A dash of data: Spotlight on Spanish households

Federico Giovannelli,  OECD Statistics Directorate

Economic growth (GDP) always gets a lot of attention, but when it comes to determining how people are doing it’s interesting to look at other indicators that focus more on the actual material conditions of households. This blog looks at a number of alternative indicators to see how households in Spain are faring.

GDP and household income

Real household disposable income per capita fell slightly (-0.1%) in Q2 2016 compared to the previous quarter (the index decreased from 94.0 in Q1 2016 to 93.9 in Q2 2016) despite rather robust economic growth, with real GDP per capita increasing by 0.8% (the index increased from 96.3 in Q1 2016 to 97.1 in Q2 2016). The slight drop in real household income comes after a 2.0% growth in Q1 2016 and, as shown in chart 1, developments in household incomes tend to be slightly more volatile than economic growth. The divergent patterns are often related to changes in net cash transfers to households (as shown in chart 2).

Chart 1 also provides a longer-term perspective and shows how much GDP and household incomes have developed since the first quarter of 2007, just before the start of the economic crisis. Despite an upward trend in both real household income and economic growth since early 2013, Spanish households still have an income which is 6% below the pre-crisis levels, while GDP per capita is 3% below.

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In nominal terms (i.e. not adjusted for price changes), household disposable income increased in Q2 2016 compared with the previous quarter, driven by increases in compensation of employees and income from self-employment. These gains were slightly offset by an increase in social contributions paid, resulting in a drop in net cash transfers to households (i.e. benefits received minus taxes and social contributions paid) (Chart 2). The increase in nominal household disposable income was however not enough to keep pace with inflation. As a result, real purchasing power of households fell in the second quarter of 2016.

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Confidence, consumption and savings

Household disposable income is a meaningful way to assess material living standards, but to get a fuller picture of household economic well-being, one may also want to look at households’ consumption behaviour. Chart 3 shows that consumer confidence continued to fall for the second consecutive quarter in Q2 2016 (the index decreased from 101.5 in Q1 2016 to 101.2 in Q2 2016) albeit remaining above its longer term average. Notwithstanding a drop in consumer confidence and in real household disposable income per capita (as seen in chart 1), real household consumption expenditure per capita (chart 4) continued to grow in Q2 2016 (by 0.6%, with the index increasing from 91.7 in Q1 2016 to 92.3 in Q2 2016). As in the case of GDP and household income, household final consumption has still not recovered its pre-crisis levels.

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Because in Q2 2016 Spanish households increased their consumption more than the increase in their income, the households’ savings rate (chart 5), which shows the proportion that households are saving out of current income, fell 0.6 percentage points to 7.9% in Q2 2016. Over the whole period, Spanish households saved increasing portions of their income during the depth of the economic crisis (up to Q2 2009, when the rate attained its peak of 14.1%), while they showed more volatile saving behaviours over the subsequent time period (with an average saving rate of 9.1% between Q4 2010 and Q2 2016). However, it is worth noting that the households’ savings rate never dropped back to the levels observed before the start of the crisis, partly reflecting households’ responses to deteriorations in financial markets and an increased level of uncertainty over future income.

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Debt and net worth

The households’ indebtedness ratio, i.e. the total outstanding debt of households as a percentage of their disposable income, may reflect (changes in) financial vulnerabilities of the household sector and provides a useful yardstick to assess their debt sustainability. In Q2 2016, household indebtedness was 113.1% of disposable income, a slight increase of 0.5 percentage point from the previous quarter (chart 6). Before the crisis, Spanish households’ indebtedness mainly increased in light of the real estate bubble and the concomitant borrowing facility, which led the ratio to its peak value of 143.9% in Q4 2007. Since then, the households’ level of indebtedness has progressively declined.

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When assessing households’ economic vulnerabilities, one should also look at the availability of assets, preferably taking into account both financial assets (saving deposits, shares, etc.) and non-financial assets (predominantly dwellings). Because information on households’ non-financial assets is generally not available on a quarterly basis, financial net worth (i.e. the excess of financial assets over liabilities) is used as an indicator of the financial vulnerability of households. In Q2 2016, financial net worth of households was 173.1% of disposable income (chart 7), 0.5 percentage points less than in the previous quarter. Households’ financial net worth actually grew slightly in Q2 2016, but it was outpaced by the growth in nominal household income thus causing the ratio to fall. The slight pick-up in financial net worth was mainly due to increases in currency and deposits and other accounts receivable, only partially offset by the rise in household debt (as seen in chart 6).

