GKI: Is domestic consumption weak?

By: Trademagazin Date: 2024. 08. 27. 23:59

Some domestic economists are looking for explanations for the anomaly called the “consumption puzzle” by the Minister of National Economy. In other words: why does this year’s strong real wage growth not drag consumption down with it?

A popular argument is the presence of the motive of prudence, i.e. the fact that after the previous years burdened with crises and in the shadow of the Russian-Ukrainian war, people are less willing to spend, they prefer to rebuild their inflated savings, or pay off their previous loans, or even save for the uncertain future, already if they can.

In order to better understand the dynamics of domestic consumption, it is advisable to compare it with the consumption data of regional countries exposed to similar geopolitical risks. In addition, it is worthwhile to take a step back and start the analysis from the last year before the crises (2019) instead of examining the volatile monthly data.