Eurozone Household Spending Slumps Amid Iran Conflict Uncertainty

The European Central Bank has released new analysis indicating that household spending in the Eurozone has fallen more sharply than initially predicted due to the ongoing conflict in Iran.

Nominal consumption growth, which measures spending before accounting for inflation, has dropped to around 2.5 per cent after averaging between 3-4 per cent annually since mid-2024.

The decline is roughly twice as large as would be expected based on historical trends and is comparable in scale to the reaction seen following Russia's invasion of Ukraine in early 2022.

Higher-income households are driving a significant portion of the slowdown, primarily by cutting back on discretionary purchases.