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

Author

Listed:
  • Donato Ceci

    (Bank of Italy)

  • Claudia Pacella

    (Bank of Italy)

  • Fabrizio Venditti

    (Bank of Italy)

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.

Suggested Citation

  • Donato Ceci & Claudia Pacella & Fabrizio Venditti, 2026. "Consumption and saving in the euro area after COVID: a scenario analysis," Questioni di Economia e Finanza (Occasional Papers) 1047, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_1047_26
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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2026-1047/QEF_1047_26.pdf
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    Keywords

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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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