In 2007, households, producing enterprises and institutional investors in Germany have significantly rebalanced their investment – not least as a result of the financial market turbulence. According to the latest financial accounts data of the Deutsche Bundesbank, this involved a preference for bank deposits and a reduction in securities holdings. The financial investment of the non-financial sectors (including general government) rose by €40 billion to just over €280 billion in the past year. At the same time, their demand for financing fell by one-third to just under €100 billion. The government's lower capital requirement and the debt reduction of households made a particular contribution to this. In total, the German economy's net capital export to foreign countries increased sharply; in 2007, it amounted to around 7½% of gross domestic product (GDP).

Households

(-€17 billion) than in 2006. However, this was associated with significant portfolio shifts. The increase in households' bank deposits, at €86 billion, was twice as high as in 2006. This was mainly in favour of the short-term time deposits. Compared with other savings vehicles, their remuneration at market rates was evidently attractive, especially towards the end of the year. By contrast, the securities holdings of households were reduced across the board. For example, households reduced their equity investments by around €16 billion net and sold debt securities amounting to some €40 billion. This is also likely to have affected certificates issued by banks, which are often similar to derivatives and which, depending on their characteristics, have become less attractive owing to the turbulence in the financial markets. Holdings of investment fund shares were acquired to the value of €25 billion. In this case, households showed a preference mainly for instruments of foreign funds, which are, however, often owned by German banks. In 2006, by contrast, households sold fund shares worth €7 billion net. As usual, the financial investments with insurers and pension funds, which traditionally are based on longer-term savings plans and regular inpayments developed much more steadily in 2007 (€49 billion compared with €50 billion in 2006).

All in all, households spent around €160 billion on topping up financial assets and on investment in fixed assets (mainly residential property). The amount of their savings showed a further increase and, as in the two preceding years, exceeded investment. The saving ratio thus showed a marked rise in 2007 from 10.5% to 10.9% of disposable income. Likely major contributors to this development were anticipatory effects as a result of the VAT increase at the start of 2007 and the dampening of households' propensity to spend owing to price developments in energy and food towards the end of the year.

Households' financial assets increased by €150 billion to around €4,560 billion at transaction values and after value adjustments and were almost three times as high as disposable income at the end of 2007. At the same time, their debt showed a further decline in 2007, namely by almost €20 billion to €1,550 billion. By the end of 2007, the debt ratio had gone down to around 100% of disposable income and was thus 13 percentage points below its peak at the beginning of this decade.

Producing enterprises

The producing enterprises greatly expanded their financial investment in 2007 by almost €60 billion to €157 billion. This was due mainly to the topping up of time deposits (€54 billion) and very buoyant and also crossborder equity investment (almost €100 billion). By contrast, debt securities were sold on a considerable scale in net terms. While the sale of money market paper was probably also due to the uncertainty in the wake of the financial market turbulence, the reduction in bond market investment is more likely to be connected with the financing of the external corporate growth.

Enterprises' external financing increased slightly to around €110 billion in 2007 and thus accounted for almost one-third of the enterprises' total funds. In the reporting year, they took out loans of €55 billion on balance from domestic and foreign banks, which was about twice as much as in 2006. These were mostly longer-term loans in line with the fairly dynamic investment in fixed assets. By selling equity and short-term debt securities, the producing enterprises accumulated funds amounting to €40 billion. In contrast to previous years, financial and trade credits, which were granted mainly by foreign firms among group affiliates, played only a subordinate role in 2007.

Institutional investors

Insurers and pension funds topped up their bank deposits by almost €40 billion in the reporting year. As usual, they showed a preference for longerterm time deposits. Mutual fund shares, which have the second-largest share after bank deposits in the portfolio of the insurance sector, were acquired only on a relatively minor scale (€15 billion). Insurers reduced their net equity investments. Other financial institutions, which include mainly the investment funds, also topped up their liquidity cushion in the form of bank deposits more than usual in 2007, namely by €34 billion. On the other hand, shares were sold on a large scale (€41 billion). By contrast, other financial institutions acquired debt securities and fund shares worth around €30 billion, as they had done in 2006.

Note: The Bundesbank will examine the results of the 2007 financial accounts in more detail in its next Monthly Report.

The data tables for the 2007 financial accounts may be found at the website. The complete annual results for 1991-2007 will be published on the internet as part of Special Statistical Publication 4, probably at the end of May, and will be sent in printed form upon request. Since the beginning of 2007, the Bundesbank has published the quarterly data of the financial accounts in the statistical section of the Monthly Report (Table VIII). They are also available as time series on the internet.

Background information

The Deutsche Bundesbank – as one of the first central banks in the world – started to compile and publish the financial accounts as early as the mid1950s. The financial accounts show all funding flows of an economy in an aggregated form. They show to what extent and in what form which sector (ie households, enterprises or government) provides or draws on financial resources. Apart from the financial transactions, the financial accounts also provide information on the financial assets and the level of debt of households, enterprises and government.