The ups and downs of consumer confidence in Europe

Olly Warren Account Director 05/09/2023

In our latest wave, consumers across Europe are 55% more confident in their financial situations than in their nation's economic outlook.

Confidence is on the rise slowly but surely

In Europe, consumer confidence has been on the rise in many markets, with notable improvements seen in the Nordics compared to the last quarter (+6pts). However, confidence remains in negative territory despite the upward trend. On the positive side, the latest wave of Consumer Compass Europe indicates that there has been a 20% drop in the number of consumers who fall into the least resilient group, known as “sufferers”, with a 13% increase in the more resilient “cautious” consumers. This means that consumers are still being cautious about their spending habits despite their improving confidence levels.

One of the most positive developments is the improvement in disposable income across many markets. Whilst still lower compared to previous years, disposable income levels appear to be improving over time, especially in the Netherlands (+50%). The country has also experienced the largest decline in “sufferers”, those who have cut all the expenditure they can due to concerns for the future, since the last quarter (9%). Highlighting that, in the Netherlands at least, consumers are beginning to feel more financially stable and comfortable spending on non-essential items.

Economic woes

Interestingly, consumers across Europe are 55% more confident in their financial situations than in their nation’s economic outlook. This trend is particularly evident in the Netherlands (30%), Nordics (31%), and Spain (30%).

However, there are still some concerns about the economic climate in certain markets, such as France, who have experienced a 5% decline in consumer confidence. This can be attributed to several factors in the country, including significant inflation rises, banking pressures, and dissatisfaction with proposed changes by the government such as the recent increase in retirement age proposed by French President, Macron. These factors have created an environment of uncertainty and concern among French consumers.

Inflation’s impact on leisure expenses

Inflation has impacted many sectors, with essential spending being the most affected. Bills, petrol, and groceries are categories that have remained ‘protected’ (spending unaffected despite high inflation impact), but other areas such as housing and leisure have been hit hard. Despite this, the latest wave of Consumer Compass Europe suggests that consumer spending on leisure remains largely consistent with the previous wave.

While there have been some observable upticks in expenditures on home improvements (+4pts), holidays (+5pts), and days out (+6pts) compared to the last quarter, the effects of high inflation on consumers’ net spending indicate that certain sectors are more vulnerable than others. In this regard, holiday expenses have shifted from being ‘protected’ to being ‘sacrificed’ due to the impact of high inflation. However, essential expenses have remained protected. Emphasising that despite minor improvements in holiday spending, most consumers are still making sacrifices in this area as they grapple with rising living costs, with many opting to prioritise essential spending over leisure activities.

While consumers are spending more on bills compared to this time last year, an all-too-familiar result of increased inflation rates, it is also worth noting they are spending significantly less than in Q4 2022.

In summary

Consumer confidence in Europe is showing signs of recovery, with disposable incomes improving and the number of “sufferers” decreasing. Despite the challenges posed by inflation and economic uncertainty in some markets, European consumers are still managing their finances carefully and prioritising essential spending. The latest wave of data from Consumer Compass Europe suggests that there have been some noticeable increases in spending on holidays, days out, and home improvements. However, non-essential spending remains limited due to the ongoing impacts of inflation on consumer budgets.