Eurozone: Hopes of a strong consumer rebound fade

Hopes of a consumer spending recovery becoming the driving engine of eurozone growth in 2024 have not materialised. Private consumption growth is still unspectacular, mirroring the tepid momentum of the wider economy. Consumption growth will remain unspectacular at 0.8% this year and 1.5% in 2025.

What you will learn:

• Still-tight monetary policy is a key headwind for consumer spending. Households continue to move their liquid savings into fixed-term deposits to take advantage of high deposit rates. Tight credit conditions have also curbed demand for durable goods.
• Rate cuts will gradually help, but we’re seeing warning signs in the labour market. We now expect a modest increase in unemployment in 2025, which will add to the moderation in real income growth and induce some precautionary saving.
• Our forecast risks are balanced and moderate. More front-loaded rate cuts could boost spending by 0.2ppts in 2025. Conversely, a more severe labour market deterioration could shave off 0.4ppts off 2025 spending growth.