power standards (PPS) using purchasing power parities (PPPs) that reflect the purchasing power of each currency, rather than using market exchange rates; in this way differences in price levels between countries are eliminated. The volume index of GDP per capita in PPS is expressed in relation to the EU-27 average (set to equal 100). If the index of a country is higher/lower than 100, this country's level of GDP per head is above/below the EU-27 average; this index is intended for cross-country comparisons rather than temporal comparisons.

The calculation of the annual growth rate of GDP at constant prices, in other words the change of GDP in volume terms, is intended to allow comparisons of the dynamics of economic development both over time and between economies of different sizes, irrespective of price levels.

Complementary data

Economic output can also be analysed by activity: at the most aggregated level of analysis ten NACE Rev. 2 headings are identified: agriculture, hunting and fishing; industry; construction; distributive trades, transport, accommodation and food services; information and communication services; financial and insurance services; real estate activities; professional, scientific, technical, administrative and support services; public administration, defence, education, human health and social work; arts, entertainment, recreation, other services and activities of household and extra-territorial organisations and bodies. An analysis of output by activity over time can be facilitated by using a volume measure – in other words, by deflating the value of output to remove the impact of price changes; each activity is deflated individually to reflect the changes in the prices of its associated products.

A further set of national accounts data is used within the context of competitiveness analyses, namely indicators relating to the productivity of the workforce, such as labour productivity measures. Productivity measures expressed in PPS are particularly useful for cross-country comparisons. GDP in PPS per person employed is intended to give an overall impression of the productivity of national economies. It should be kept in mind, though, that this measure depends on the structure of total employment and may, for instance, be lowered by a shift from full-time to part-time work. GDP in PPS per hour worked gives a clearer picture of productivity as the incidence of part-time employment varies greatly between countries and activities. The data are presented in the form of an index in relation to the EU average: if the index rises above 100, then labour productivity is above the EU average.

Data on consumption expenditure may be broken down according to the classification of individual consumption according to purpose (COICOP), which identifies 12 different headings at its most aggregated level. Annual information on household expenditure is available from national accounts compiled through a macroeconomic approach. An alternative source for analysing household expenditure is the Household budget survey (HBS): this information is obtained by asking households to keep a diary of their purchases and is much more detailed in its coverage of goods and services as well as the types of socioeconomic analysis that are made available. HBS is only carried out and published every five years – the latest reference year currently available is 2005.

Household saving is the main domestic source of funds to finance capital investment. The system of accounts provides for both disposable income and saving to be shown on a gross basis, in other words, with both aggregates including the consumption of fixed capital.

Sector accounts

Sector accounts group together economic subjects with similar behaviour into institutional sectors, such as: households, non-financial corporations, financial corporations and government. Grouping economic subjects in this way greatly helps to understand the functioning of the economy. The behaviour of households and non-financial corporations is particularly relevant in this respect.

The households sector covers individuals or groups of individuals acting as consumers and entrepreneurs provided, in the latter case, that their activities as market producers are not carried out by separate entities. For the purpose of the analysis within this article, this sector has been merged with the relatively small sector of non-profit institutions serving households (for example, associations and charities).

Non-financial corporations cover enterprises whose principal activity is the production of goods and non-financial services to be sold on the market. It includes incorporated enterprises, but also unincorporated enterprises as long as they keep a complete set of accounts and have an economic and financial behaviour which is similar to that of corporations. Small businesses (such as sole traders and entrepreneurs operating on their own) are recorded under the households sector.

Sector accounts record, in principle, every transaction between economic subjects during a certain period and can also be used to show the opening and closing stocks of financial assets and liabilities in financial balance sheets. These transactions are grouped into various categories that have a distinct economic meaning, such as the compensation of employees (comprising wages and salaries, before taxes and social contributions are deducted, and social contributions paid by employers).

In turn, these categories of transactions are shown in a sequence of accounts, each of which covers a specific economic process. This ranges from production, income generation and income (re)distribution, through the use of income, for consumption and saving, and investment, as shown in the capital account, to financial transactions such as borrowing and lending. Each non-financial transaction is recorded as an increase in the resources of a certain sector and an increase in the uses of another sector. For instance, the resources side of the interest transaction category records the amounts of interest receivable by different sectors of the economy, whereas the uses side shows interest payable. For each type of transaction, total resources of all sectors and the rest of the world equal total uses. Each account leads to a meaningful balancing item, the value of which equals total resources minus total uses. Typically, such balancing items, such as GDP or net saving, are important economic indicators; they are carried over to the next account.

The analysis in this article focuses on a selection of indicators from the wealth of sector accounts data. Households’ behaviour is described through indicators covering saving and investment rate, as well as debt-to-income and net financial wealth-to-income ratios. The analysis of non-financial corporations is based on the business investment rate and business profit share.

