By Leonidas Stergiou
With the appearance of the first positive change of the consumer price index, at 1.8%, in the third quarter of 2021, consumption increase immediately decreased in half, while net disposable income slowed by 30%, compared to the second quarter and by almost 50%, compared to the first quarter. This is despite the continuation of support measures, increased real estate revenues and the reduction of direct taxes.
According to an analysis by the ECB, the negative effect is observed without any time delay (in the third quarter of 2021). And the only reason for the decrease in net disposable income was inflation, which was then close to 2%, which is much lower than today. What significantly restrained both gross and net disposable income was the significant reduction in direct taxes (-2.7% on an annual basis in the third quarter, compared to -0.5% in the second quarter). Otherwise, together with the GDP deflator which increased from 0.1% to 1.8%, the net increase in disposable income by about 4% would have disappeared.
According to bank executives, the deterioration that occurred in the third quarter of 2021, accompanied by a general decline in consumer confidence, normalized in the fourth quarter, but the negative effects became more noticeable from February onwards. The intensity of the energy crisis and inflation, as well as the uncertainty of the war, contributed to this.
Thus, in addition to January, which is traditionally considered to be the month in which deposits “deflate”, the first two months of the year saw the first net decrease in household savings, and February saw a net disbursement of consumer loans of € 17 million for debt repayments. There was also a slowdown in mortgage repayments (fewer repayments than new disbursements, ie more loan liabilities) by € 174 million.
The same sources reported in Capital.gr that the imprint of accuracy and tax and insurance obligations will appear in the coming months, with corresponding emphasis on the side of loans, including the increased risk of red loans.
Immediate effects
Returning to the third quarter of 2021, according to ECB data, the first impact of the appearance of inflation was the reduction of consumption, which until then was running at an annual rate of 16%. Immediately, in the third quarter, with the appearance of inflation, the annual growth rate of consumption falls to 8%.

Annual change of net disposable income and the elements that affect it on a quarterly basis (Greece)
Orange: Wages, Red: Other income, Green: Direct taxes, Blur: Net benefits, Gray: Real estate income, – – – – Net disposable income
The second effect is observed in savings. Following the continuous increase in deposits in 2020, which continued until the first quarter of 2021, the second quarter saw a significant decrease in savings with a simultaneous increase in consumption, as a sign of enhanced consumer confidence. With the onset of inflation, households restrained consumption and the rate of reduction of savings, compared to the second quarter of 2021 fell to almost a third.
The following phenomenon is observed in the labor market: The real salaries of the employees show the biggest annual decrease in the third quarter of 2021, even compared to the last 4 years. However, employment is rising but not so much as to justify a reduction in the unemployment rate. At the same time, total wage costs are rising. A closer look shows that working hours have actually increased, which explains the increase in employment and workers and, consequently, the decrease in unemployment and the increase in wage costs (although net wages per employee have decreased).

Annual change,%
Blue: 2021 c ‘trim. Blue: 4-year average
Hellas
Ireland
Netherlands
Germany
Spain
Belgium
EA -> OXI
Luxembourg
Cyprus
France
Austria
Slovenia
Slovakia
Italy
Portugal
Estonia
Malta
Latvia
Finland
Luxembourg
The numbers
Savings: Per capita savings fell in the third quarter of 2021 to 537.8 euros from 677.9 euros in the second quarter.
Real estate: Per capita non-financial investments, which according to the ECB methodology are mainly related to real estate, increased to 392.6 euros from 368.7 euros in the second quarter. This is confirmed by another element, namely the increase in housing lending.
“Cash desk”: The net difference between those who owe and those who owe was positive, with the per capita “surplus” decreasing in the third quarter to 145.2 euros from 309.2 euros in the second quarter.
Deposits: The average deposit (balance of 4 quarters) in the third quarter of 2021 fell to 1,062.6 euros, compared to 1,091.6 euros in the second quarter.
Interest-bearing bonds: Per capita position in bonds decreased to 22.1 euros from 49 euros.
Investment funds, mutual funds, shares: The per capita position increased to 328.8 euros from 286.2 euros.
Life insurance and retirement plans: The per capita position decreased further from -20.5 euros (loss) in the second quarter of 2021 to -41.4 euros in the third quarter. This trend, according to market executives, was cyclical, which became more apparent in January, without characterizing 2021, while from February onwards, the production of insurance premiums increased. The change is largely due to the shift to bancassurance products, ie insurance contracts linked to investments that are counted in the previous category (investments).
Total investments in financial assets (deposits, repos, bonds, shares, mutual funds, etc.): The per capita amount from 1,591.1 euros in the second quarter fell to 1,525.6 euros, mainly due to investments in shares and real estate income. It is noted that the amount over 1,500 euros is recorded for the first time in 2021 since 2016 when the ECB has data.
Lending: Households reduce short-term borrowing, such as small consumer loans, and increase long-term borrowing, such as mortgages or large consumer loans. For example, per capita short-term borrowing in the third quarter drops to 86.6 euros from 89.2 euros in the second quarter, but long-term borrowing increases to 181.3 euros from 157.6 euros. However, this trend has worsened since February, when for the first time there was a net disbursement of consumer loans for payment of liabilities.
Other obligations: In the category of other liabilities -excluding loans-, these tripled in one quarter. Liabilities per capita increased from 10 euros to 32.7 euros.
Read also:
Businesses and households “eat from the ready” – Reduction of deposits
Source: Capital

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