Households have faced significant challenges in recent years, particularly due to high inflation triggered by various factors such as supply bottlenecks caused by the pandemic and the surge in energy prices following Russia’s invasion of Ukraine. This has led to a notable impact on consumer behavior, particularly in terms of spending and saving.
According to the ECB’s Consumer Expectations Survey (CES), evidence suggests that consumers have primarily adjusted their consumption to cope with inflation. In fact, the majority of CES respondents (69%) reported modifying their consumption in response to elevated prices. Other strategies employed by consumers included tapping into their savings (43%) and increasing their income (31%).
Specifically, consumers have resorted to various measures to manage their spending, with the predominant response being to shop around (50%), followed by trading down to lower quality product varieties (33%) and reducing the quantities purchased (28%). Additionally, around 35% of respondents reported reducing their savings to support consumption, while approximately 15% negotiated a pay rise and 17% worked more hours or took on an additional job to boost their income.
Notably, households facing budget constraints, defined as those with a high share of spending on necessities relative to their income, were more likely to adjust their shopping and saving patterns compared with households with unconstrained budgets. The percentages of adjustment measures were similar across the two groups for income strategies.
Overall, the CES data indicates that consumers’ responses showed increases across all margins compared with previous surveys. Consumption options exhibited the largest increase (9 percentage points), followed by saving (7 percentage points) and income strategies (7 percentage points).
These findings shed light on how households have adapted their spending and saving behavior in the face of high inflation, providing valuable insights into consumer resilience and adaptation during challenging economic conditions.
