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

Author

Listed:
  • Bobasu, Alina
  • Gareis, Johannes
  • Esposito, Dario

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

Suggested Citation

  • Bobasu, Alina & Gareis, Johannes & Esposito, Dario, 2024. "Why are euro area households still gloomy and what are the implications for private consumption?," Economic Bulletin Boxes, European Central Bank, vol. 6.
    • Handle: RePEc:ecb:ecbbox:2024:0006:3
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    More about this item

    Keywords

    consumer confidence; private consumption;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E29 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Other

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