Retail traffic and residential consumption may slowly recover

By: Trademagazin Date: 2024. 07. 19. 14:28

The development of retail sales and the recovery of household consumption have been a prominent topic among economists in recent months. The weakening of the German economy further increased the weight of this issue, since the weaker export performance can be compensated by the expansion of domestic consumption.

Household consumption: expansion with caution

Based on the data of the first five months of the year, residential consumption continues to grow, but falls short of expectations. The reason for this is primarily caution and the rebuilding of savings. On an annual basis, stable growth can be observed in retail sales, although stagnation or a small decrease also occurred compared to the previous months.

This phenomenon can be explained not only by the reduction of the purchasing power of the population, but also by the fact that after crises the rebuilding of savings comes to the fore. After that, consumption starts to strengthen again – we can read in the article of VG analyst Péter Koncz.

High inflation and decline in real assets

The net financial wealth of the population increased from HUF 18,000 billion in 2010 to nearly HUF 82,000 billion by 2023, which nominally represents a more than fourfold increase. According to inflation-adjusted real values, wealth growth was dynamic until 2021, but high inflation in the past two years reduced the real value of savings. A similar trend can be observed in the case of real wages, which increased by 70.8 percent between 2010 and 2022, but in 2023 the rapid currency deterioration reduced their real value.