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News : EU Economy Last Updated: Nov 23, 2010 - 2:11:20 AM

European purchasing power begins to improve
By Finfacts Team
Nov 23, 2010 - 2:01:15 AM

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The updated GfK Purchasing Power Europe 2010 / 2011 study by market research firm Gfk reveals the regional distribution of the population's purchasing power in 42 European countries. This year's study suggests the beginning of a recovery from the economic and financial crisis.

According to the GfK study, European consumers have a net household income of approximately €7.9bn available for consumer purchases in 2010. This corresponds to an average purchasing power of €11,945 per inhabitant of the 42 countries considered by the study. This is an increase of around 2.1% over the previous year's level.

The crisis has definitely left its mark in some countries. There are however no major shifts in the purchasing power levels of the wealthier countries evaluated by the study, with the exception of Sweden. Here per capita purchasing power rose significantly due to the revised 2009 figures and 2010 exchange rate fluctuations. Even so, Sweden's purchasing power lags behind Finland's.

The Baltic countries, which bore the full brunt of the financial crisis, slipped further in 2010 despite improvements to Europe's overall economy. With a per capita purchasing power of €4,938, Estonia fares best among the Baltic states.

The countries comprising former Yugoslavia as well as Moldova, the Ukraine and Belarus continue to occupy the lowest ranks: Inhabitants of these areas have less than one-third of Europe's average purchasing power. Exceptions are Croatia and Slovenia. In recent years, Slovenia has climbed to the top of the rankings among the Baltic countries and even overtook Portugal in the crisis year of 2009. Slovenia has consolidated this position in 2010 with a per capita purchasing power of €10,045.

Portugal, Italy, Ireland, Greece and Spain fall in the middle of Europe's purchasing power rankings. All of these countries have purchasing power levels that have remained relatively stable since last year's study. A few countries are already enjoying a clear upswing. Turkey is among those European countries that successfully weathered the economic crisis and achieved positive economic development in 2010. Turkey's per capita purchasing power consequently rose by over 10%, moving it up several places in the rankings.

Purchasing power is a measure of per capita disposable income (including any received state benefits) after the deduction of taxes. The study indicates annual per person purchasing power levels in euros and as an index value. GfK purchasing power figures reflect the nominal disposable income, meaning that the values have not been adjusted for inflation. The study draws on statistics on income and tax levels, government benefits and forecasts by economic institutes.

The GfK purchasing power study does not take into account regional cost-of-living variations or recurring monthly deductions from disposable income such as rent, mortgage payments and contributions to private retirement funds and insurance policies.

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