Private payrolls have continued to contract, and the declines in employment, together with earlier increases in food and energy prices, have eroded the purchasing power of households. This sluggishness of real incomes, together with tighter credit and declining household wealth, is now showing through more clearly to consumer spending. Indeed, since May, real consumer outlays have contracted significantly.
But of course, we cannot speak of synchronous developments, as countries still differ in terms of infrastructure, institutions, and political and economic philosophies – and for that matter, economic developments, too. Apart from that, the current upswing should not distract from existing issues. Banks in several member states are still saddled with huge volumes of non-performing loans.