The European Central Bank has published staff research on how higher energy prices and greater consumer uncertainty linked to the war in the Middle East could affect the euro area household saving rate. The analysis finds that a deterioration in the terms of trade, closely tracking higher real energy prices, would tend to reduce saving by eroding households’ real incomes, while higher uncertainty would raise saving through precautionary behaviour. Although the two shocks push the saving rate in opposite directions in the short term, both would weigh on real GDP growth and, if they materialised together, could leave the saving rate broadly stable while still creating a sizeable drag on growth and net upward pressure on inflation. In the model scenarios, an adverse terms-of-trade shock comparable to the 2022 deterioration lowers the saving rate by 0.3 percentage points at its trough at the beginning of 2027, reduces 2027 real GDP growth by 0.1 percentage points and raises HICP inflation by 0.4 percentage points, almost entirely through energy. A rise in consumer uncertainty similar to that seen at the onset of Russia’s invasion of Ukraine raises the saving rate by 0.4 percentage points at its peak at the end of 2027, cuts 2027 growth by 0.3 percentage points and has negligible effects on inflation. Distributional modelling suggests the terms-of-trade shock is regressive, with the lowest income tercile accounting for 54% of the decline in consumption, while under an uncertainty shock the top tercile accounts for 63% of the fall in consumption and makes the largest savings adjustment.
European Central Bank 2026-05-11
European Central Bank research finds Middle East energy and uncertainty shocks could alter euro area household saving and weigh on growth
The European Central Bank has published staff research on how higher energy prices and war-related uncertainty in the Middle East could affect the euro area household saving rate, real GDP growth and inflation. Model scenarios show that an adverse terms-of-trade shock lowers the saving rate and growth but raises Harmonised Index of Consumer Prices inflation, while a rise in consumer uncertainty increases the saving rate and further reduces growth with negligible inflation effects. The analysis also finds contrasting distributional impacts, with lower-income households bearing most of the consumption decline under a terms-of-trade shock and higher-income households driving the adjustment under an uncertainty shock.