Real individual consumption per capita, expressed in PPS, constitutes a key indicator of the material well-being of households. This measure reveals significant variations across Europe, revealing disparities in living standards. The Europe Business Observatory takes a look at these differences.
Defining well-being is not easy. It is even more difficult to compare well-being from one country to another. Material well-being is more measurable, but it remains complex. Real individual consumption (AIC) per capita based on purchasing power parity (PPP) is widely used as an indicator of household material well-being.
According to Eurostat, CSA includes “all goods and services that households use, whether purchased and paid for directly by households, by the government or by non-profit organizations”. We explain this in detail at the end.
So which countries in Europe have the highest levels of material well-being? The Europe Business Observatory first examines EU member states, then examines available data from EU candidate countries and the European Free Trade Association (EFTA).
Luxembourg comes at the top of the ranking, while Hungary and Bulgaria come at the bottom of the ranking.
In 2023, real 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, the EU average being set at 100 in the 27 Member States.
This means that household material well-being was 36% higher than the EU average in Luxembourg and 30% lower than the EU average in Hungary and Bulgaria.
Nine countries recorded an AIC per capita above the EU average. In addition to Luxembourg, these are Germany (119%), the Netherlands (119%), Austria (114%), Belgium (113%), Denmark (108%), from France (106%), Sweden (106%) and Finland (105%).
Among the EU’s Big Four, Germany performed best, sharing second place with the Netherlands. In France, the material well-being of households was 6% higher than the EU average. Italy matched the EU average, while Spain recorded the lowest level of well-being, 9% below the EU average.
At the bottom end of the EU, Latvia, Estonia, Croatia and Slovakia follow Bulgaria and Hungary, with household material well-being more than 20% below the EU average .
Candidate countries are below the EU average
All three EFTA countries recorded material well-being above the EU average. Norway outperformed the EU average by 24%, while Switzerland was 16% higher.
AIC per capita was lower than the EU average in all six candidate countries, with Turkey being an exception among them. In Turkey, household material well-being was 16% below the EU average, compared to 36% in Montenegro, the second best performing candidate country.
Turkey outperforms nine EU countries in material well-being
The material well-being of Turkish households, 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 significantly higher AIC per capita, reflecting greater material well-being. In contrast, Central and Eastern European countries, as well as EU candidate countries, generally have lower AIC per capita. This reveals a disparity in material well-being between regions and manifests itself in differences in living standards.
Change over the past three years
Over the past five years, AIC per capita relative to the EU average has remained relatively stable in some countries, with slight changes in others. However, several countries experienced significant increases and decreases.
Among EU members, the most notable decline was recorded in Denmark, where AIC fell from 120% in 2020 to 108% in 2023, followed by Czechia (from 90% to 81%) and Finland (from 111% to 105%). Germany (124% to 119%) and France (110% to 106%) also saw declines.
Over the same period, Ireland (87% to 99%), Bulgaria (62% to 70%) and Spain (83% to 91%) recorded the highest increases in the EU .
If we include the EFTA and candidate countries, Turkey recorded the most significant increase, from 64% to 84%. The five other EU candidate countries also recorded increases.
What does this indicator tell us?
Household expenditure refers to the final consumption expenditure made by resident households to meet their daily needs and satisfy their wants. These expenses can be individual or collective and encompass various categories, such as food, clothing, housing (including rent), energy, transportation, durable goods such as cars, health care, leisure activities and various services. For example, in 2023, total household spending in the EU amounted to 52.1% of GDP.
“The material well-being of a household can be expressed in terms of access to goods and services,” explains Eurostat.
However, this indicator excludes spending by government and non-profit institutions serving households. When these contributions are taken into account, the measure changes to AIC. To allow a fairer comparison of material well-being between regions or countries, AIC per capita is often expressed in PPS, which takes into account differences in price levels.
