Why are euro area households still gloomy and what are the implications for private consumption?

Alina Bobasu, Johannes Gareis and Dario Esposito

Economic Bulletin Boxes, 2024, vol. 6

Abstract: Consumer confidence in the euro area plummeted when Russia launched its full-scale invasion of Ukraine and has remained at a low level since then, despite some recovery. This box analyses the underlying factors that explain this subdued consumer confidence and assesses the implications of persistently low confidence for private consumption going forward. It finds that rising inflation was the initial cause of the decline in consumer confidence compared with the pre-invasion period, followed later by the increasingly negative effects of higher borrowing costs coupled with declining house prices. Moreover, the fact that consumer confidence is still subdued suggests that private consumption will only improve moderately in the short term. JEL Classification: E21, E27, E29

Keywords: consumer confidence; private consumption (search for similar items in EconPapers)
Date: 2024-09
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