The European Central Bank published analysis linking the sharp decline in euro area consumer confidence following the outbreak of war in the Middle East to weaker consumption. The consumer confidence index fell about 12 points from February to April 2026, while annual nominal consumption growth slowed to around 2.5% in April from an average of 3% to 4% since mid-2024. The decline was concentrated in discretionary spending and appears to have reflected households postponing purchases amid heightened uncertainty rather than binding income constraints. A 10-point year-on-year fall in confidence was associated with a 0.4 percentage point reduction in individual nominal consumption growth in April, twice the estimated relationship across the full sample period. Higher-income and otherwise unconstrained households made the largest adjustments, while necessities remained broadly resilient apart from increased energy spending. Around 40% of surveyed consumers expected no recovery in real income under a persistent-inflation scenario, presenting a risk that the slowdown could become more entrenched. Confidence recovered by 3.5 points in May and June but remained significantly below its prewar level. The ECB found that postponed discretionary spending could return if tensions ease and confidence continues to recover, while a renewed deterioration or perceptions of permanent real income losses could further weaken consumption.
European Central Bank2026-08-03
European Central Bank analysis finds Middle East war confidence shock weakened euro area consumption
European Central Bank analysis found that the confidence shock following the outbreak of war in the Middle East weakened euro area consumption, particularly discretionary spending by higher-income households. Nominal consumption growth slowed to around 2.5% in April 2026, while confidence remained well below its prewar level despite a partial recovery in May and June. Perceptions of permanent real income losses could make the slowdown more persistent.