The Pandemic Cuts Household Income By 3.3% And Companies’ Gross Operating Surplus By 18%

Net wealth of European households lost in the crisis recovered; now is over seven times disposable incomeCompanies have not benefited from support measures comparable to those in place for households

The impact of the pandemic on household accounts has been more moderate than that suffered by companies because most of the protective measures implemented by the government have been aimed at the former. In this respect, analysts at Funcas explain that the decline in the gross disposable income of households in 2020 was 3.3%, lower than that of GDP (-10.8%) and consumption (-12%). Meanwhile, the gross operating surplus of companies fell by 18%, the biggest drop in the entire historical series, and their gross disposable income fell by 17%.

Funcas notes that companies have not benefited from support measures comparable to those in place for households. Whatsmore, along with a historic decline in their results, there has been an increase in their debt and financial pressure. There has also been a rise in the percentage of firms with negative results and those in a situation of vulnerability, all of which is reflected in a reduction in the number of businesses.

As for households, one of the most striking consequences of the crisis has been the historic rise in their savings rate, the result of a greater fall in consumption than in income. Excess savings amount to 60 billion euros, of which 32 billion correspond to preventive savings and 28 billion to forced savings. This pool will not be fully spent, but it provides significant growth potential for consumption – or household investment. So a positive shock to spending can be expected as mobility restrictions are lifted and the vaccination process is completed.

The pandemic has not only impacted households and businesses but has also altered, perhaps irreversibly, retail payments. According to the ODF-Funcas Barometer, the percentage of the population that has made a payment with a mobile phone rose from 55.7% before the pandemic to 63.2% in the last months of 2020. On the other hand, the use of applications for transferring money between individuals (peer-to-peer or P2P), of which the most telling example in Spain is Bizum, has grown from 62.8% to 75.3%.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.