Bad news for those in Brussels and Berlin who expected higher competitiveness through austerity budgets. Eurostat said today that in the fourth quarter of 2011, compared with the previous three months, business investment rates decreased in both the euro area and the European Union. Furthermore, official data also showed that in the euro area, the business profit share declined as wage costs increased while value added fell slightly.
From October to December in 2011, the gross investment rate of non-financial corporations was 20.2% in the EU, compared with 20.6% in the third quarter of 2011. In the euro area, the investment rate was 20.7% in the fourth quarter of 2011, compared with 21.0% in the previous quarter, as investment fell at a higher pace (-1.7%) than gross value added (-0.1%). Total stocks (materials, supplies and finished goods) remained almost unchanged after having increased since the second quarter of 2010.
In the EU, the gross profit share of non-financial corporations was unchanged at 37.7% in the fourth quarter of 2011, but in the euro area, the profit share was 38.1% in the fourth quarter of 2011 compared with 38.4% in the previous quarter. The decline in the profit share was due to an increase in compensation of employees (wages and social contributions) plus taxes less subsidies on production (+0.4%) while value added fell slightly (-0.1%).
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