Thread by @ndrea_terzi

Update of sectoral financial balances (flow of funds) in the #Euroarea (EA)

---Chart built on @ecb data - now including 2020 Q2---

*This time is different*

With the #COVID19 shutdown, households’ financial savings have been rising fast, as expected.

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Before the virus tsunami hit, the balance of non-financial corporations had turned negative with rising capital spending.

It is now slightly positive, reflecting the net effect of lost revenue and a faster falling rate of investment.

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With the EA current account surplus virtually unchanged, the increase in financial savings has been funded entirely by rising government deficits, with overall EA deficit/GDP ratio approaching 4% (and rising).

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More info on the chart:

The chart shows rolling four quarters data.

The red bars (when positive) track the flow of financial savings, i.e., the negative net spending flows (spending<income) by resident households (dark red) and by financial corporations (light red).

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The green bars (when negative) track the internal sources of financial savings, i.e., the positive net spending flows (spending>income) by resident non-financial corporations (light green) and by all 19 consolidated EA governments (dark green).

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The yellow bars track foreign net spending into the EA. When below zero, EA runs a current account surplus.

Before #COVID19, EA balances described a vulnerable economy. They now simply outline an economy that first and foremost needs to be rescued from a scary pandemic.

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