ING expects no increase in purchase power until 2025 despite significant wage increases

The average wage is growing faster than the prices in 2024. That is usually good news for regular citizens, but many homes are going to feel this as purchasing power recovery instead of purchasing power gain, said ING economists. According to the bank, some things still need to be rectified after two years of sharply rising prices.

Many homes suffered a significant decrease in purchasing power in 2022 and 2023. Despite the fact that the wage increase is far above this year's inflation, the bank stated that the loss of purchasing power of the last few years will only be restored by 2025.

According to the Netherlands Bureau for Economic Policy Analysis (CPB), the average wage increase in 2024 will be 6.6 percent, which is far above the average price increase of 3.4 percent.

According to ING, real incomes, where wage increases are corrected for inflation, have shown the most significant growth since 1977.

The most recent purchasing power policy, which is usually given a lot of attention in anticipation of Budget Day, states that the purchasing power has increased by an average of 2.5 percent. A further improvement of around one percent is expected for 2025.

Between 2022 and 2023, the purchasing power loss for homes was estimated at over three percent. ING said that based on the numbers, there have been no real purchasing power gains yet, rather a purchasing power recovery.

The bank noted that the increase in purchasing power varies significantly among different groups of homes. For example, employed people saw their purchasing power increase more than people on benefits in 2024. The exact opposite is expected to happen in 2025.

Consumers also experience inflation differently. For example, in 2024, a non-smoker will experience very different inflation than a smoker, as the non-smoker will not be affected by the recent increase in excise duty on tobacco.