New Euroconsumers Affordability Barometer shows cost of living crisis is taking its toll
The latest in the annual survey of consumers’ perspectives on the affordability of everyday life paints another disheartening picture of higher prices, financial worries and low expectations of change any time soon.
The 2022 survey results show that the costs of essentials like housing, food and travel are causing major problems for consumers across all incomes. The survey was carried out before the downward trend in inflation began, so we might expect some difficulties to be eased in the future.
However, with war in Europe continuing, investment urgently needed to bring down the long term costs of energy and jitters about another banking crisis, policy makers should take note of the cumulative impact of these multiple crises on consumers' everyday lives.
How the Euroconsumers Affordability Barometer works
Since 2018, Euroconsumers has run an annual survey of consumers across Belgium, Italy, Portugal & Spain to measure consumers’ financial affordability of daily-life needs and activities and the impact on their quality of life.
Each year, around 15,000 consumers are asked about any difficulties they had with paying food, transport, health costs, education, leisure and general household bills over the past year and what their outlook is for the next twelve months.
This gives us vital insight into affordability trends over time and spot which sectors and services impact most on household budgets. It also means we can spot if and where a lack of spending power is putting families in precarious situations.
This year 16,563 consumers aged between 25 and 79 years were again surveyed across the four countries. The results were then weighted for age, gender, location and education level to be representative of the national population in each of the countries.
Consumers are also asked to rank how important each area is to them in terms of contributing to their quality of life. Comparing this ranking with the capacity of households to meet their outgoings creates an index which shows how easy people are finding balancing finances and quality of life. Households are then ranked on an index between 0 from 100, higher index value showing an easier balance, and a lower one showing a difficult situation.
Two barometer indexes have been created, one that measures the financial affordability of daily needs over 2022, and one that measures consumers’ projections of financial affordability for 2023.
Consumer Affordability Barometer falls for second consecutive year
Consumers are feeling the impacts of rising prices and squeezed wages. Over all four countries, there was a decline in the consumer index since last year in terms of financial affordability and quality of life.
Across all countries, around a third of people said it had become much more difficult or impossible to afford monthly household expenditure.
The details behind the index shed light on some differences in how affordability affects circumstances and outlook, but generally all countries share increases in problems affording things, increases in the number of people in difficult financial situations and low expectations on things improving any time soon.
Belgium sees highest rise in people in financial difficulties
The Belgian Consumer Affordability index continued on a downward trajectory since its first ever fall in 2021. Looking at what was behind this fall, 37% said they had difficulties affording housing expenses, 39% leisure and free time expenses and 28% food.
Although Belgium had the most people reporting no financial difficulties (41.4%), it also had the highest rise in consumers with some financial difficulties which at 53.3% was up 4.3% on last year. Another 5.4% considered themselves to be in serious financial straits, up 0.7% on 2022.
Belgians’ expectations for this year remained gloomy, with 50% expecting things to get worse, 42% saying it would stay the same and only 8% predicting an improvement.
Italy sees smallest drop in index despite continuing worries about finances
Italy saw the smallest drop of all four countries in its index score from 46.2 in 2021 to 45.2, although it’s the third drop in three years and is still 3.7 points lower than in 2020. Italians reported difficulties with affording food costs (37%), mobility costs (39%) and housing (49%).
The percentage of Italians reporting to be in serious financial difficulties was 8.5%, a rise of 3.5% on 2021, while those in some difficulty was 63.2%, up 2.8%.
Despite the current situation, 15% of people surveyed in Italy expected things to get better - one of more optimistic outlooks of the four nations. 41% expected it to remain the same and 45% to get better.
Portuguese are the most pessimistic about immediate improvements
Portugal saw similar levels of cost pressures on key consumer spending, with housing, food and mobility causing the most difficulties. Overall, Portugal’s index had the biggest drop from the previous year, at 42.1 it was 3.2 points lower.
Portugal did have rises in the number of people in some or serious financial difficulties, but they were the lowest rises of all four countries.
Portuguese were also the most pessimistic about seeing any immediate improvements, 54% of respondents felt things would be worse in 2023 than in 2022, 34% thought it would be the same, and 12% thought it would be better.
Spain has most people in difficulty, but also the most hope for better times next year
Spain: More Spanish consumers said they were feeling the negative impact of housing, food and leisure time costs than in any of the other countries – 51% had difficulties affording housing expenses, 47% food and 41% mobility.
At 10.7%, Spain also had the highest proportion of people reporting they were in serious financial difficulties, this was 2.2% points above the next biggest proportion in Italy.
However, with an eye on the future, Spaniards had the greatest number of people who were hopeful about improvements in 2023. Here, 16% expected things to get better, compared to 42% who thought it would stay the same and the same number who thought it would get worse. The positive expectation was twice as high as in Belgium where only 8% thought 2023 would be better.
Supporting consumers as financial squeeze continues
The energy crisis, war in Europe and current global economic trends have all taken hold, putting consumers in an ongoing situation of stress and reduced spending power. Whileinflation in the Eurozone is coming down from its double digit peaks of 2022, higher interest rates and renewed anxiety of a broader financial crisis on the horizon will continue to keep price pressures up. The Euroconsumers Affordability Barometer gives valuable insight into how this wider systemic activity is felt in the real economy in real consumers’ pockets.
As the cost of living crisis continues, Euroconsumers and its national members will continue to work with consumers to improve the market so it can serve people in the most difficult of times.