What We Think

June 25, 2020

Chart of the Week (26) – Purchasing Power

Actual Individual Consumption (AIC) is a measure of material welfare of households. According to preliminary estimates for 2019, published this week by Eurostat, AIC per capita expressed in purchasing power standards (which accounts for currency fluctuations) varied from 59% to 135% of the EU average across the 27 Member States.

Nine countries recorded AIC per capita above the EU average, with the highest level reported in Luxembourg at 35% above the average. Other Member States that fall in this category comprise the more developed central and northern European markets. The majority of Member States in the Mediterranean region and some Eastern European countries recorded AIC per capita between the EU average and 25% below. At the opposite end of the scale, Slovakia, Latvia, Hungary, Croatia and Bulgaria fall more than 25% below the EU average, with Bulgaria actually recording the lowest AIC per capita in the EU at 41% below the average.

Malta’s AIC per capita currently stands at 20% below the EU average and has been at this level for the past 10 years. Consumer price levels, on the other hand, have increased by more than 14% between 2009 and 2019. Notwithstanding, general price levels in Malta are 12% lower than the EU average.

Comparing price indices of different goods making the average household basket, shows varying trends in price developments. Food prices, for example, increased by close to a quarter over the last 10 years and are today 11% higher than the EU27 average. According to the last Household Budgetary Survey 2015, food accounts for roughly 20% of the average household weekly expenditure and therefore the increase in food price levels weighs heavily on the AIC per capita. The highest food price increases were recorded for bread and cereals which increased by 43% during the reference period, followed by meat (+29%) and fruits and vegetables (+25%). Dairy product prices only increased by 6% but are among the most expensive staples when compared to the EU average; 20% higher than the EU27 average. Similarly, non-alcoholic beverage prices only increased by 8% during the period between 2009 and 2019 but are then 25% higher than the EU average.

Price levels of other non-food commodities increased on average by 15% over the past ten years. In this regard, Malta continues to enjoy a relative price competitive advantage in comparison to the EU27 average. Clothing and footwear and communications stand at just 1% and 4% higher than the EU average, respectively. Additionally, recreation and culture, and dining out in Malta are on average 11% more affordable in comparison to EU27 price levels.


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