Context

European institutions, governments, central banks as well as other economic and social bodies in the public and private sectors need a set of comparable and reliable statistics on which to base their decisions. National accounts can be used for various types of analysis and evaluation. The use of internationally accepted concepts and definitions permits an analysis of different economies, such as the interdependencies between the economies of the EU Member States, or a comparison between the EU and non-member countries.

Business cycle and macroeconomic policy analysis

One of the main uses of national accounts data relates to the need to support European economic policy decisions and the achievement of economic and monetary union (EMU) objectives with high-quality short-term statistics that allow the monitoring of macroeconomic developments and the derivation of macroeconomic policy advice. For instance, one of the most basic and long-standing uses of national accounts is to quantify the rate of growth of an economy, in simple terms the growth of GDP. Core national accounts figures are notably used to develop and monitor macroeconomic policies, while detailed national accounts data can also be used to develop sectoral or industrial policies, particularly through an analysis of input-output tables.

Since the beginning of the EMU in 1999, the European Central Bank (ECB) has been one of the main users of national accounts. The ECB’s strategy for assessing the risks to price stability is based on two analytical perspectives, referred to as the ‘two pillars’: economic analysis and monetary analysis. A large number of monetary and financial indicators are thus evaluated in relation to other relevant data that allow the combination of monetary, financial and economic analysis, for example, key national accounts aggregates and sector accounts. In this way monetary and financial indicators can be analysed within the context of the rest of the economy.

The Directorate-General for Economic and Financial Affairs produces the European Commission’s macroeconomic forecasts twice a year, in the spring and autumn. These forecasts cover all EU Member States in order to derive forecasts for the euro area and the EU-27, but they also include outlooks for candidate countries, as well as some non-member countries.

The analysis of public finances through national accounts is another well established use of these statistics. Within the EU a specific application was developed in relation to the convergence criteria for EMU, two of which refer directly to public finances. These criteria have been defined in terms of national accounts figures, namely, government deficit and government debt relative to GDP. See the article on government finance statistics for more information.

Regional, structural and sectoral policies

As well as business cycle and macroeconomic policy analysis, there are other policy-related uses of European national and regional accounts data, notably concerning regional, structural and sectoral issues.

The allocation of expenditure for the structural funds is partly based on regional accounts. Furthermore, regional statistics are used for ex-post assessment of the results of regional and cohesion policy.

Encouraging more growth and more jobs is a strategic priority for both the EU and the Member States, and is part of the Europe 2020 strategy. In support of these strategic priorities, common policies are implemented across all sectors of the EU economy while the Member States implement their own national structural reforms. To ensure that this is as beneficial as possible, and to prepare for the challenges that lie ahead, the European Commission analyses these policies.

The European Commission conducts economic analysis contributing to the development of the common agricultural policy (CAP) by analysing the efficiency of its various support mechanisms and developing a long-term perspective. This includes research, analysis and impact assessments on topics related to agriculture and the rural economy in the EU and non-member countries, in part using the economic accounts for agriculture.

Target setting, benchmarking and contributions

Policies within the EU are increasingly setting medium or long-term targets, whether binding or not. For some of these, the level of GDP is used as a benchmark denominator, for example, setting a target for expenditure on research and development at a level of 3 % of GDP.

National accounts are also used to determine EU resources, with the basic rules laid down in a Council Decision. The overall amount of own resources needed to finance the EU budget is determined by total expenditure less other revenue, and the maximum size of the own resources are linked to the gross national income of the EU.

As well as being used to determine budgetary contributions within the EU, national accounts data are also used to determine contributions to other international organisations, such as the United Nations (UN). Contributions to the UN budget are based on gross national income along with a variety of adjustments and limits.

Analysts and forecasters

National accounts are also widely used by analysts and researchers to examine the economic situation and developments. Financial institutions’ interest in national accounts may range from a broad analysis of the economy to specific information concerning savings, investment or debt among households, non-financial corporations or other institutional sectors. Social partners, such as representatives of businesses (for example, trade associations) or representatives of workers (for example, trade unions), also have an interest in national accounts for the purpose of analysing developments that affect industrial relations. Among other uses, researchers and analysts use national accounts for business cycle analysis and analysing long-term economic cycles and relating these to economic, political or technological developments.

See also

Further Eurostat information

Publications

Main tables

Annual national accounts (t_nama)
Quarterly national accounts (t_namq)

Database

Annual national accounts (nama)
Quarterly national accounts (namq)
Supply, use and Input-output tables (naio)

Dedicated section

Methodology / Metadata

Source data for tables and figures (MS Excel)

Other information

External links


Views