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Unemployment

The unemployment rate and the labour underutilisation rate (chart 8) also provide indications of potential vulnerabilities of the household sector. More generally, unemployment has a major impact on people’s well-being, especially in Spain where the unemployment rate is currently the second highest among OECD countries. In Q2 2016 the unemployment rate dropped to 20.1%, confirming a downward trend observed since Q3 2013 (26.2%). Until then, the unemployment rate in Spain had increased in all quarters since Q2 2007, when it was 8%. The labour underutilisation rate, which takes into account underemployed workers and discouraged job seekers, is on average about one and a half the size of the unemployment rate. Among the different groups, youth (14-24 years old) are the most affected by unemployment.

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One should keep in mind that households’ income, consumption and savings may differ considerably across various groups of households; the same holds for households’ indebtedness and (financial) net worth. The OECD is working on these distributional aspects and preliminary results can be found here and here.

Spain was one of the hardest hit countries during the crisis: unemployment remains high; income and consumption per capita have yet to recover to their pre-crisis levels. Yet, overall, the second quarter of 2016 saw a slight improvement of Spanish households’ material well-being, with expanding consumption per capita and decreasing unemployment, despite a slight contraction of household income per capita which shows a relatively volatile trend, but has been improving over the last four years. However, to fully grasp people’s overall well-being, one should go beyond material conditions, and also look at a range of other dimensions of what shapes people’s lives, as is done in the OECD Better Life Initiative.

Useful links

For many years, OECD has been focusing on people’s well-being and societal progress. To learn more on OECD’s work on measuring well-being, visit the Better Life Initiative.

Interested in how households are doing in other OECD countries? Visit our household’s economic well-being dashboard.

A dash of data: Spotlight on Australian households

Bettina Wistrom, OECD Statistics Directorate

Economic growth (GDP) always gets a lot of attention, but when it comes to determining how people are doing it’s interesting to look at other indicators that focus more on the actual material conditions of households. Let’s see how households in Australia are doing by looking at a few alternative indicators.

GDP and household income

Real household disposable income per capita increased 0.9% in Q1 2016 compared to the previous quarter (the index increased from 113.7 in Q4 2015 to 114.7 in Q1 2016), outpacing GDP per capita which increased 0.6% from the previous quarter (the index increased from 108.1 in Q4 2015 to 108.8 in Q1 2016). The rise in household disposable income mainly reflected a growing compensation of employees and income from self-employment, and – to a slighter extent – an increase in interest received by households.

This recent development continues the trend observed since the first quarter of 2007. Indeed Australian real household disposable income per capita has grown considerably more than real GDP per capita: 14.7% versus 8.8% (chart 1). The growth in household income over that period partly reflects government interventions during the first years of the crisis which, it is worth noting, did not impact the Australian economy as severely as it did other OECD countries. Even though there was a dip in economic activity in Q4 2008, the Australian economy was never formally in recession (defined as two consecutive quarters of negative growth).

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Chart 2 shows that net cash transfers to households increased sharply at the start of the financial crisis, mainly due to increases in social benefits. Since the peak in Q2 2009, net cash transfers to households exhibit a downward trend corresponding to the time period when economic growth and household disposable income have started to move (more or less) in tandem.

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Confidence, consumption and savings

Household disposable income is a meaningful way to assess material living standards, but to get a fuller picture of household economic well-being, one may also want to look at households’ consumption behaviour. Consumer confidence (chart 3) remained broadly stable at 99.7 in Q1 2016. This contributed to sustaining real household consumption expenditure per capita which increased by 0.3% in Q1 2016 (the index increased from 107.7 in Q4 2015 to 108.0 in Q1 2016) (chart 4).

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The households’ savings rate (chart 5) shows the proportion that households are saving out of current income. In Q1 2016, the savings rate ticked-up to 15.8% showing that households chose to save some of their additional income, rather than spending it on goods and services. Overall, Australian households have a relatively high savings rate. Over the whole period observed, the average rate is 16.2%, one of the highest among OECD countries. In Q4 2008, the savings rate increased sharply, to its highest level (19%), partly reflecting households’ responses to deteriorations in financial markets and an increased level of uncertainty over future income.

