Does national economy have an effect on consumer behaviour?

Would we change our behaviour on how we spend our money if we knew that the country is going to recession? Or if we hear that the country is now in an economic expansion would we run shopping and spend more money than last week?

In theory, when a country is in recession, people save money rather than invest in bigger purchases. For example they don’t buy summerhouses or new cars or other investment items because there isn’t that much extra to spend. Similarly, during a boom period people have more money to spend and aren’t so tight with their money.

Europe and the United States have been in an economic crisis since 2008 and they are still struggling how to proceed to get the balance back. At least in Finland this means increased taxes, high prices and low salaries. I just read a few days ago in Helsingin Sanomat that Finland is one of the most expensive countries in the European Union. Why is it so? The article pointed out that the prices are high because of high taxation, another reason was the lack of competition. The government raises taxes for example because they need more money to survive of the national debts. Finland now has a debt of about EUR 84 billion, which is estimated to be about 46% of GDP (veronmaksajat.fi). Higher taxes increase prices, which again decreases consumers’ purchasing power.

Let’s go back to the main topic; does economy have an effect on consumer behaviour? I would say yes, because everything in business is somehow related to national economy. But do people think this deeply while making decisions on buying is another thing. I think media affects more consumer behaviour by publishing news about the economic situation. It provokes the economic situation by scaring people. Consumers stop spending because they are afraid of ending up in personal economic crise and if enough people stop spending the economic growth will stop.

I think consumers are affected by the national economy while making decisions what to buy and when or maybe not buy at all today and save it for tomorrow. I’m just not sure if most of us think how saving “too much” affects national economy while the country would need the consumer to spend more.

Sources:

http://www.hs.fi/talous/Suomessa+lähes+kaikki+on+muuta+euroaluetta+kalliimpaa/a1363933295142
http://www.veronmaksajat.fi/fi-FI/tutkimuksetjatilastot/kansantaloudentunnusluvut/valtionvelka/

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3 Responses to Does national economy have an effect on consumer behaviour?

  1. bank 3.0 says:

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  2. ofelia says:

    Although it is fact that people will stop major purchases they wíll how ever change towards every day small “investments”. E.g. during the last big recession in nineties sales of dog and cat food boomed. Life was concentrating more on home and while many were unemployed they have their pets for company – compensating perhaps the missing colleagues from work. It will be interesting to see which items will be the boomers during this recession.

  3. makelam says:

    I agree with you that national economy can effect on consumer behavior. For instance alcohol prices have been increased in Finland because of raised tax. Instead of buying expensive alcohol in Finland, most Finns go shopping to Tallinn and bring cheaper beer from there.

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