Economic recovery still remains sluggish. Improving exports have had a marginal positive effect but household consumption is still lagging. Consumers were still cautious in the first six months of 2004, preferring to put their money in savings accounts. Consumer confidence shows an upward trend but consumers will not be prepared to spend more money as long as consumer confidence remains at its current low level.
Domestic household consumption
Household consumption dwindling in 2003
In 2003 consumer spending was almost 1 percent below the level of the previous year. The last time this happened was in 1982. In the first six months of 2004 the volume of domestic household consumption was only 0.3 percent down on the same period in 2003. In June the volume of consumption was larger than one year previously for the first time in fifteen months.
Share of savings in GDP
National savings including interest grew from 135 billion euro in 2000 to 187 billion euro at the end of 2003, the equivalent of 41 percent of the value of the gross domestic product (GDP) . From a historical point of view savings were exceptionally high by the end of 2003 averaging 26.6 thousand euro per household. In the first six months of 2004 this trend continued.
Consumer confidence growing
Consumer confidence is showing an upward trend after a dip in 2003. In particular consumer opinions on confidence in the general economic situation is picking up. Willingness to buy also improved slightly. The economic situation, inflation, recent developments on the labour market and purchasing power all contribute to a more positive attitude.
After the slump in 2003, the economy picked up in the first six months of 2004. The number of households who think inflation is high has significantly decreased lately. The decrease in employment was less substantial in the second quarter of 2004 than in the two previous quarters, and the sharp rise in unemployment was also came to a standstill in the course of the year. Purchasing power, on the other hand, is unstable. A tight financial situation may have a negative effect on consumer confidence.
Karin van der Ven