Consumer confidence fell sharply after the conflict began, and the ECB said higher-income households delayed discretionary purchases as fears of inflation weighed on spending.
Euro zone household consumption dropped sharply in the early phase of the Iran war, with the European Central Bank saying the shock to consumer confidence was strong enough to weigh on an already weak growth backdrop. In an Economic Bulletin published on Wednesday, the ECB said April consumption fell by about twice the historical trend, a decline comparable in magnitude to the pullback seen when Russia invaded Ukraine in early 2022. Nominal consumption growth, which had averaged around 3% to 4% since mid-2024, slowed to roughly 2.5% year over year in April. The ECB said the slowdown was driven mainly by higher-income households cutting discretionary spending, supporting the view that the weakness reflected postponed purchases rather than binding income constraints. It added that households feared conflict-driven inflation could erode real incomes, and 40% of respondents said they did not expect the lost income to be recovered.