Income and Expenditure in Western Europe

Delivery

This report comes in PPT.

Key findings

Disposable income grows slowly, yet to remain high by global standards

Total disposable income is set to rise by 22.2% in real terms over 2021-2040, and disposable income per household is set to remain the third largest globally, reaching more than USD65,000 by 2040. Nevertheless, near-term outlook is clouded by higher energy prices and trade disruptions stemming from the war in Ukraine, which could result in potential destabilisation of businesses, constraining growth in consumer incomes.

Savings ratio to remain elevated post-pandemic

Historically, Western Europeans saved about 10% of their income, but since the start of the pandemic savings ratio reached 17% and is expected to remain elevated over the forecast period. A higher level of savings is expected to partly offset pressure from rising prices, bolstering spending in the face of economic uncertainty.

Income inequality to rise slightly, yet remain low by global standards

Low gender and regional inequality will continue to support relatively equal income distribution in Western European countries. However, in 10 out of the 17, either highest earning (class A) or lowest earning (class E) social class are set to expand at the fastest rate over the forecast period, indicating that income inequality is set to slightly increase.

Proportion of discretionary spending to increase slightly

Extensive expenditure on housing due to high rented and mortgaged housing rates makes spending on essentials exceptionally high in Western Europe. Nevertheless, over 2021-2040, spending on discretionary categories is expected to witness faster expansion, compared to essentials, with hotels and catering, as well as leisure and recreation recording among the largest expenditure growth rates.