He household income in it Uruguay rose 6.4% year-on-year in the first quarter of the year compared to the same period of the previous year, according to figures from the Institute National Statistics Office (INE). The increase was expected given the forcefulness that had been recorded in the increase in real wages, which has been accompanied by an expansion of the employment.
Indeed, real wages in the first months of this year rose at real rates of around 4% annually. This is due to the recent decline in inflation, simultaneous with nominal increases in wages in the formal sectors of the economy that were above 4% in almost all cases.
Employment, for its part, has fluctuated, but in the year-on-year comparison there is an increase of more than 40,000 new jobs according to official statistics. More wages and more employment at the same time obviously lead to a significant improvement in household income, as we mentioned at the beginning.
He real household income It had already been advancing in the previous quarters, but in a more moderate way and not with the forcefulness that the last data has had. And it can be expected that this latest advance in household income will have a stronger impact in these months compared to what it would have had last year, due to the important change in price relations with Argentina. For almost the entire year 2023 (even before), the greatest capacity of consumption of the Uruguayans due to the improvement in real income was partly diverted to Argentina, due to the ridiculously favorable price relations for the Uruguayans who crossed the river. This severely affected the local trade on the coast, with sharp real falls in sales. In the rest of the territory the impact was somewhat more moderate, but the situation prevented more visible improvements in sales.
Thus, the positive effects that an economy usually has when disposable income in households improves were truncated. This effect would no longer be occurring this year: consumption capacity that rises with the increase in income will be allocated more in our country. Of course, this does not mean that many Uruguayans continue to consume abroad (as seen, for example, in reservations during the July holidays); but with Argentina, we reversed the loss of competitiveness from last year.
This should generate a positive impact on commercial activity locally; certain sectors of commerce (bathroom, shopping malls, clothing) are already registering it. This increased consumption may have some impact on the rate of inflation (surely what happened in Argentina had the opposite effect last year); This rate has fallen to historically very low levels (less than 4%) and analysts expect it to rise to 5.5% annually by the end of the year. The issue deserves attention because in certain sectors with productivity and supply problems, higher income levels can generate extraordinary price increases.
The significant increase in household income should support a decrease in poverty. It should be noted that there was not only an increase in the average real income but also in the median real income of households (the data that divides the whole in the middle), which gives more firmness to the trend (table). Besides, the inflation food -a key determinant of the poverty line- is at less than 2% annually (the general CPI is at 3.7%), which would also support a decrease in poverty measured by income, although we will have to see what will happen in the next few years. months.
In any case, the scenario is not easy to predict and unforeseen events may arise in the economic dynamics, especially in a small economy like Uruguay’s. Employment has begun to turn on some yellow lights; It can be expected that it will improve in commerce and services associated with consumption, but at the industrial level the outlook is not good.
For all this, it is worth noting that the last record of real household income is a all-time high (a record), surpassing the previous maximum that occurred in 2017. Indeed, after the historic 1999-2002 crisis, which plunged income into a hole, a continuous recovery began and then – starting in 2010-2011 – an advance above pre-crisis levels. The trend continued until 2017, setting historical highs. However, from that year onwards a period of decline ensued, because – although the real salary rose – employment fell and dragged real income downwards. The pandemic arrived and the situation was hard: real income fell more than 10% and we had to wait until the beginning of 2022 for a complete recovery, to pre-pandemic levels. From then on, the drop in inflation, with an increase in employment and wages, marked a new stage of growth in income, reaching new historical highs. But – as is obvious from going through history – there are no guarantees that this will continue inertially. Uruguay It has to improve competitiveness, investment and formalization of employment, among other levels, so that real household income continues to rise.
Source: Ambito
