The forecasts developed by the Europa Research Center for Confesercenti: -3.7 billion in the second half compared to the first six months of the year. And to the erosion of purchasing power is added that of savings
The The high cost of living slows down consumption. The erosion of purchasing power and savings is starting to impact family spending which, if there are no reversals in the trend, will it should decrease in the second half of the year by -3.7 billion compared to the first six months of the year. This is what emerges from the forecasts developed by the Europa Research Center for Confesercenti.
Due to the slowdown in the second half of the year, at the end of the year the overall growth in household spending should stand at +0.8%, compared to +4.6% last year. A combination of factors penalizes consumption choices. Firstly, the long period of high inflation, which has reduced the spending capacity of Italians: the recovery is underway, but is less rapid than expected, with a trend increase in prices which in August was still above the threshold of 5% (+5.4%). Adding to the erosion of purchasing power is that of savingsused by families in the first phase of the price increase to maintain previous consumption levels: a margin for maneuver which, after almost two years of rising prices, has now been significantly reduced.
The increase in interest rates carried out by the ECB is also slowing down consumption, which has now reached its tenth consecutive increase: a decision taken to combat inflation, but which unfortunately negatively influences the spending capacity of families – in particular those with a variable rate mortgage – impacting the overall growth of the economy. The increase in interest rates also comes amid a rapid worsening of the economy. The driving forces of the post-pandemic recovery are fading away, with a strong weakening, in particular, of the impulses coming from exports and investments, whose contribution to GDP growth is declining.
The change in gross domestic product, continues Confesercenti, therefore returns to depend mostly on the dynamics of consumption, which is unfortunately slowing down. The overall share of consumption in GDP should stand at 59.3%, from 59.8% last year, but net of inflation it would give a real contribution of 58.4%, the lowest since the beginning of the century (in 2000 it was 59.9%).
All in all, these trends would lower GDP growth in the second half of the year to +0.1%, from +1.2% in the first half of the year. On an annual basis, 2023 growth would therefore stop at 0.7%, against the 1% set as the objective in the Def. Reversing the trend is possible, but we need to act promptly, warns Confesercenti.
To bring growth back in line with objectives, according to Confesercenti analysts, a greater growth in consumption of 4 billion would be needed in the second half of the year, with a contribution to GDP growth that would rise from 0.6 to 0.9 points. Considering that the propensity to consume is today equal to 93%, this increase in spending could be obtained by reducing tax on thirteenth wages by 4.3 billion. A lower income which, however, would be partially recovered: the greater growth and greater consumption expenditure generated by the tax relief on the thirteenth would lead to an increase in revenue of 1.3 billion, reducing the cost of the measure for the public budget to 3 billion, they conclude.