Middle East war shock curbs euro area spending
The war in the Middle East caused euro area consumer confidence to drop by 12 index points between February and April 2026, lowering nominal consumption growth from over 3 percent to 2.5 percent. The reduction was driven mainly by unconstrained households delaying discretionary spending.
Postponable purchases bear the brunt
Euro area consumer confidence fell by around 12 index points between February and April 2026 following the outbreak of the war in the Middle East, a decrease comparable to the 15 point drop observed after Russia invaded Ukraine.
In parallel, nominal consumption growth slowed from 3-4 percent to around 2.5 percent year on year in April 2026.
This deceleration was driven primarily by reductions in discretionary spending, such as travel, luxury clothing, and non-essential services.
In contrast, nominal spending on energy increased due to higher transport costs, while expenditure on necessities like housing and food remained resilient.
Higher-income households adjusted their spending more than lower-income households by delaying postponable purchases.
Amplified sensitivity to major shocks
Microdata from the survey indicates that a 10 point decline in confidence reduced individual nominal consumption growth by 0.4 percentage points in April 2026.
This sensitivity doubles the historical average of 0.2 percentage points, matching the impact from April 2022.
Salient energy shocks exert a strong immediate dampening effect on demand among unconstrained households.
In addition, 40 percent of respondents expect no real income catch-up, raising risks that deferred spending becomes entrenched.
Deferred demand, uncertain return
Attributing spending cuts to sentiment rather than budget constraints offers cautious optimism for recovery.
If geopolitical tensions ease, delayed discretionary purchases could quickly rebound to support economic momentum.
Yet with 40 percent of households expecting permanent income losses, consumer caution could prove stubborn.