Households gloomy about their economic future, survey finds

Households are pessimistic about their financial prospects in 2005, according to the annual consumer survey by ICAP. Six out of 10 households see their finances dwindling this year, compared to only one in 10 who see them improving. And this pessimism comes as people save less and spend more on regularly purchased household goods. About 57.5 percent of respondents said their economic situation will deteriorate. The optimists have sharply dropped from 20.5 percent last year to 9.6 percent. About 25 percent said their finances will stay the same. There are many reasons for this pessimism. The cost of living has gone up, people are disillusioned because employment and higher incomes during and after the Olympics did not materialize, and, just as the survey was taking place, there was a hike in value-added tax starting April 1. But many other factors are souring personal economics. Greece has seen a rise in inflation, and fewer Greeks are expecting their disposable income to grow. There are fewer opportunities for people to get more income from work as well as fewer prospects for upping finances through other revenue. Even though stocks have risen, people do not expect returns from the stock market. And prospects for interest rates are only marginally positive. This means households will likely reduce expenditure on things like drinks, apparel, durable goods and recreation, while increasing spending on food, housing, transport and health. ICAP suggests changes in the economic environment were not as dramatic in the last 12 months as these shifts in attitudes indicate. During national elections last year, for instance, people were filled with a short-lived optimism that has since waned. Households claimed that the rising cost of living made them worse off than the previous year. ICAP considers this a paradox, since inflation was reduced in 2004.