Home » Confcommercio: ‘5.3 billion euros of consumption at risk’

Confcommercio: ‘5.3 billion euros of consumption at risk’

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Confcommercio launches the inflation alarm: the run in prices due to expensive raw materials and the shortage of supply in the face of a rapidly growing demand, risks significantly reducing household consumption with the risk of negatively impacting even Christmas purchases and slow growth in 2022.

In the hypothesis of an average price increase of 3%, approximately 2.7 billion euros of consumption would be lost, which could reach 5.3 billion in the – not so unrealistic – hypothesis of inflation at 4%. This is what emerges from an estimate by the Confcommercio Research Office on the effects of a rise in inflation on household consumption in the fourth quarter of 2021.

The ECB, however, throws water on the fire. According to the chief economist, Philip Lane, the flare-up in prices is “unusual and temporary” and therefore very different from the “chronic” rises seen in the 1970s and 1980s. “If we look at the situation in the medium term, the inflation rate is still too low, below our target of 2%,” the economist said in an interview with El Pais.

For the president of Confcommercio, however, “inflation and an increase in compulsory spending could reduce consumption in the coming months, with the risk of slowing down the country’s growth” which is why “it is therefore necessary to use the resources of the NRP quickly and well. finally begin to reduce the tax burden on households and businesses, starting with the cost of labor. Only in this way can investments and consumption be relaunched ».

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In both inflationary scenarios, nearly three-quarters of the loss would derive from an immediate reduction in the purchasing power of disposable income, the rest from the erosion of financial wealth held in liquid form; This reduction in consumption is also affected by the increase in compulsory expenses due to the rise in energy prices, which has already been transferred to electricity and gas bills.

For 70% of the estimated losses are due to immediate reductions in the purchasing power of disposable income; for the remainder to the lower purchasing power of financial wealth held in liquid form and, therefore, not protected from unexpected inflation, it is explained. For Confcommercio, that such potential price increases – as it is quite probable an abundant 3% trend in prices in the fourth quarter – does not lead to any change in household expectations and does not reduce purchases during the important Christmas period, appears rather unlikely.

Furthermore, it is possible to hypothesize an increase in the share of expenditure destined for compulsory expenses, due to the increase in energy prices that has already been reflected in the electricity and gas bills (despite the support allocated by the government to neutralize, in part, the effects of these increases on household budgets, especially those more fragile in terms of income from work).

«Therefore – the note reads -, given the rigidity of the obligatory expenses – also with respect to changes in relative prices – it is possible to imagine, if the scenarios described were to be plausible, a rather significant impact on marketable consumption. Nor can we neglect more significant consequences for the year 2022, also in terms of economic growth, negatively influenced by a lower real demand for consumption ”.

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