Consumption expenditure of families with two children up by EUR 1,500 per year

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The economists of the OP Pohjola Group demonstrate the year-on-year change in consumer prices with a calculation explaining the increase in the consumption expenditure of a family of four members.
     
The calculation is based on the price level in January 2008, with annual inflation accelerating to 3.8 per cent.
      The analysis is based on Statistics Finland’s survey on the structure of consumption in a family with children from 2006.
     
According to the bank, nearly half of the increase in the expenditure of a family with children is caused by the fact that the prices of food, housing, and transport have increased following the accelerating inflation.
      In fact, the consumption expenditure of a family with two children will this year be an average of EUR 3,000 higher than in 2006. In other words, the annual spending of the family has gone up by EUR 1,500.
      However, the fact that the prices have gone up by 1-2% to 3-3.5% over one year is no major catastrophe”, says Timo Lindholm, the chief economist of the OP Pohjola group.
     
He points out that the family in the example is an average family, while the curious fact is that fewer and fewer such families exist in Finland nowadays.
      ”Currently, the differences between the economic situation of Finnish families can be huge. While some families have difficulties coping with the rising costs, some others do not notice anything”, notes Lindholm.
     
In the old days, inflation was beneficial to those with housing loans. Unfortunately, in today’s world this is no longer true.
      ”Previously, inflation and interest rates had nothing to do with each other. When inflation accelerated, it was compensated by higher salaries. As the interest rates did not change, it was easier to cope with the loan”, says Lindholm, crushing the hopes of debtors who have housing loans.
     
In fact, nobody can escape from inflation, when it affects staple commodities, including food products.
      "The only positive aspect is that perhaps consumers awake to reality and start considering what they really need and what is not so important to buy”, Lindholm concludes.
      On the other hand, today’s competition prevents the increases in prices from accelerating constantly.
      The OP-Pohjola group predicts that inflation will slow down again in 2009.


Links:
  OP-Pohjola Group
  Statistics Finland

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