Bank of Spain confirms lower consumption expectations of families

After leaving the period of restrictions behind due to the epidemic and starting 2021 with great expectations, events such as Russia’s invasion of Ukraine came to the fore. Reducing spending expectations, and especially those of low-income families, with a lower liquidity pad. One of the effects is that incomes with lower saving capacity delay purchases of durable goods such as household goods or automobiles.

The analysis, by Carmen Martínez-Carrascal, of the Bank of Spain’s Directorate General for Economy and Statistics, found that “the release of war has had a significant impact on families’ spending expectations, thus consumer recovery trend interrupted projected nominal”.

As a matter of fact, since last March, “households have revised their nominal spending plans downwards as a result of the crises experienced. The effect of war on your self-confidence and on the expected evolution of their income, their inheritance status, and their access to credit, in the context of a specific adjustment to expected high inflation rates that month”.

less dynamism

As a result, according to the study ‘The impact of the rise in inflation and the war on the economic prospects of Spanish households’, “after the start of the war, families, significantly lower dynamism In addition, “households indirectly slightly lower savings rates“.

Data from the European Central Bank’s (ECB) Survey of Consumer Expectations (CES) reveals that the climb in inflation since 2021 has not been so rapid at first. transferred to the expectations of households about the rate of change of prices.. “However, from the second half of last year, this translation began to be observed more intensely in short-term inflation expectations than in medium-term ones.”

When the war started in Ukraine, worsening expectations on the future financial situation of households On a House-by-household basis, those with liquidity problems and outstanding debt tend to offer less positive perspectives on the future course of their wealth situation.

The data also confirms that the nominal spending expectations of households in the two highest income quintiles continue to be more positive than others, as in previous months. And this model holds true when looking at spending expectations in real terms. According to the study, this may be because families with higher incomes tend to be more optimistic when they have more income. more stable income.

In contrast, items most affected by the pandemic in consumption baskets (especially those associated with activities that require a higher degree of social interaction, such as those related to entertainment, tourism and culture) and that he can recover once the restrictions are over. And the last factor is that they have higher saving capacity and therefore to alleviate some of these needs that may arise. The greater the saving capacity, the greater the ability to sustain expenditure.

Another element to consider is war” unfavorable conditional expenditure expectations on certain itemsas a result of deterioration of confidence and households’ perceptions of their finances. This is the case for consumer durables, which are often more affected by increased uncertainty, deterioration in family wealth, or declines in purchasing power. Consumers have adjusted their household and automobile spending expectations in recent months. and especially since the beginning of the war.

Holidays are not for everyone

On the other hand, expectations for the future vacation spend they continued to improve in a context characterized by the virtual elimination of restrictions associated with the pandemic. It only lowered expectations for the lowest incomes with the least capacity to benefit from surpluses and savings.

And when it comes increase Energy cost“Families with a modest liquidity cushion have reduced spending on other goods.” In contrast, families with a larger liquidity buffer did not significantly change their level of spending on other items in the face of the increase in these costs and would therefore temporarily lower their savings rates to meet them.