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Debt and net worth

The households’ indebtedness ratio, i.e. the total outstanding debt of households as a percentage of their disposable income, may reflect (changes in) financial vulnerabilities of the household sector and provides a useful yardstick to assess their debt sustainability. In Q1 2016, household indebtedness increased to 198.5% of disposable income (chart 6), doubling over the past 20 years and one of the highest levels among OECD countries. This rise in household’s indebtedness followed the introduction of mortgage packages in the 1980s and 90s, which allowed homeowners to draw down on their mortgages when needed, without having to sell their house. In addition Australian households have increasingly borrowed money to finance house purchases (Chart 6).

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When assessing households’ economic vulnerabilities, one should also look at the availability of assets, preferably taking into account both financial assets (saving deposits, shares, etc.) and non-financial assets (for households, predominantly dwellings). Because information on households’ non-financial assets is generally not available on a quarterly basis, financial net worth (i.e. the excess of financial assets over liabilities) is used as an indicator of the financial vulnerability of households.

In Q1 2016, financial net worth of households was 183.9% of disposable income (chart 7), 4.9 percentage points less than in the previous quarter. This decrease was predominately driven by the rise in household debt (chart 6), and holding losses on pension assets, equity and investment fund shares.

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The unemployment rate and the labour underutilisation rate (chart 8) also provide indications of potential vulnerabilities of the household sector. More generally, unemployment has a major impact on people’s well-being. In Q1 2016 the unemployment rate in Australia remained at 5.8%, while the  labour underutilisation rate, which takes into account underemployed workers and discouraged job seekers, decreased slightly to 21.3% (from 21.8% in Q4 2015). Notwithstanding this small decline, the gap between the unemployment rate and the labour underutilisation rate remains large in Australia – the largest among OECD countries, indicating unmet aspirations for more work among Australian workers.

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One should keep in mind that households’ income, consumption and savings may differ considerably across various groups of households; the same holds for households’ indebtedness and (financial) net worth. The OECD is working on these distributional aspects and preliminary results can be found here and here. The Australian Bureau of Statistics (ABS) has also a long history analysing households’ developments broken down by income and household characteristics.

Overall, the first quarter of 2016 saw a continued increase of Australian households’ material well-being with still expanding income and consumption per capita. The upward trend in the household debt-to-income ratio and the high labour underutilisation rate – reflecting the challenge for some groups of workers to bounce back after displacement – remain a source of concern. Despite increasing household debt, financial net worth is slowly getting back to its pre-crisis level. However, to fully grasp people’s overall well-being, one should go beyond material conditions, and also look at a range of other dimensions of what shapes people’s lives, as is done in the OECD Better Life Initiative.

Useful links

For many years, OECD has been focusing on people’s well-being and societal progress. To learn more on OECD’s work on measuring well-being, visit the Better Life Initiative.

Interested in how households are doing in other OECD countries? Visit our household’s economic well-being dashboard.

A dash of data: Spotlight on Canadian households

Matthew Dequeljoe, OECD Statistics Directorate

Economic growth (GDP) always gets a lot of attention, but when it comes to determining how people are doing it’s interesting to look at other indicators that focus more on the actual material conditions of households. This blog looks at a number of alternative indicators to see how households in Canada are faring.

GDP and Household Income

Neither real GDP per capita, which adjusts economic growth for price changes and the size of the population, nor real household disposable income per capita kept pace with the population growth in Q4 2015. The Canadian population grew 0.4% in the fourth quarter of 2015, outpacing real GDP and real disposable income growth which were both positive but relatively modest (increasing 0.2% and 0.3%, respectively). As a consequence, real GDP per capita decreased 0.2% (the index fell from 103.8 in Q3 2015 to 103.6 in Q4 2015), while the decrease in real household disposable income per capita, by 0.1%, was slightly less (with the index moving from 112.8 in Q3 2015 to 112.7 in Q4 2015).

Quarterly developments may be volatile. Chart 1 provides a longer-term perspective and shows how much GDP and household income have increased since the first quarter of 2007, just before the start of the economic crisis. Over this period, real disposable income per capita has increased substantially more than real GDP per capita (12.7 percent versus 3.6 percent, respectively).

