Data published by Eurostat shows that profitability of non-financial corporations in the Euro-zone slipped back to 38.5% in the 4th quarter of 2024; this is its lowest level since the 1st period of 2020. The business investment rate also fell – in this case to 21.3%, which matches the rate seen in Q2-2024 but is the joint-lowest since Q1-2015.
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 lower investment rate was because business gross fixed capital formation declined by -1.2%, while gross value-added increased by +0.8%.
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. The ratio eased down because business compensation of employees (wages and social contributions) plus taxes less subsidies on production rose more quickly (+1.3%) than gross value added (+0.8%).
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 (04 April – listed as “household saving rate …” which is part of the same document) or requested from MTA.