The recession is anticipated in Spanish homes: «The climate that is breathed is pre-apocalyptic»

The crisis and the economic decline are already slipping into the pockets of the Spanish with a cut in spending. Consumers are not waiting for autumn and are now changing their purchasing habits due to double-digit inflation and a context with a high degree of uncertainty. In the midst of a perfect storm of exorbitant prices, a large part of households are pessimistic about the current situation and change their habits to save or, directly, to survive. Using appliances less, opting for shorter showers, buying cheaper brands or even giving up buying more expensive foods, such as fresh fish or meat, are some of the changes that Spaniards are already putting into practice (see graph) . The data, which is extracted from a survey carried out at the end of the first semester by the Consumer Organization (OCU), reveals that 34% of those interviewed declare that they do not have any savings or the possibility of tightening their belts more to withstand more price increases. Experts predict that the Spanish will continue to revolutionize their habits abruptly and that they will replace the products they put in the basket, the establishments where they are purchased, and that they will even eat worse with lower quality food. Not only do behavior patterns change, there is also a clear risk of a fall in private consumption. Consequently, in the latest BBVA Research report “Situation in Spain” it warns that “the possibility of a 'precipice effect' in household spending during the last part of 2022 or the first part of 2023 is high”. In fact, the billing and VAT data sent to the Tax Agency reveal a slowdown in daily spending from 31.5% in mid-June to 29.3% detected on August 9. The truth is that more and more consumers need to count down to the last penny; although other economic indicators, such as employment, are not going badly at the moment. "The climate that is breathed is pre-apocalyptic," says Carlos Cotos, director of Customer Service at Kantar Worldpanel. However, Cotos points out that the current behavior of Spanish consumers "is governed more by future expectations than by what is happening today", since in the macroeconomic scenario there are still no clear signs of recession. “Spaniards still have a large amount of accumulated savings, but there is a lot of fear that winter will come -both figurative and real- and in economics, if you think something is going to happen, it ends up happening“recalls the expert from Kantar Worldpanel. What is perceived is that Spaniards buy smaller and smaller baskets with fewer products each time they visit the supermarket. “This may be a first marker that we are entering a crisis. We must remember that at the beginning of the previous financial crisis, people began to split their purchases and several establishments and, therefore, the baskets were smaller then, "clarifies Cotos. Fall in demand Enrique Porta, partner responsible for Consumption at KPMG in Spain, confirms the scenario of prevailing pessimism. "High inflation and significant uncertainty are undermining consumer confidence, an indicator that is already at the same levels as at the start of the pandemic," he warns. For this reason, families no longer indulge in whims or stop buying goods such as clothing or enjoying leisure activities. "You have to pay more for basic items such as household supplies, the mortgage or food and there is a forced transfer of spending from non-essential categories to those of first need," explains Porta. The situation is different in households with greater difficulties, where an increasingly high cost of living forces them to sacrifice the consumption of fresh fish or meat. These families also express more problems to pay for gas and electricity or to cover the educational expenses of their children. In addition, 33% of those interviewed by the OCU began to reduce going out to bars and restaurants and 21% decided to change their vacation plans for this summer. “Demand is already falling sharply, as is the case with two out of ten respondents who stop buying fresh food. Autumn is very difficult for families », warns, for his part, Enrique García, OCU spokesman. Desktop code Image for mobile, amp and app Mobile code AMP code 2120 APP code The polarization of consumption also differentiates between households that still have a cushion of accumulated savings after the pandemic - estimated at 80,000 million by BBVA - and between those that They arrive very fair at the end of the month. Citizens are beginning to resort to easy credit and assume the risk of indebtedness to survive daily expenses such as shopping at the supermarket, but also to shield vacations. The demand for financing for consumption rose last June to 29.30%, 5.20% more than a year ago and twice as much as in the same month of 2020, according to Asufin data. This drop in demand puts an added element of pressure on companies, which are also suffering from the unbridled rise in costs at origin and are now facing a cut in customer spending. This distrust that prevails in the street is noticeable when buying in the supermarket. "In volume, there was a 4.9% drop in mass consumption, but spending rose 3.1% until June," says Cotos, from Kantar. For this reason, Porta points out that the brands will have to clearly justify to the consumer the price difference with respect to cheaper alternatives. He also predicts that inflationary pressure will lead to the rapid development of other consumption models such as rental, pay-per-use, second-hand or purchase between individuals. MORE INFORMATION news No Spanish families activate the 'crisis mode': they reduce spending and pull their savings news Yes Spanish families borrow twice as much as in 2020 to survive skyrocketing daily expenses In addition, the context could get worse. "After the respite for hotel and tourist establishments during the summer break, in autumn the trend of falling consumption is expected to continue," predicts Massimo Cermelli, professor of Economics at Deusto Business School. “Citizens are beginning to postpone certain purchase decisions, especially in clothing or leisure. It is the same effect as in a deflation scenario, since when prices are reduced, acts of consumption are delayed.

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