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In nominal terms (i.e. not adjusted for price changes) household disposable income increased in Q4 2015 compared with the previous quarter driven by increases in primary income, as compensation of employees and, to a lesser extent, income from self-employment rose. These gains were slightly offset by an increase in taxes, resulting in a drop in net cash transfers to households (i.e. benefits received minus taxes and social contributions paid) (Chart 2).

Chart 2 also shows that net cash transfers to households rose during the economic crisis  and sustained households’ disposable income levels. The increase starting in Q1 2008 to its peak in Q1 2010 corresponded to the time when real household disposable income began to diverge from Canada’s overall economic growth trend as seen in Chart 1.

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Confidence, Consumption, and Savings

Household disposable income is a meaningful way to assess material living standards, but to get a fuller picture of household economic well-being it is interesting to also look at households’ consumption behaviour. Chart 3 shows that the index of consumer confidence in Canada has still not recovered its pre-crisis level.  It decreased by 0.1 percentage points and stood at 99.3 in the fourth quarter of 2015. The index of real household consumption expenditure dropped from 111.2 in Q3 2015, its highest value since 2007Q1, to 111.0 indicating that households on average have slightly decreased their purchases of goods and services (Chart 4).

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The households’ savings rate (Chart 5), which corresponds to the share  that households are saving out of current income, remained stable in Q4 2015 at 8.1%, 2.5 percentage points higher than its lowest point reached in Q4 2007 at 5.7%. The savings rate increased during the depth of the recession, in part reflecting households’ responses to deteriorations in financial markets and an increased level of uncertainty over future income.

Canada-chart5Note: It is necessary to adjust household income for the difference between pension contributions paid and pension benefits received (called adjustment for the change in pension entitlements) to appropriately calculate the change in net worth of households, since pensions are considered a financial asset of households.

Debt and net worth

The households’ indebtedness ratio (i.e. the total outstanding debt of households as a percentage of their disposable income) is a measure of (changes in) financial vulnerabilities of the household sector  and its evolution over time allows for an assessment of households’ debt sustainability. In Q4 2015, household indebtedness in Canada (Chart 6) increased to 166.2% of disposable income, its highest level since 1990. As mortgage debt makes up the largest component of household debt in Canada, Chart 6 shows that Canadian households have continued to increase their borrowings to finance house purchases, in the face of low interest rates and high house prices.

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A growing debt ratio is often interpreted as a sign of increasing financial vulnerability. However, when assessing vulnerabilities, one should also look at the availability of assets, preferably taking into account both financial assets (saving deposits, shares, etc.) and non-financial assets (for households, predominantly dwellings). Because information on households’ non-financial assets is generally not available on a quarterly basis, financial net worth (i.e. the excess of financial assets over financial liabilities) is used as an indicator of the financial vulnerability of households.

In Q4 2015, households’ financial net worth (Chart 7) in Canada was 343.8% of disposable income, rebounding 6.3 percentage points from Q3 2015. Holding gains on equity and investment fund shares helped boost households’ financial assets supported by a depreciating Canadian dollar that increased the value of foreign-denominated assets. Other factors included increased acquisitions of insurance and pension assets.

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Unemployment

The unemployment rate and the labour underutilisation rate (Chart 8) also provide indications of other potential vulnerabilities of the household sector. More generally, unemployment has a major impact on people’s well-being. In Q4 2015, the unemployment rate remained stable at 7%, approximately the same rate as in the previous quarter. The unemployment rate has been trending up in recent quarters. In Q4 2015, it was 1.1 percentage points higher than its low point of 5.9% in Q4 2007, but still 0.4 percentage points below the peak of 8.6% in the third quarter of 2009. The labour underutilisation rate was 13.8% in Q4 2015, slightly up from the third quarter and still two percentage points above pre-crisis levels in Q4 2007. The labour underutilisation rate is about twice the size of the unemployment rate.

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One should keep in mind that households’ income, consumption and savings may differ considerably across various groups of households; the same holds for households’ indebtedness and (financial) wealth. The OECD is working on these distributional aspects and preliminary results can be consulted here and here.

