Last year, the Czechs drastically reduced their purchases. Shopping malls and restaurants full before Christmas were apparently just an illusion, the poor working faster.
Consumption of Czech households in the third quarter of last year, i.e. from July to September, in fact, historically it has failed. In real terms, i.e. after accounting for inflation, people in the Czech Republic were shopping 7.8% less goods and services per capita than in the same period of 2021. This is the second largest year-on-year decrease since 2005, for which the Czech Statistical Office publishes the time series shown.
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More, albeit slightly, by 7.9 per cent, real consumption decreased on an annual basis only in the period from April to June 2020. At the time, however, the Czech Republic was grappling with the first wave of the covid-19 pandemictherefore a significant part of the physical shops, but also of the restaurants, have been closed for health reasons.
Real consumption fell sharply in the third quarter of last year, despite the fact that stores were already fully open. The result is all the more serious. It confirms that judging the state of the economy and the willingness of consumers to spend only from the perspective of “full malls and restaurants” can be quite misleading.
Optical illusion
The recent pre-Christmas period has also optically filled many shops and restaurants, however, the question still remains of how much people have actually spent on them. Data released today for the third quarter of last year indicate that we can expect a historic decline in consumption in the last quarter of last year as well.
Significant the decrease in real consumption is mainly due to a significant decrease in real monthly income in per capita terms, i.e. financial income that takes inflation into account. In this statement, per capita income decreased 5.2% year-over-year. This is the second sharpest drop in real income for the full period since 2005.
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Although wages, salaries and pensions grew nominally (numerically) year on year last summer, but inflation was so high that people’s income in the Czech Republic was significantly reduced in real terms. Even more significantly, by 10.7 per cent, the highest ever recorded in the entire history of the historical series dating back to 2005, the monthly compensation of employees per person decreased on an annual basis. People who have all their income from work, and not from pensions or other benefits, or from renting real estate or holding shares, have therefore suffered in real terms even more than the population as a whole.
To a relatively sensitive one decrease in real incomes, especially those from work, have already occurred in the first half of last year. However, this decline at that time has not yet manifested itself in a decline in real consumption. It only happens in the third quarter of last year.
It seems during the first half of last year, people in the Czech Republic were still able to increase their real consumption despite the reduction in real income, thanks to savings from the times of the pandemic. They have accumulated them through prudent savings fearing the arrival of even worse times, but also due to the described simple impossibility of making purchases in a whole series of physical stores, or perhaps due to difficulty or practical impossibility – always caused by the pandemic and related restrictions here and abroad – to travel at leisure or take a vacation.
