Actual individual consumption per capita, expressed in PPS, serves as a key indicator of household material welfare. This metric reveals significant variations across Europe, displaying disparities in living standards. Euronews Business takes a closer look at these differences.
Defining welfare is not easy. Comparing welfare across countries is even harder. Material welfare is more measurable, but it remains complex. Purchasing Power Parity (PPP)-based Actual Individual Consumption (AIC) per capita is widely used as an indicator of household material well-being.
According to Eurostat, AIC includes “all goods and services that households use, regardless of whether they were purchased and paid for directly by households, by the government, or by nonprofit organisations”. We explain this in detail at the end.
So, which countries in Europe have the highest levels of material welfare? Euronews Business first examines EU member states, and then looks at available data from EU candidate countries and the European Free Trade Association (EFTA).
Luxembourg tops list, while Hungary and Bulgaria rank lowest
In 2023, actual individual consumption per capita, expressed in purchasing power standards (PPS), ranged from 70% of the EU average in Bulgaria and Hungary to 136% in Luxembourg, with the EU average set at 100 across the 27 member states.
This means household material welfare was 36% above the EU average in Luxembourg and 30% below the EU average in both Hungary and Bulgaria.
Nine countries recorded an AIC per capita above the EU average. In addition to Luxembourg, these included Germany (119%), the Netherlands (119%), Austria (114%), Belgium (113%), Denmark (108%), France (106%), Sweden (106%) and Finland (105%).
Among the EU’s “Big Four”, Germany performed the best, sharing second place with the Netherlands. In France, household material welfare was 6% above the EU average. Italy matched the EU average, while Spain recorded the lowest welfare, 9% below the EU average.
At the lower end of the EU, Latvia, Estonia, Croatia, and Slovakia followed Bulgaria and Hungary, with household material welfare more than 20% below the EU average.
Candidate countries fall below the EU Average
All three EFTA countries reported higher material welfare than the EU average. Norway exceeded the EU average by 24%, while Switzerland was 16% above.
AIC per capita was below the EU average in all six candidate countries, with Turkey standing out as an outlier among them. In Turkey, household material welfare was 16% below the EU average, compared with 36% below in Montenegro, the second-best performing candidate country.
Turkey outperforms nine EU countries in material welfare
Turkey’s household material welfare, at 84% of the EU average, was higher than that of nine EU countries, including Poland (83%), Czechia (81%), and Greece (80%).
This figure was below 50% in North Macedonia, Bosnia and Herzegovina, and Albania.
Nordic and Western European countries have notably higher AIC per capita, reflecting greater material welfare. In contrast, Central and Eastern European nations, along with EU candidate countries, generally report lower AIC per capita. This reveals a disparity in material well-being across regions and is demonstrated by differences in living standards.
Change in the last three years
Over the past five years, AIC per capita relative to the EU average remained relatively stable in some countries, with slight changes in others. However, several countries experienced significant increases and declines.
Among EU members, the most notable decrease was in Denmark, where AIC fell from 120% in 2020 to 108% in 2023, followed by Czechia (90% to 81%) and Finland (111% to 105%). Germany (124% to 119%) and France (110% to 106%) also recorded declines.
During the same period, Ireland (87% to 99%), Bulgaria (62% to 70%), and Spain (83% to 91%) recorded the largest increases within the EU.
When EFTA and candidate countries are included, Turkey saw the most significant rise, climbing from 64% to 84%. The other five EU candidate countries also reported rises.
What does this indicator tell us?
Household spending refers to the final consumption expenditure made by resident households to meet their daily needs and satisfy their wants. This expenditure can occur individually or collectively and encompasses various categories, such as food, clothing, housing (including rent), energy, transportation, durable goods like cars, healthcare, leisure activities, and miscellaneous services. For example, in 2023, EU total household expenditure amounted to 52.1% of GDP.
“A household’s material well-being can be expressed in terms of its access to goods and services”, Eurostat explains.
However, this indicator excludes expenditures made by the government and non-profit institutions serving households. When these contributions are accounted for, the measure evolves into AIC. To enable a more fair comparison of material welfare across regions or countries, AIC per capita is often expressed in PPS, which accounts for differences in price levels.