Overall, the fourth quarter of 2015 saw a slight drop for Canadian households’ material well-being with a contraction of income and consumption per capita alongside declining consumer confidence. Moreover, the upward trend in the household debt-to-income ratio remains a source of concern for financial stability. Notwithstanding developments in Q4 2015, taking a longer term perspective shows that income and consumption levels as well as financial net worth have recovered from the economic crisis and surpassed their pre-crisis levels. To fully grasp people’s overall well-being, one should go beyond material conditions, and look at a range of other dimensions of what shapes people’s lives

Useful links

For many years, OECD has been focusing on people’s well-being and societal progress. To learn more on OECD’s work on measuring well-being, visit the Better Life Initiative.

Interested in how households are doing in other OECD countries? Visit our households’ economic well-being dashboard.

A dash of data: Spotlight on German households

Leonie Beisemann, OECD Statistics Directorate

German version available here.

Economic growth (GDP) always gets a lot of attention, but when it comes to determining how people are doing economically it’s interesting to look at other indicators that focus more on the actual material conditions of households. Let’s see how households in Germany are doing by looking at a few of these other indicators.

GDP and household income

Chart 1 shows the development of real GDP per capita and real household disposable income per capita since the first quarter of 2007, with this quarter being set to the baseline level of 100. For the most recent quarter for which we have data, Q3 2015, real GDP per capita, which adjusts economic growth for the size of the population, increased 0.1% from the previous quarter (the index increased from 107.3 in Q2 2015 to 107.4 in Q3 2015). Real household disposable income per capita showed stronger growth, increasing 0.4% from the previous quarter (the index increased from 105.9 in Q2 2015 to 106.3 in Q3 2015). However, despite the stronger growth in household income in the most recent quarter, and the sharp drop in economic growth during the financial crisis, GDP has grown more than household income since 2007: 7.4 % versus 6.3%.

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The increase in household disposable income in Q3 2015 was caused by an increase in primary income, mainly due to increases in compensation of employees and dividend income. On the other hand, taxes and social contributions paid by households increased more than social benefits received by households, meaning that net cash transfers to households declined slightly (chart 2).

Chart 2 shows that the net cash transfers to households increased sharply during the depth of the financial crisis (at the beginning of 2009), corresponding to when real household disposable income began to diverge from the pattern exhibited by economic growth, as shown in chart 1. This clearly shows that government intervention was successful in cushioning households from the negative effects of the contraction in economic growth.

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Confidence, consumption and saving

Household disposable income is a meaningful way to assess material living standards, but to get a fuller picture of household economic well-being it is interesting to look also at households’ consumption behaviour. Consumer confidence (chart 3) fell in Q3 2015 (the index decreased from 101.5 in Q2 2015 to 101.0 in Q3 2015) reversing the upward trend seen during the first two quarters of 2015. Notwithstanding this slight drop in consumer confidence, real household consumption expenditure per capita increased 0.3% in Q3 2015 (chart 4), with the relevant index increasing from 107.1 in Q2 2015 to 107.4 in Q3 2015.

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The household savings rate (chart 5) shows the proportion that households are saving out of current income. In Q3 2015, the savings rate was 16.9%, the same rate as in the previous quarter. Overall, German households have a relatively high savings rate (on average 16.7%, one of the highest among OECD countries). It is also relatively stable (the rate varies the least among OECD countries).

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 Debt and net worth

The household indebtedness ratio, i.e. the total outstanding debt of households as a percentage of their disposable income, can be looked at as a measure of (changes in) financial vulnerabilities of the household sector and can be helpful in assessing debt sustainability. In Q3 2015, household indebtedness was 85.5% of gross disposable income (chart 6), 0.2 percentage points higher than the previous quarter (mainly related to a rise in long-term loans). Over a longer period of time, since the beginning of 2007, one can observe a steady decline in household indebtedness in Germany.

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When assessing vulnerabilities on the basis of indebtedness, one should also take into account the availability of assets, preferably both financial assets (saving deposits, shares, etc.) and non-financial assets (for households, predominantly dwellings). Because information on households’ non-financial assets is generally not available on a quarterly basis, financial net worth (i.e. the excess of financial assets over liabilities) is used as an indicator of the financial vulnerability of households.

