21/5/16: Euro Area Income per Capita: Is the Crisis Finally Over?

Has euro area recovered from the crisis on a per-capita basis? 

Let’s take a look at the latest data available from the Eurostat, covering the period through 4Q 2015.

Looking at the Nominal gross disposable income per capita first: in 4Q 2015, income per capita in the euro area stood at +6.67 percent premium over the pre-crisis peak (measured as an average of 4 highest pre-crisis quarters) and at +3.86 percent premium to the overall highest pre-crisis quarter reading. This is not new: the measure attained its pre-crisis peak within 6 quarters following the peak quarter (3Q 2008). So by this metric, the answer to the above question is ‘Yes’.

Now, consider Real gross disposable income per capita: in 4Q 2015, real income per capita in the euro area was still down 0.57 percent on pre-crisis peak (based on 4 quarters pre-crisis peak average) and down 0.72 percent on pre-crisis peak quarter. Given the peak quarter was in 1Q 2008, we are now into 31 quarters of a crisis and counting. Notably, due to deflation at the height of the crisis, real disposable per capita income actually reached above the pre-crisis peak in 3Q 2009, and as of 4Q 2015, real disposable income per capita in the euro area is down on that reading some 1.31 percent. So by real (inflation-adjusted) metric, the answer to the above question is ’No’.

Lastly, consider Real actual final consumption per capita: in 4Q 2015, real consumption per capita in the euro area was 0.25 percent below pre-crisis peak (for peak measured as an average of four quarters including the peak quarter); and it is down 0.52 percent on pre-crisis peak quarter. As with real income per capita, we now into 31 quarters of below-peak real consumption, so the crisis goes on, judging by this metric.

Here’s a chart to illustrate: