ECB Warns of Consumption Downturn Amid Iran Conflict

The European Central Bank has analyzed consumption trends following the conflicts in the Middle East and found that consumer confidence has deteriorated markedly due to the war in Iran and rising fuel and energy prices.

This implies a lower propensity to consume, which could worsen if households believe their income losses are persistent. High-income households have postponed discretionary spending and cut back on travel and non-essential services.

Lower-income households have started cutting back on dining out and having coffee at cafes. The ECB's economists stress that the shock is shared and directly linked to risks to energy prices, inflation, and real incomes.