In Q3 2015, financial net worth of households was 196.5% of disposable income (chart 7), 3.2 percentage points less than in the previous quarter. The decrease was mainly due to holding losses on equity and investment fund shares on the asset side and the slight increase in household debt mentioned above.

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Unemployment

The unemployment rate and the labour underutilisation rate (chart 8) also provide indications of potential economic vulnerabilities of the household sector. More generally, unemployment has a major impact on people’s overall well-being. In Q3 2015, the unemployment rate in Germany continued its fall since 2007 and at 4.6% it is the lowest rate of unemployment since 1991. The labour underutilisation rate shows a similar pattern: in Q3 2015, it reached a new low of 9.2%.

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One should keep in mind that households’ income, consumption and savings may differ considerably across various groupings of households; the same is true for households’ indebtedness and (financial) wealth. The OECD is working on these distributional aspects and preliminary results have been published in “Measuring inequality in income and consumption in a national accounts framework” and in “Household wealth inequality across OECD countries: new OECD evidence”.

While the financial crisis did affect the German economy, its consequences have been relatively modest when compared with other OECD countries. GDP per capita and household income per capita returned to their pre-crisis levels quickly. The positive developments in household income and consumption reflect continuous improvements in the German labour market since 2010. To fully grasp people’s overall well-being, one should go beyond household material conditions, and look at a range of other aspects of people’s lives and how they feel. Indicators on these other aspects (e.g. health, education, environmental quality, and personal security) are regularly published in the OECD How’s Life publications.

Useful links

For many years, OECD has been focusing on people’s well-being and societal progress. To learn more on OECD’s work on measuring well-being, visit the Better Life Initiative.

Interested in how households are doing in other OECD countries? Visit our households’ economic well-being dashboard.

A dash of data: Spotlight on Italian households

Rachida Dkhissi, OECD Statistics Directorate

Economic growth (GDP) always gets a lot of attention, but when it comes to determining how people are doing it’s interesting to look at other indicators that focus more on the actual material conditions of households. This blog looks into how households in Italy are doing by looking at a number of alternative indicators.

GDP and Household Income

Chart 1 shows how much GDP and household income have declined since the first quarter of 2007, just before the start of the economic crisis, with this period representing the baseline value 100. For the most recent quarter, Q2 2015, GDP per capita, which adjusts economic growth for the size of the population, increased 0.3% from the previous quarter. The index increased from 87.9 in Q1 2015 to 88.2 in Q2 2015, which is still around 12 percentage points below the pre-crisis level. Real household disposable income per capita increased at the same pace as real GDP per capita in Q2 2015 (0.3%), with the index increasing from 86.6 in Q1 2015 to 86.8 in Q2 2015. Real household income has moved in tandem with real GDP per capita: in Q2 2015 the household income index was 13 percentage points below the baseline of Q1 2007. This means that households have less purchasing power now that they had before the crisis. Chart 1 also shows that over the last 8 years, GDP and household income have declined in more quarters than they have grown.

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The primary income of households fell in Q2 2015 compared with the previous quarter. Although there was a slight increase of income for the self-employed, this was entirely offset by a drop in net property income received (mainly due to a decrease in dividends received). . The fact that households experienced an increase in disposable income in Q2 2015 was mainly due to cash social benefits received by households, as can be seen in chart 2, which shows the net cash transfers to households.

Chart 2 also shows that the decline in the net cash transfers to households ratio from Q4 2011 to Q3 2012 corresponded to a time when household disposable income was falling faster than GDP, as shown in chart 1.

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Confidence, Consumption, and Savings

Household disposable income is a meaningful way to assess material living standards, but to get a fuller picture of household economic well-being it is interesting to also look at households’ consumption behaviour. Chart 3 shows that consumer confidence remained broadly stable in Q2 2015 at 101.5 suggesting that with two consecutive quarters of positive economic growth consumers continued to be relatively confident about their economic situation. This confidence coupled with a rise in household income helped real household consumption expenditure per capita increase by 0.4% in Q2 2015 (chart 4), with the relevant index increasing from 89.4 in Q1 2015 to 89.7 in Q2 2015, the strongest quarterly growth rate since Q3 2010. However, Italian households are still buying less goods and services to meet their own everyday needs than they were before the crisis.

