How is inflation affecting consumer behaviour?

How is inflation affecting consumer behaviour?

As European consumers’ quarterly quantitative perceptions of price developments over the past 12 months edged down for the first time since 2020-Q4, quantitative price expectations for the next 12 months decreased slightly further. However, consumers’ qualitative price expectations, which are published on a monthly basis, picked up in August and September.

Consumer confidence halted the rebound that started in autumn 2022. Compared to June, EU/EA consumer confidence was, respectively, 1.5 and 1.7 points lower at the end of the third quarter, further below its long-term average.

Weaker confidence was mainly driven by downbeat expectations regarding the country’s general economic situation, and households’ future financial situation, while views on their past financial situation and their intentions to make major purchases remained broadly stable.

Consumer confidence decreased in Spain (-3.8), and more moderately so in Germany (-2.1), Italy (-1.7) and France (-1.1), while it recorded moderate increases in Poland (+2.0) and the Netherlands (+1.5).

In the EU and the EA, consumers’ quarterly quantitative perceptions of price developments (change over the past 12 months, in % change) edged down for the first time since 2020-Q4. The arithmetic mean of price perceptions edged down over the third quarter, remaining at an exceptionally high level. The median of price perceptions, which is less sensitive to the presence of extreme values, remained broadly stable in both the EU and the EA, also suggesting that the peak has passed.

Quantitative price expectations (change over the next 12 months, in %) decreased slightly, both in terms of mean and median, remaining at very high levels by historical standards. The results at total level were mirrored across almost all income, education and age groups, as well as among both men and women. However, consumers’ qualitative price expectations, which are published on a monthly basis, picked up in August and September

Reflecting developments in HICP inflation, an increasing share of consumers in the EU reported rising prices from early 2021 until autumn 2022. After a period of stabilisation at record-high level, the balance of replies reporting (fast/moderately/slightly) increasing prices over those reporting stable or falling prices started to decline in April 2023, while remaining at exceptionally high levels.

Consumer confidence in the EU reached an all-time low in September 2022, as HICP inflation was about to peak at 11.5% the following month. Since then and up to July 2023, consumer confidence has steadily increased towards its long-term average, while inflation has gradually eased. This suggests that moderating inflation has had a positive influence on consumer confidence.

A large proportion of consumers have yet to recover from the negative shocks to confidence suffered over the last three years. The consumer confidence indicator is composed of four variables: views on the past and expected financial situation of the household, intentions to make major purchases and views on the general economic situation in their country. The analysis shows that all components improved as inflation eased between autumn 2022 and July 2023, though all remaining well below both their pre-COVID levels and their long-term averages.

This suggests that an important share of consumers have not yet recovered from the negative confidence shocks incurred over the past three years (COVID, war in Ukraine, steep increase in energy costs and high inflation).

The survey results show that a gap opened between consumers’ forward-looking and backward-looking assessments of their household’s financial situation, with the forward-looking assessments rebounding more strongly. The results further show that the recovery in consumers’ intentions to make major purchases was also slow compared to the expectations of an improved financial situation. In August and September 2023, however, the gap shrank as consumers’ expectations concerning their household’s future financial situation slipped back down again.

An opening gap is also apparent between the balance of currently saving or dissaving households and their savings intentions over the 12 months following the survey. Between early 2020 and autumn 2022, developments in the two variables had been very similar: after increasing steeply until the summer of 2021, they both fell rapidly to a trough in October 2022, when inflation peaked. When inflation started to decline, consumers’ intentions to save started soaring, beyond their pre-COVID19 level.

By contrast, the balance of currently saving or dissaving households improved much more slowly. The discrepancy between changes in the assessment of the current savings/dissaving situation and savings intentions mainly results from developments among consumers with the highest incomes (4th quartile), the group with the largest saving potential.

It is worth noting that the share of respondents reporting to be drawing on their savings or running into debt – an indicator of financial distress – increased rapidly between August 2021 and October 2022, when it reached an all-time high. The percentage of respondents reporting to be saving (a lot or a little) decreased to a similar extent. Since inflation started to ease, both series have been showing some improvement, but the share of consumers reporting to be in financial distress remains very high.


Overall, the partial recovery in consumer confidence since inflation started to come down has not yet translated into clear improvements in the assessments of households’ balance sheet positions. This, compounded by increasing intentions to save by the most affluent consumers, suggests subdued growth in private consumption ahead. The recent deterioration in many of the above-discussed consumer variables in August and September – if confirmed in the months ahead – could further dampen the prospects for household spending considering the long-term negative influencing factors and the latest news from Israel and Gaza.

European Business Cycle Indicators

European Economy Technical Papers are reports and data compiled by the staff of the European Commission’s Directorate-General for Economic and Financial Affairs.
European Economy Technical Papers can be accessed and downloaded free of charge from the following address:

LOGO Research is an independent market research agency that provides comprehensive service and consulting to end clients as well as valuable assistance to international research agencies for services covering essential elements of the research process.
The company offers a wide range of research solutions, including the collection and analysis of primary and secondary market information, studies of consumer attitudes and habits, strategies and loyalty programs and others in various spheres of economic activity – consumer goods, healthcare, financial services, telecommunications, retail, public sector, consumer and professional services and others.
LOGO Research calculates and analyzes the Consumer Confidence Index in Bulgaria by order of the European Commission from May 2020.

Consumer Confidence Index in BG by EU and LOGO Research

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