Purchasing power falls due to high oil prices

9th August 2006, Comments 0 comments

10 August 2006, BRUSSELS — The purchasing power of Belgian households fell in the past year as prices rose faster than wages and the high cost of oil increasingly made a dent in family budgets.

10 August 2006

BRUSSELS — The purchasing power of Belgian households fell in the past year as prices rose faster than wages and the high cost of oil increasingly made a dent in family budgets.

"There is a downward pressure on Belgian wages and therefore on purchasing power of families," KBC Asset Management economist Erwin Van der Sande said.

"The phenomenon is occurring in the entire eurozone and America."
 
KBC figures indicate the trend has been noticeable since the second half of last year and was confirmed in the first half of this year.

In 2002 and 2004, the situation was more positive, when wages grew at least as fast as living costs.

The KBC figures are supported by ING studies indicating that purchasing power declined in 2005, newspaper 'De Morgen' reported on Wednesday.
 
The fall in purchasing power is due to two reasons: namely a policy of wage moderation agreed on by the federal government with unions and employers and rising oil prices.

Automatic wage indexation offers no relief either. Since 1994, wages have been adjusted based on the 'health index', which does not take into account prices of oil products such as petrol and diesel.

The good news is that the fall in purchasing power has been partly compensated for by a recent cut in personal income tax.

The governor of the National Bank, Guy Quaden, said in June he expected wage rises would amount to 4.2 percent in the period 2005-06, under the agreed maximum.

Inflation amounted to 2.8 percent last year — the highest rate in the past five years.

If inflation amounts to more than 1.4 percent in 2006, the average Belgian household will lose purchasing power. An inflation rate of 2 percent is forecast for this year.

[Copyright Expatica News 2006]

Subject: Belgian news

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