Household Finance and Consumption Survey (Ireland)

The consumption impulse from pandemic savings ‒ does the composition matter?

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fredag, juni 30, 2023
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Key Points: 

The impact of the recent rise in inflation on low-income households

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fredag, november 11, 2022
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The effects of the recent increase in euro area HICP inflation significantly differ for low and high-income households.

Key Points: 
  • The effects of the recent increase in euro area HICP inflation significantly differ for low and high-income households.
  • This box explores how recent high inflation levels are affecting low-income and high-income households differently in two main areas: their effective inflation rate due to different spending patterns, and their ability to buffer cost of living increases through savings or borrowing.
  • Consumption baskets vary across income groups, with low-income households spending proportionally more on essentials.
  • The income-specific consumption baskets reported in the Eurostat Household Budget Survey (HBS) allow effective inflation rates to be calculated by income quintile.
  • Decomposing the inflation gap, electricity, gas and other fuels and, increasingly, food prices are the main drivers of the higher inflation faced by lower-income households.
  • Inflation difference between the lowest and highest income quintile households in the euro area
    (percentages)

    Sources: Eurostat Household Budget Survey, ISTAT and ECB calculations.

  • Notes: Chart B shows the difference between the effective inflation rates for low-income households (first quintile) and high-income households (fifth quintile).
  • They tend to consume a larger share of their income, save less and face liquidity constraints more often than high-income households.
  • The higher incidence of liquidity constraints experienced by poorer households is reflected in the rise in households expecting to make late payments on their utility bills.
  • Low-income households perceived the recent government measures aimed at easing the impact of higher energy prices as less adequate than high-income households did.
  • This may suggest that there is scope for more effectively targeting government measures towards low-income households.