How to Read Flow of Funds Accounts : continued

Reading Sector Tables

Sector Tables

'Sectors' are the issuers and purchasers of securities that appear in the left column of the instrument tables of flow of funds accounts.

We refer to the sectors as 'players' to remind us that these sector tables represent groups of people, rather than legal concepts like stocks and bonds.

Sectors can be motivated to buy and sell securities. Seeking and understanding this motivation is the essense of Capital Flow Analysis.

Sector tables present partial balance sheets and income statements for each of the players that deal in the instruments followed by the Federal Reserve.

The basic pattern of a sector table is as follows:

Typical Sector Table
	Period 1	Period 2
NIPA, Income, Savings	XXX	XXX
Instruments (Assets)	XXX	XXX
Other Assets	XXX	XXX
Instruments (Liabilities)	XXX	XXX
Other Liabilities	XXX	XXX
Discrepancies	XXX	XXX

The data that appears as instrument assets and liabilities in the sector tables matches the data in the related instrument tables.

You might spent a few minutes to check this out.

Look up the net flow of equities purchased by life insurance companies in the sector table (F.117) and check this against the figure shown in the instrument table for corporate equities (F.213).

The sector tables also present balances for other assets and liabilities for which there is no corresponding instrument table.

For example, the Household sector has a line for the asset 'consumer durable goods' for which there is no corresponding instrument table.

The NIPA group of items have no corresponding instrument tables and are not exactly the same as the figures on the profit and loss accounts of the various players, although they may be used as a proxy for such balances.

Many accounts that would appear on the balance sheets of an entity in the sector do not appear on the sector tables at all.

For example, most fixed assets are ignored, as are items like prepaid expenses, goodwill, reserve for bad debts, and capitalized leases.

Don't Miss the Forest for the Trees

Federal Reserve Release Z.1, 'The Flow of Funds Accounts of the United States', presents about 172 statistical tables and over one hundred thousand data items, when historical data is included.

It is easy to get lost in this mass of data, missing the forest for the trees.

Furthermore, there are many different kinds of consumers of flow of funds data and the capital flow analyst needs to focus on those particular items that are relevant to the task of explaining supply and demand in the capital market.

This website is designed specifically to make your job as an analyst easier, by providing focused access to the data, as well as conveniently organized research sources.

Before proceeding, check your progress:

Self-Test

Sector tables show: Purchasers by class of investment asset. Data for estimated income or savings. Sector liabilities for securities outstanding. A sector's non-securitized liabilities.
Which item never appears in the left column of a sector table: A sector's gross savings or income. Number employed in the sector. Financial assets owned by the sector. A breakdown of a sector's liabilities.
Which is the relationship between sector and instrument tables? Both are part of flow of funds accounting. Instrument data is also in sector tables. All sector data appears in instrument tables. There is no relationship.