Consumption, savings and debt burden of household income groups in 2012

Real household consumption has been falling in year-on-year terms for more than a year, although the decline moderated at the start of this year and consumption rose in quarter-on-quarter terms. With nominal disposable income falling, the gross saving rate was above its long-term average in 2012. This box analyses the behaviour of individual household income groups in the areas of consumption, saving and debt using the latest data for 2012.

In 2012, nominal consumption was decreasing in most household income groups. Consumption dropped most significantly among households with the highest income (see Chart 1),1 although income in this group increased in both nominal and real terms following a previous decrease. Only in low-income groups did nominal consumption increase.

Chart 1 (BOX)  Consumption of selected household income groups
Consumption dropped most significantly in 2012 in high-income households
(annual percentage changes; in nominal terms)


By comparison with the pre-crisis period, the consumption-to-income ratio decreased in all household income groups. In 2009 it had been low and medium-income households that had reacted to the worsening economic situation with cautious consumption behaviour, whereas in 2012 it was mainly households in the two highest deciles. Compared to the pre-crisis period, most medium-income groups and all high-income groups had a somewhat larger proportion of their income left after covering consumption and loan repayments. However, the debt burden (the ratio of interest and principal to income) rose in almost all groups of households (see Chart 2).2

Chart 2 (BOX)  Household income burden by consumption expenditure and loan repayments 
Compared to the pre-crisis period, most medium-income groups and all high-income groups have a somewhat larger proportion of their income left after covering consumption and loan repayments
(in % of net money income) 

The money saving rate increased in 2012. However, this increase was unevenly distributed across income groups (see Chart 3). The saving rate in high-income households was the highest and grew further, whereas that in low-income households was the lowest (slightly negative) and decreased further. The poorest households used their unused income in full to repay loans and did not make deposits. Such households are most frequently overindebted and are highly sensitive to economic shocks. Households in the fifth to eighth deciles mostly took out fewer new loans in 2012. Their debt burden increased, but they simultaneously created savings to a larger extent.

Chart 3  (BOX)  Savings of selected household income groups
The money saving rate increased in high-income households (in % of net money income)


The ratio of household debt to gross disposable income is at a historical high (65%). Households’ ratio of financial and non-financial assets to income is three, respectively four times higher than their level of debt, but the assets are distributed unevenly across household groups.

A living conditions survey conducted by the CZSO in the first half of 2012 reveals that households saw their financial situation as being more difficult than in 2011. The proportion of households that were having difficulty making ends meet had increased to 31%. At the same time, the proportion of households’ expenditure on housing had risen to 18.2%, with almost one-third of households regarding housing costs as a heavy burden. A full 44% of households could not afford an unexpected expense of CZK 9,300. This was particularly apparent among low and medium-income households. Households’ concerns about getting deeper into debt had increased as well.3

The shape of the Lorenz curve indicates that the unevenness in the creation of money savings increased in 2012. Households with higher-than-median income accounted for about 90% of total savings and about 60% of total consumption (see Chart 4). This is consistent with the Gini coefficient, a measure of relative inequality, which for savings increased from 0.46 in 2011 to 0.58.4 In 2012, the unevenness was somewhat lower for consumption than for income. Unevenness was visible also for new loans – households with higher-than-median income accounted for about 70% of such loans, slightly less than in 2011.

Chart 4 (BOX)  Lorenz curve 
In 2012, the unevenness in the distribution of money savings increased, while the unevenness for newly accepted loans was rather lower than that for savings 
(percentages on both axes; source: CZSO Household Budget Survey 2012, CNB calculations) 

Note: The x-axis is the percentage cumulative share of households by income and the y-axis is the percentage cumulative share of households in income, consumption, savings and loans.

1 Data based on the CZSO Household Budget Survey for 2012.
In 2012, total annual consumption accounted for 78% of income, loan repayments for 6%, or 3% net of funds from new loans (i.e. consumption plus repayments accounted for 81% of income) and the remaining part of income for 19%. Of this 19%, other expenditure (e.g. investment expenditure on house construction or reconstruction, which is usually financed from loans) made up 10% and money savings in the form of various financial instruments made up 9%.
3 This is evidenced by a decrease in the share of households with loans in the total number of households within the individual income groups. Mortgages are used by about 14% of households overall and most of all by high-income households (almost one-quarter). Consumer credit is used by 16% of households overall and in particular by low-income households (24%).
4 The highest Gini coefficient in recent years was recorded in 2008 (0.67).