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Czechs are getting poorer and buying less

In the past year, the Czechs have significantly reduced their purchases. Shopping malls and restaurants full before Christmas were apparently an illusion, the faster worker poor.

Czech household consumption in the third quarter of last year, that is, from July to September, In fact, it has historically failed. In real terms – that is, after adjusting for inflation – people in the Czech Republic were shopping 7.8 percent of goods and services per capita compared to the same period in 2021. This is the second most significant year-on-year decline since 2005, at which time the Czech Statistical Office publishes the exact time series.

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More, albeit slightly, by 7.9 percent, real consumption fell year-on-year only in the April-June 2020 period. But at the time, the Czech Republic was fighting the first wave of the COVID-19 pandemicTherefore, a large part of the traditional shops, as well as restaurants, have been closed for health reasons.

Last year, in the third quarter, real consumption decreased significantly, despite the fact that the stores were already fully open. The result is more serious. He maintains that judging the state of the economy and consumers’ willingness to spend solely in terms of “full malls and restaurants” can be completely misleading.

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Optical error and illusion

The last pre-Christmas period also visually filled many shops and restaurants, However, the question remains how much people actually spend in them. The numbers published today for the third quarter of last year suggest that we can expect a historic decline in consumption in the fourth quarter of last year as well.

Important The decrease in real consumption is mainly due to the significant decrease in real monthly income In per capita terms, that is, financial income that takes into account inflation. In this statement, per capita income decreased year-on-year by 5.2 percent. This is the second-largest drop in real income over the period again since 2005.

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Although salaries, wages and pensions rose nominally (numerically) year on year last summer, however Inflation was so high that people’s incomes in the Czech Republic fell dramatically in real terms. More importantly, by 10.7 percent, the highest in the entire history of the given time series since 2005, monthly labor income per person decreased year-on-year. People who get all their income from work, rather than from pensions or other benefits, or from renting real estate or owning stocks, have suffered in real terms more than the population as a whole.

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a relatively sensitive person decrease in real income, especially those who work, really happened in the first half of last year. However, this decline at that time had not yet manifested itself in a decline in real consumption. It only happens in the third quarter of last year.

sound During the first half of last year, people in the Czech Republic were still able to increase their real consumption despite lower real incomes, thanks to savings from pandemic times.. They have accumulated these out of prudent savings for fear of worse times to come, but also out of the described simple impossibility of shopping in the full range of brick-and-mortar stores, or perhaps out of the practical difficulty or impossibility—caused again by the pandemic and related restrictions here and abroad—of traveling in free time or take a vacation.

Read more of Lukasz Kovanda’s comments here: