Consumer spending in Portugal has plummeted to its lowest level since reliable records began in 1978.
According to the Bank of Portugal (BdP), spending by private individuals and families is now lower than in 2009 at the height of the financial and subprime crisis when Lehman Brothers collapsed in the United States of America.
Spending is even lower than when the International Monetary Fund was in Portugal in 1983/4.
Families have never before cut back their spending so drastically, which is having an impact on the retail and catering trades in the country.
At the same time, the amount of bank deposits and savings shot up in June to €124.5 billion according to the Bank of Portugal’s monthly bulletin.
Families have been encouraged to save thanks to more attractive interest rates which increased to 3.63% from 3.54%, the highest interest rates since 2008.
At the same time, families are not only withdrawing less cash from the banks but are depositing more of their income – up 1.9% between May and June this year.
In overall terms, deposits have increased 5.2% to June since the same 12 month period last year, rising from €118 billion in June 2010 to €124.5 billion in June 2011.
But spending is falling: rates fell -1.6 base points in July from -1.3 base points in June, the lowest level since July 2009, when the economic recession was at its peak, pushing internal economic indicators to their lowest levels in two years.
Economic activity across the board has been falling since July 2010, reflecting not only the impact of the sovereign debt crisis but also the effects and perceived effects of successive austerity plans imposed by the IMF/EU/ECB.
The performance of Portugal GDP and its sub-sectors in terms of consumer spending and private consumption has been affected by salary cuts and wage freezes, unemployment, fear of unemployment, increased taxes and slashed holiday subsidies.
And the amount of cash provided in terms of unemployment benefit and social security payments has also been slashed by the Government as the length of time awarded shortens and criteria to get it becomes stiffer in a bid to balance the nation’s finances.
The PSD Minister for the Economy, Álvaro Santos Pereira, said that the indicators showed that most people in Portugal were “going through difficult times” but that the reforms the Government was implementing were “absolutely fundamental” for the country to get out of a difficult situation.
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