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The households’ savings rate (chart 5), which shows the proportion that households are saving out of current income, decreased 0.1 percentage point in Q2 2015, as compared to the prior quarter, showing that households used their entire increase in income to consume goods and services. The households’ savings rate in Q2 2015 was 11.1%, 3.9 percentage points lower than the peak reached in Q1 2009 (during the depth of the economic crisis). Since Q1 2009, the declining trend in the savings rate reflects households’ need to trade-off between saving and consumption as income kept falling.

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Debt and net worth

The households’ indebtedness ratio, i.e. the total outstanding debt of households as a percentage of their disposable income, is a measure of (changes in) financial vulnerabilities of the household sector and can be helpful in assessing households’ debt sustainability. In Q2 2015, household indebtedness in Italy (chart 6) was 82.5% of disposable income, a marginal increase of 0.1 percentage point from the prior quarter showing that households financed some of their consumption by increasing their debt.

STD-HHDashboard-Italy-Chart-6-950

A growing debt ratio is often interpreted as a sign of financial vulnerability. However, when assessing vulnerabilities, one should also look at the availability of assets, preferably taking into account both financial assets (saving deposits, shares, etc.) and non-financial assets (for households, predominantly dwellings). Because information on households’ non-financial assets is generally not available on a quarterly basis, financial net worth (i.e. the excess of financial assets over liabilities) is used as an indicator of the financial vulnerability of households.
In Q2 2015, financial net worth of households (chart 7) in Italy was 280.1% of disposable income, 3.5 percentage points less than Q1 2015. The decrease in the second quarter was mainly due to holding losses on debt securities on the asset side and an increase in household debt (mainly trade credits). This resulted in a slight deterioration of the households’ financial net worth in Q2 2015.

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Unemployment

The unemployment rate and the labour underutilisation rate (chart 8) also provide indications of potential vulnerabilities of the household sector. More generally, unemployment has a major impact on people’s well-being. In Q2 2015, the unemployment rate remained stable at 12.4%, the same rate as the previous quarter. The labour underutilisation rate was 28.9% in Q2 2015, well above the standard unemployment rate and remained unchanged compared with the first quarter.

STD-HHDashboard-Italy-Chart-8-950

One should keep in mind that households’ income, consumption and savings may differ considerably across various groupings of households; the same holds for households’ indebtedness and (financial) wealth. The OECD is working on these distributional aspects and preliminary results can be consulted here and here.

As shown above, in order to properly measure people’s material well-being, looking beyond economic growth is essential. The economic crisis has hit hard for households in Italy. The unemployment rate remains high and income and consumption levels have yet to recover to pre-crisis levels. Yet, the second quarter of 2015 shows a slight improvement in households’ material well-being. To fully grasp people’s overall well-being, one should even go beyond material conditions, and look at a range of other characteristics that shape what people do and how they feel. For more than 10 years, OECD has been focusing on people’s well-being and societal progress. To learn more on OECD’s work on measuring well-being, visit the Better Life Initiative web site.

Useful links

Interested in how households are doing in other OECD countries? Visit our households’ economic well-being dashboard.

£40 a month for junked food

In OECD Insights: Sustainable Development, chapter 5 on production and consumption mentions a report on food waste published by UK government advisory agency WRAP. The latest WRAP report also includes wasted liquids. It estimates that UK households generate 8.3 million tonnes of food and drink waste a year. That makes 330 kg (726 lbs) per year for each household on average, or just over 6 kg (13 lbs) per household per week. The figure would no doubt be much higher if food processing and catering were included.

5.3 million tonnes of this waste is avoidable. The rest is split equally between “unavoidable” and “possibly avoidable” waste.

Of the avoidable food and drink waste, 2.2 million tonnes is left over after cooking, preparing or serving, and 2.9 million tonnes is not used in time.

For the average household, the retail price of the avoidable food and drink waste is £40 ($65) per month. Given that the average household spends £260 ($424) a month on food and drink, avoidable waste accounts for around 15% of the shopping budget.

It’s not just the budget that suffers. The average household generates 210 kg of avoidable food and drink waste per year. This translates into roughly the equivalent of 0.8 tonnes of CO2. That doesn’t sound much compared with the 33 tonnes CO2 equivalent per household per year, but it is the equivalent of all members of a household taking an annual return flight from London to Vienna, or a quarter of the annual mileage driven by the members of that household. See the full report here