European consumers curb credit demand in the face of new tariffs | Atalaya

Eurozone consumers are much more pessimistic than monetary authorities on the situation and prospects of economic recovery, as shown by the results of the survey on consumer expectations conducted monthly by the European Central Bank (ECB).

The June survey clearly shows that consumers perceive and expect a much bleaker outlook than the issuer’s forecast as regards price trends, employment development, economic growth, the real estate market and access to credit.

In this regard, consumers in the euro area believe that conditions for access to credit have tightened slightly over the past twelve months and their expectations for the next twelve months remain virtually unchanged. The percentage of consumers who declare that they have applied for credit in the last three months – data collected quarterly – drops again, in this case by one percentage point, to 12.7% in April 2022, compared to 13.7% in January.


In Spain, The Bank of Spain’s Bank Lending Survey shows that banks tightened their lending criteria during the second quarter and lending conditions slightly worsened both in Spain and in the Economic and Monetary Union (EMU). For the analysts of the Bank of Spain, the contraction in supply is determined by the increased risk represented by the surge in inflation, the war in Ukraine and the uncertainties about monetary policy.

How logical, the evolution of consumer financing intentions (including generic credit resources: loans, cards, etc.) derives both from the projections on interest rates, which the ECB has already started to raise, and from the conditions of these and, above all, the job prospects they have.

In this sense, Europeans expect mortgages to get more and more expensive over the next twelve months and stop at 4%, compared to 3.3% consumers themselves placed them at earlier this year. In the same period, the Euribor went from -0.447% at the end of January to 0.852% at the end of June, with an increase of 130 basis points.

Otherwise, conditions for access to credit have slightly tightened in the last twelve months, as perceived by European consumers, whose expectations for the next twelve months remain virtually unchanged.

In Spain, where the big banks have had an excellent first half in the mortgage market, demand has turned to fixed-rate mortgages, subsidized on the basis of the products that the consumer contracts with the institute, which begin to oscillate around the amplitudes expected by consumers. So, for example, for a 30-year soft loan, Spanish buyers have products with a 4% APR, such as Banco Santander’s Hipoteca Fija Bonificada, 3.364% of CaixaBank’s Hipoteca Casa Fácil Fijo APR, or l ‘Hipoteca Fija of Banco Sabadell April of 2.91%.

AFP / DANIEL RONALD – Headquarters of the European Central Bank (ECB) in Frankfurt

Pessimistic outlook

On the other hand, consumer expectations for house price growth over the next 12 months fell slightly to 3.3%. After some upward momentum in 2021, the ECB says “expectations have stabilized since October 2021”.

In the same order of ideas, The 12-month economic growth forecasts have worsened since May to forecast a decline of -1.3%. This pessimism goes beyond any age distinction. Similarly, consumers fear a deterioration in the labor market which brings the unemployment rate to 11.5%, close to those recorded at the beginning of the year. In April 2022, quarterly data show that the expectations of unemployed respondents to find a job in the next three months had dropped from 26.7% in January to 23.8%. The expected probability of losing one’s job in the next three months is also decreasing, from 10.3% in January to 9.5% in April.

In terms of income, the growth expectations of nominal income in the next twelve months remain at 0.9%, although they are higher (1.8%) among consumers aged 18 to 34 and among people with very low incomes.

The perception of nominal expenditure growth in the previous twelve months has been steadily increasing since April 2021 and has reached 5%. Consumers with income below the median perceive the largest increase in nominal spending. As for the future growth of nominal spending, the expectations of the interviewees, twelve months later, stand at 3.9%.

The survey shows a consumer (from the euro area) who perceives a higher price increase than that reflected by the statistics.

Thereby, the perception of inflation by European consumers in the twelve months preceding June (date of the last sample) is strongly increasing, as well as their expectations for future inflation. The median perceived inflation rate during this period worsened by six basis points to 7.2% at the end of June.

PHOTO / Dirk Claus / European Central Bank – Cristina Lagarde

At that time, the harmonized CPI for the euro area officially stood at 6.0%. And, as sentiment remains, consumers expect prices to stabilize by 5% within a year. This seems to contradict Christine Lagarde’s bank’s “optimistic” forecasts that headline inflation will decelerate from 7.2% at the end of this year to 2.6% in 2023 and 1.8% in 2024.

The Consumer Expectations Survey (CES) collects information on Eurozone consumer perceptions and expectationsas well as on their economic and financial behavior.

The CES includes views and perceptions on a variety of indicators ranging from inflation, consumption, income, residential market activity and housing prices, labor market conditions, consumer finance, savings and investment, financing and access to credit, general economic prospects and other central bank issues.

The CES is based on questionnaires sent to around 14,000 consumers aged 18 and over from six euro area countries: Belgium, Germany, Spain, France, Italy and the Netherlands, which represent 85% of GDP and 83.8% of the population.

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