Consumption and saving in the euro area after COVID: a scenario analysis

Donato Ceci (), Claudia Pacella () and Fabrizio Venditti ()
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Donato Ceci: Bank of Italy
Claudia Pacella: Bank of Italy
Fabrizio Venditti: Bank of Italy

No 1047, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper examines the unexpectedly weak consumption dynamics of euro-area households following the COVID-19 crisis. Despite a recovery in disposable income during the 2022 reopening and the government measures mitigating the energy shock after Russia's invasion of Ukraine, the saving rate rose and remained high through 2025. We show that tighter monetary policy dampened consumption via higher interest rates, while inflation eroded real financial wealth, limiting spending further. Persistently weak consumer confidence also weighed on expenditure. However, even after taking account of these factors, the increase in savings remains unusually large by historical standards. We discuss two possible explanations: heightened pessimism about future income due to the exceptional sequence of shocks, and the disproportionate contribution of wealthier households to aggregate savings, as suggested by micro-level evidence.

Keywords: consumption; savings; energy; monetary policy (search for similar items in EconPapers)
JEL-codes: C11 C32 C53 C54 E21 E31 E37 E52 (search for similar items in EconPapers)
Date: 2026-07
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_1047_26

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