The pockets of Europeans and Italians are increasingly empty. The high cost of living affects consumption, which is falling. Savings for everyone. Overtime, small jobs and extras. The habits of the Eurozone are changing thanks to geopolitical crises, driven by wars (in Ukraine and the Middle East). For families still affected by the pandemic, it is therefore an obstacle course. With skyrocketing prices, lives and habits are profoundly changing, forcing the European economy to adjust to the new course.
What the European Central Bank says
In a study updated last January, European central bank used data from its consumer surveys in the euro area to understand what paths families have taken to cope with the high cost of living. The majority, i.e. 69%, changed consumption, 43% used savings, 31% tried to increase their income.
Among those who negotiated only for their own consumption, half tried to find better prices elsewhere, 33% reduced the quality of their purchases to spend less, 28% reduced the quantity. Among the minority who sought an increase in income, 15% negotiated a raise, while 17% worked overtime or took on extra work.
Savings in monuments because
The study also noted a drop in savings over the past two years, which was not due to increased spending on essentials, but spending on travel and recreation in general.
An apparent paradox, but it has a statistical explanation. This is because, according to the ECB, spending by high-income households has increased more and recovered from travel and leisure activities following pandemic restrictions. While the expenses of low-income households, focused on basic life needs, fluctuated less. In particular, there was a strong expansion in leisure services such as restaurants, leisure activities and travel, which jumped from 7.4% in 2021 to 12.9% in 2023.
what are you buying
The composition of the household basket changed based on the product categories that experienced the largest price increases. Compared to 2021, consumption of goods such as food and equipment underwent a substantial downward adjustment in 2023 (around -1%) in response to higher price growth. However, the ECB emphasizes that the consumption behavior of families was not only affected by inflation, but also by other shocks. For example, transport (including vehicle purchases) experienced the biggest decline, which fell by almost -4% in 2023 compared to 2021, due to problems with semiconductor supplies arising precisely from the logistical difficulties of the pandemic. In the case of clothing and health, consumption did not fall much, and in luxury products it remained practically stable.
Last updated: Wednesday, March 20, 2024, 6:20 p.m
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