NewsWorldEuropean consumer confidence sinks below pandemic levels

European consumer confidence sinks below pandemic levels

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The indicator prepared by the European Commission registered its biggest drop in history in September: -28.8% Not even in the worst moment of the pandemic were consumers so negative about the economic environment High inflation, rising interest rates and the war in Ukraine they undermine the prospects of households in the eurozone Times of uncertainty cloud European consumer confidence like never before, sinking to record lows. In September, the indicator produced by the European Commission shows its worst historical figure: it fell by -28.8% in the euro zone. Not even in the pandemic had such a high level of pessimism been recorded. “Households are very concerned about high energy and food prices in a context of high uncertainty about the impact of the war in Ukraine,” the ECB explains in its latest bulletin. Leading indicator of lower spending The confidence minimum recorded in September is a good leading indicator of lower household consumption in the coming months. Confidence is essential in household purchasing and investment decisions. The level of pessimism we see may cripple the main engine of the European economy: spending. “The euro area economy grew by 0.8% in the second quarter of 2022, mainly due to strong consumer spending on services that require greater social interaction,” explains the ECB in its analysis of the situation. The Europeans we went on vacation in the summer, we consumed outside the home in activities related to tourism. But that was in the summer. Economic growth is going to slow down and one of the reasons pointed out by the ECB is precisely: “the high level of uncertainty and the marked deterioration of confidence”. We still don’t know what will happen this winter with the gas. Although the countries are complying with the storage objectives, these reserves are worth what they give. “If companies and households had to deal with energy supply rationing, confidence could deteriorate further,” warns the central bank. The uncertainty channel Uncertainty is a powerful economic channel with an impact on GDP. This is the main reason why growth forecasts for the euro zone for next year have been lowered. Instead of advancing 2.1%, the ECB now expects less than half: 0.9%. And that in the best case. A Rubicon has already been crossed: both the ECB and the US Federal Reserve take the risk of causing a recession with their monetary policy. It is not their intention, but if that is the side effect of their medicine they will have to face it. The disease (inflation) is worse than the remedy (rise in rates), they come to argue. “I would like there to be a less painful way (to lower the CPI), but there isn’t,” said the Fed president on Wednesday after raising rates another 0.75%. There they are already at 3.25%. In the euro zone, at 1.25%. In Spain, where close to 400,000 million of mortgage debt is still linked to variable rates, some fear is beginning to spread about the impact of the sudden rise in the Euribor. Nothing seems to row in favor of consumer confidence except employment. Both in our country and in the euro zone, this variable is holding up reasonably well to the turbulence. The key to the evolution of the coming months will be closely linked to the strength of this labor market.

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