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.


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.


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.



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.


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.


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).



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.


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.

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