How Eurozone consumers spend their income when they have one…

Viviane Reding, Vice-President of the Eurpeam Commission in charge of Justice, Fundamental Rights and Citizenship, gave a press conference on the modernisation of travel rules for consumers and businesses. (EC Audiovisual Services, 09/07/2013).

Viviane Reding, Vice-President of the Eurpeam Commission in charge of Justice, Fundamental Rights and Citizenship, gave a press conference on the modernisation of travel rules for consumers and businesses. (EC Audiovisual Services, 09/07/2013).

Eurostat, the EU statistical service, presented on 30 August a statistical survey on the euro area headline inflation and its four main components. Together with it Eurostat published a valuable table showing the weight of each of the twelve items that compose the inflation index and its four main components. By the same token however this table tells us how and on what our fellow Eurozone citizens spent their money.

       Relative weights of the harmonised indices of consumer prices components (%)

inflation1                                        Source : Eurostat

The idea is the following. The weight that each consumption item or category carries in the inflation index is based on another statistical analysis measuring the distribution of consumer expenditure. In order the inflation index to accurately measure the rhythm of change of consumer prices of goods and services, its components must reflect exactly the average composition of consumer expenditure. But this depicts also the exact manner in which the average Eurozone household or individual divides its consumer spending on the various products and services.

What we value

In this way when Eurostat gives us this table of the euro area headline inflation and its main components at the same time it informs us about the distribution of the consumption expenditure of the average Eurozone household. Looking at the main components of euro area inflation Eurostat found that the sector of “services is the largest component, accounting for around 42.3 % of individual consumption expenditure in the euro area. It is followed by non-energy industrial goods with around 27.4 %. Food, alcohol & tobacco and energy account for 19.4 % and 11.0 %, respectively”.

This means the average Eurozone household or individual distributes its consumer spending exactly in the same way as above. However the EU statistical service provided us with a table analysing these four categories in twelve more detailed ones. Let’s start from the most important of them, services.

Costly services

Numbers tell us that the average Eurozone spender is a rather selfish person. The largest part of its spending on services goes to recreation and personal care, absorbing 0.1465% of his, or hers or theirs income. This is also the largest single consumer expenditure item out of the twelve included in the above table. The second more costly service item is ‘housing’ absorbing 0.1025% of total consumption expenditure. Transport is also an important item in the services sector absorbing 0.0721% of our consumer spending, followed by communications with 0.0310%.

The second largest category in our purchases basket is the non-energy industrial goods. Within this sector the most important category which absorbs 0.1054% of our expenditure on consumption is the semi-durables, followed by industrial consumer durables with 0.0884% of our total consumption spending.

Then come food, alcohol and tobacco, with those items claiming 0.1937% of what we spend on consumption, accounting almost for one fifth of it. Within this category, processed food is the main item with 0.1202% of our total consumption. Last but not least comes our expenditure on energy.

The average Eurozone household or individual spends 0.1096% of its total consumer spending on energy goods. Consumers split this spending almost equally in two categories. Electricity, gas, solid fuels and heating is the first one, with the second being fuels and lubricants for personal transport equipment, that is our beloved or much hated private car.

Consumer spending distribution can be a very valuable tool for marketeers and marketing plans. In any case the structure of consumer spending is a dynamic magnitude and changes fast, following the major economic trends. For example in the crisis stricken Eurozone countries the weight of the basics in their consumption spending has greatly increased during the past three years favouring food and energy. That is why aggregates and averages must be treated with much caution. The people bellow the line may be tens of millions.

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Comments

  1. Stephen says:

    Why are the percentages in this table all wrong by two decimal places? ie, food is not 0.1937%, it’s 19.37%.
    Additionally, taking the CPI as a proxy for household expenditure is misleading as it does not include mortgage payments and hence misses out a large amount of expenditure for those countries with a high prevalence of renting. ie. Germany, which also happens to make up the largest weighting in the euro-area HICP weights.

  2. Or to correct myself, is biased toward those countries with a high prevalence of renting, such as Germany

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