Rising inflation and interest rates weigh negatively and visibly on the spending power of European citizens, including Italians. So much so that, in Italy, 68 percent of consumers are looking to cut back on everyday spending. And six out of 10 will have to dip into their savings to pay their bills and essential purchases. One in two Italians, in fact, say they have less money than a year ago to spend on everyday and necessary expenses. In the lead are utility bills, which for 30% of citizens in difficulty, it is acceptable not to pay. A really economic nightmare presented by ItaliaOggi, shows the sad reality of a country in economic turmoil.
These are some of the findings of the European consumer payment report (Ecpr), research based on the spending experiences of 20 thousand consumers in 20 European countries, carried out by Intrum, one of Europe’s leading credit service providers. The report speaks of a ‘perfect storm’ to indicate the economic turmoil that is affecting people’s ability to spend. “The increase in inflation and the consequent rise in interest rates are starting to negatively affect the financial health of European citizens, including Italian citizens,” says Giovanni Gilli, president of Intrum Italy. “From our observatory, it is clear that a change in the social attitudes of consumers is taking place, with a growing appreciation towards companies that provide more flexible payment solutions. The research clearly shows how financial education improves people’s awareness of how to manage their resources’.
The weight of the economic downturn
Compared to a year ago, one in two Italians (51%) say they have less money available after buying essentials and paying bills. This figure is in line with the European average (49%) and with that of France (49%) and Germany (52%). The rise in interest rates, on the one hand, translates into a significant increase in monthly expenses for those with variable-rate mortgages or fixed-rate contracts nearing maturity. The rise in the cost of living, on the other hand, affects almost everyone. Wages, despite being higher than in the years following the global financial crisis, are not keeping pace. Consequently, consumers say they are ready to make sacrifices. 71% plan to cancel holiday spending; 77% want to spend less on Christmas and upcoming festivities. But, in addition to these incidental expenses, there are the essential ones: 68% are looking to cut back; 60% will have to draw on their savings to meet essential needs.
In fact, according to Ecpr, many consumers have no ‘cushion’ to meet unexpected expenses during the month. More than one in three respondents say they can only access income for a month or less at short notice, while 17% have no money to spare. In Italy, however, we see a slight upward trend of respondents who have less than one month’s salary or nothing to spare to cover any unexpected expenses. 38% are in this situation (it was 39% in 2022 and 42% in 2021). In the event of unforeseen events, such as a car or house breakdown or medical expenses, they would have to take out a loan. In fact, those who are already short of liquidity are pushed to apply for loans. Research shows that one in five Italians has taken out a loan in the last six months to pay their bills. In the last year, 28% have not paid on time, and 25% plan to take out new debts to meet their daily expenses.
People spend more than their paycheck brings in
At the European level, three out of four consumers say they spend all their money or spend more than they can afford in a month. In Italy, this number is 76%. 17% of Italians spend more than they earn just to meet essential commitments. The budget is overspent, on average, by 267 euros, a figure similar to what the French overspend (265 euros), but higher than the 208 euros of the Germans.
The digital economy is a double-edged sword. The advent of digitalization also brings disadvantages to consumers’ pockets. Indeed, according to the report, the increasing ‘infiltration’ of subscriptions, the rise of the so-called subscription economy, impoverishes consumers. This is the phenomenon whereby watching a film, listening to music, or even buying various items comes through online platforms to which one has subscribed. But to date, almost half of the respondents (49%) say they are surprised at how much their subscriptions have accumulated without realising it. And again, two out of ten consumers admit to having difficulty keeping track of purchases made with buy-now/pay-later options (Bnpl), another emerging trend thanks to the digitization of payments.
Skipping payments? A common practice in Italy
Almost a third of respondents in Italy (28%) claim to have skipped paying at least one bill in the past 12 months. A percentage, however, is improving compared to recent years. The European average, on the other hand, bucks the trend and rises to 35%. It is mainly northern European and central European countries that are worse off than in 2022. Three out of ten say that they feel less guilt now than they did a few years ago for failing to pay a bill.
Consumers distrust ‘greedy’ companies. The focus of consumers is on so-called ‘greedflation’. That is, more than 73% of Italian respondents (68% in Europe) say they are ready to stop buying from companies that apply indiscriminate price increases in order to exploit general inflation to their advantage by increasing profit margins. Conversely, companies that position themselves as ‘allies’ of consumers are at an advantage: 78% believe that offering flexibility in times of economic slowdown is a matter of social responsibility. And payment flexibility is also a growing attraction for consumers, especially younger consumers, who say they are willing to spend flexibly in 45% of cases.