Data published by Eurostat shows that the business investment rate improved to 22.2% in the 1st quarter of 2025, its best level since the 2nd period of 2023 but still relatively low by historical standards. Profitability of non-financial corporations in the Euro-zone improved to 38.8% – this is its best rate for a year but is also quite low by past standards.
The gross investment rate of non-financial corporations is defined as gross fixed capital formation divided by gross value added – this ratio relates investment in fixed assets (buildings, machinery etc.) to the value added created during the production process. The increase in the investment rate was because business gross fixed capital formation grew by +5.2%, a much faster rate than the +1.4% growth in gross value-added.
The investment ratio can be affected by large imports (or exports) of intellectual property products reflecting globalisation; this particularly affects Ireland where the presence of large multi-national headquarters operations makes their data very volatile, but it was last noticed in Q1-2020.
The profit share of non-financial corporations is defined as gross operating surplus divided by gross value added. This shows the share of the value added created during the production process remunerating capital and it is the complement of the share of wage costs (plus other taxes minus other subsidies on production) in value added. This improved because business compensation of employees (wages and social contributions) plus taxes and less subsidies on production rose less quickly (+0.9%) than gross value added (+1.4%).
At this stage we only have data for the Euro-zone and the EU figures won’t be available for a couple of weeks.
You can get the full details from the Eurostat News Release which can be downloaded from their website at https://ec.europa.eu/eurostat/news/euro-indicators (03 July – listed as “household saving rate …” which is part of the same document) or requested from MTA.