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New Consumer Survey Composite Indicator as Households’ Financial Distress Measure

One of the key targets defined in Europe 2020 Strategy (for the period 2010-2020) is stimulating social inclusion and poverty reduction. In accordance with this, Croatian Government adopted the Strategy for Combating Poverty and Social Exclusion in Croatia (2014-2020). This strategy is based on ensuring conditions for achieving three main objectives: the fight against poverty and social exclusion and the reduction of inequalities in society ; preventing the emergence of new categories of the poor, and the establishment of a coordinated system of support for groups at risk of poverty and social exclusion. Therefore, different measures (variables) of poverty levels should be available. The established EU statistics on income and living conditions (EU-SILC) monitors and publishes several variables related to the general national poverty levels (people at risk of poverty or social exclusion, material deprivation rate, etc.). The goal of this paper is concentrated on the pioneer application of Harmonized EU Consumer survey (CS) in tracking poverty levels in Croatia. As opposed to the annual EU-SILC variables, CS offer a considerable benefit by providing monthly information on the consumers’ financial position. It is of interest to calculate a CS-based composite indicator of households’ financial distress, using factor analysis. The newly proposed indicator could serve as a timely indicator of cumulous socio-economic problems in Croatia, as well as in all other EU member states, and in that way significantly complement the EU-SILC data. The harmonized European CS offer several questions pointing to the financial situation of households (Q1: Financial situation over last 12 months, Q2: Financial situation over next 12 months, and Q12: Statement on financial situation of household). The main advantage of these questions is their monthly frequency, which provides more detailed information about the prevailing social trends than annual EU-SILC data. The monthly CS data used in the paper cover the period from 2005/6 to 2016/5, and the EU-SILC annually data span from 2010 to 2015. The data sources were European Commission (Directorate General for Economic and Financial Affairs) and Eurostat European Union Statistics on Income and Living Conditions).

consumer survey; EU statistics on income and living conditions (EU-SILC); composite indicator; factor analysis; financial distress

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