Eurozone inflation to take a toll on consumer spending growth
Eurozone consumer spending was poised to drive growth in 2022, but increasingly consumers’ underpinnings have become shaky. While we still expect a solid rebound in Q2 as the economy emerges from the Omicron wave, headwinds are mounting for the rest of the year. In particular, soaring energy prices, a consequence of Russia’s invasion of Ukraine, are squeezing real incomes and eroding the purchasing power of savings.
What you will learn:
- High-frequency data show a solid rebound in consumption following a decline of 0.6% q/q in Q4 2021.
- The recovery is repeating the pattern seen in the aftermath of previous pandemic waves, with spending rotating back to contact-intensive services.
- Higher inflation directly impacts consumer spending by eroding the purchasing power of real income.