Consumption: even those with high incomes spend less (out of prudence).
«The effects of the rebound compared to the pandemic period are wearing off. But we are not yet able to figure out how quickly the household consumption curve will fall», says Fabio Bacchini, manager of Istat's data analysis and economic, social and environmental research service.
Do the most recent economic trends show a decline in household consumption?In the second quarter, household consumption still seemed to register positive impulses. But if we projected these values up to the end of 2022, assuming that they remain constant, we would still obtain values that are still at least three percentage points lower than those of 2019. Not to mention that expectations about the future today have changed negatively and that household confidence is in sharp decline, with some concern also on the labor market.
What are the first signs?
First of all, retail sales in trade, although not immediately comparable to the consumption trend, increased by 4.1% in value in September but decreased by 2.7% in volume. Furthermore, the propensity to save, which is the mirror image of consumption, was still higher than pre-crisis levels in the second quarter. A value that is unlikely to fall in the light of worsening expectations: interest rates are rising and price increases continue, only partially covered by contract renewals. The approved measures have mitigated the effects for the lowest income brackets, maintaining their purchasing power. But elsewhere spending power is being lost and this will increase precautionary behavior.
What are the most penalized consumption items?
All expenditure on services, in particular those for accommodation and catering, remain far from pre-crisis levels. Furthermore, the first negative signs are also beginning to be seen on non-durable goods, a trend that should be examined further but which could be associated with the reduction in food spending. Retail food sales, for example, increased in value by 6.8% in September due to price increases, but decreased by 4.5% in volumes.
