Good news for Europe’s top economies as disposable income rises

Most European countries recorded growth in both real household income per capita and real Gross Domestic Product (GDP) per capita in the first quarter of 2024 according to the Organisation for Economic Co-operation and Development (OECD).

Poland experienced the largest increase in disposable income per capita, rising by 10.2% compared with a decrease of 2.7% in the last quarter of 2023. According to the OECD, this growth was “mainly driven by increases in employee compensation, social benefits other than in-kind transfers, and property income”. 

Portugal followed with the second-largest increase, at 6.7%.

Among Europe’s top economies, Italy recorded the strongest increase at 3.4%. The OECD attributed this rise to “an increase in employee compensation and in-kind social transfers, reversing the decline seen in the previous quarter”. 

Spain and Germany also registered significant increases in real household income per capita. In Spain, this increased by 1.5%, following a substantial rise of 3.7% in the previous quarter. In Germany, it rose by 1.4%, compared to just 0.1% in the previous quarter, partly driven by an increase in employee compensation.

France experienced a 0.6% growth in real household income per capita, which was “supported mainly by an increase in basic pension benefits to keep pace with inflation”, according to the OECD. The United Kingdom recorded a more modest increase of 0.2%.

Greece experienced the largest decline in disposable income, with a drop of 1.9%, followed by Belgium and Czechia, both at 1.4%, and Hungary at 0.7%. Sweden and Denmark also recorded slight decreases.

Real – adjusted for inflation – GDP per capita increased in 21 out of 27 countries across Europe, although the rise was very slight in some of these countries. Turkey recorded the highest increase at 2%, followed by Latvia 1.1%.

Among the top five economies, Spain and the UK saw the largest rise, both at 0.5%. Real GDP per capita increased by 0.4% in Italy in the first quarter of 2024, while this rate stood at 0.2% in both France and Germany.

Iceland and Denmark experienced the largest declines, with decreases of 1.5% or more.

Contradictory trends

When comparing the quarterly changes in real household income per capita with real GDP per capita, some countries exhibited significant contradictions, where one metric increased while the other declined.

For example, in Greece, real GDP increased by 0.9%, while real household income declined by 1.9%. Czechia exhibited a similar pattern, with real GDP rising by 0.6% and real household income falling by 1.4%.

Conversely, in the Netherlands, real GDP fell by 0.6%, whereas real household income rose by 2.5%.