Euro area consumer confidence unexpectedly improved in April, after falling sharply in the previous month, yet remained in the negative territory indicating pessimism, preliminary figures from the European Commission showed Thursday.
The flash consumer confidence index rose to -16.9 from -18.7 in March, which was the weakest since May 2020 shortly after the coronavirus pandemic began. Economists had forecast a score of -20.
The corresponding index for the EU climbed 2.0 points to -17.6.
Both indicators remained well below their long-term averages.
The survey data was collected from April 1 to 20.
Eurozone consumption in recent weeks was likely underpinned by increased mobility due to removal of most of the restrictions linked to the pandemic and households releasing their pent-up demand, Capital Economics said.
“Looking ahead, the outlook for consumption is weak,” Capital Economics economist Michael Tran said.
Energy price-driven headline inflation is widely expected to climb further from its fresh record of 7.4 percent in March, and hurt consumer spending and confidence. Consumers could also turn more cautious as the war in Ukraine prolongs and start to save more as they worry about the financial and economic outlook.
While the stock of forced savings over the past few years could provide a buffer against declines in real incomes, there is little scope for continued big declines in savings to drive consumption growth as household saving rate is now close to pre-pandemic levels, the economist added.
“Accordingly, we think that overall household spending will decline in Q2 and remain weak in Q3,” Tran said.
The final data is set to be released along with the monthly economic sentiment survey data on April 28.
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