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ECB: Consumer Spending Slowdown in Euro Area Due to Increased Uncertainty from Middle East War

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Reduced consumer spending among households in the euro area can be largely attributed to increased uncertainty due to the Middle East War rather than inflation, according to a European Central Bank economic bulletin published Monday.

"Overall, the weakening in nominal consumption appears to have been driven largely by households that are not budget constrained but are choosing to delay spending in response to heightened uncertainty," according to the ECB researchers.

The eurozone's consumer confidence index deteriorated after the war began, falling by 12 points cumulatively between February and April, and consumption momentum "softened materially."

The slowdown in consumption was mainly driven by weaker growth in discretionary spending categories, whereas nominal spending on energy rose on the back of higher transport costs. Meanwhile, expenditure on housing and food, among other necessities, remained resilient, with higher-income households making more adjustments to their spending than those with lower income.

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