Danish private consumption likely to further rise in coming years – Danske Bank

Danish private consumption has grown unevenly last year. It dropped in both the second and third quarter. But this was mainly because of temporary factors linked with car and energy consumption. According to a Danske Bank research report, private consumption is expected to further pick up in  the years ahead, mainly because the Danes have more money in their wallets – both as a result of real wage growth and because more are likely to transit from transfer incomes into work.

Two factors are expected to mainly lift consumption this year and in next, but could also add to considerable fluctuations in consumption from quarter to quarter. Early retirement pension contributions could be paid out tax free in spring 2018, while in 2019 around 730,000 homeowners would be compensated. A considerable share of these refunds is likely to be spent on increased consumption.

Compared to earlier upswings, Danes are spending a comparatively small share of their income on consumption. Economic growth usually also signifies growth in credit-financed consumption, partially because of rising home equity. However, currently, the growth in lending to households is greatly non-existent and very modest credit growth is expected going forward, stated Danske Bank.

“If credit growth, contrary to expectations, begins to seriously take off, then consumption growth could potentially be somewhat higher than our current forecast indicates”, added Danske Bank.

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