Norges Bank

Staff Memo

What influences household demand for goods and services?

Henrik Andersen, Eilert Husabø and Mari Aasgaard Walle
Staff Memo

Norwegian household consumption has been weak since the financial crisis, both in a historical context and compared with other countries. The estimations over the period 1994-2015 indicate that since the financial crisis consumption has been restrained by more limited access to credit and greater uncertainty surrounding economic developments. In addition, other estimations indicate that demographic changes and the pension reform in 2011 have dragged down consumption. Those structural changes are likely to have a lasting negative effect on consumption, while the uncertainty effect is more temporary. If consumer confidence, uncertainty and access to credit return to their historical averages, consumption may over a period grow faster than household disposable income. Our estimations indicate that consumption will account for between 90 percent and 95 percent of disposable income in a long-term equilibrium. The share was a little higher than 90 percent in 2015.

Staff Memos present reports and documentation written by staff members and affiliates of Norges Bank, the central bank of Norway. Views and conclusions expressed in Staff Memos should not be taken to represent the views of Norges Bank.

ISSN 1504-2596 (online)

Published 10 May 2016 15:50
Published 10 May 2016 15:50