In the first six months of 2011, Dutch consumption expenditure remained at the same level as one year previously. In June, households even spent one percent less on goods and services than twelve months previously. It was the first decrease in well over a year. Consumption expenditure has hardly played a role in the economic upturn. The virtual standstill in consumption is in line with developments in wages and prices.
Domestic household consumption
Wages up by less than prices
For most households, a paid job is the main source of income. Over the past year, the financial situation of employees has hardly improved, however. Contractual wage levels were approximately 1 percent higher than one year previously. The inflation rate continued to rise steadily, to 2.6 in July 2011. The increase in the cost of living has been larger than the increase in wages for well over a year now, and the gap is widening. This means that households are able to buy fewer goods and services than previously. Subsequently, willingness to buy is low.
Contractual wages and inflation
Willingness to buy invariably low
Consumers’ willingness to buy has hardly changed over the past twelve months. The component indicator of consumer confidence varied between -8 and -12, with pessimists clearly outnumbering optimists among consumers. Currently, willingness to buy is low. On average over the past twenty years, optimists and pessimists virtually equalled each other out. Consumers’ willingness to buy is based on their opinions about their own financial situation and whether they think the time is favourable to buy expensive items such as washing machines and television sets.
Consumers’ willingness to buy
Further developments in consumption expenditure depend, among other things on consumers’ expectations, the situation on the labour market and households assets. The Consumption Radar shows how circumstances for consumption develop, using indicators representing those factors. Circumstances for consumption deteriorated across the board in August, after a few months in which they hardly altered. Among other things, consumers were more pessimistic about their finances and about future unemployment.Karin van der Ven