ECB Blames War Uncertainty for Euro Area Consumption Slump

The European Central Bank (ECB) has attributed the decline in consumer demand in the euro area following the war in the Middle East to a crisis of confidence rather than a drop in income.

The study, signed by economists Neus Dausà i Noguera, Maria Dimou, and Omiros Kouvavas, concludes that households with no apparent income limitations are choosing to delay their purchases due to the increase in uncertainty.

The authors point out that the confidence channel is particularly strong in cases of major disturbances perceived by consumers, leading to a more intense and rapid effect on consumption, especially among households without budget constraints.

The study suggests that the crisis of confidence has exerted a containment effect on demand, which could negatively affect the underlying dynamism of consumption. However, it notes that if tensions decrease and confidence is maintained, part of the deferred discretionary consumption could be reactivated.