How the ‘double scar’ of past inflation woes and geopolitical shocks amid the Iran war is hitting consumers
Consumers are increasingly affected by past inflation and geopolitical tensions, particularly due to the ongoing Iran war. Research from the European Central Bank indicates that these factors are leading to heightened sensitivity regarding economic conditions and retail spending. The findings suggest that memories of previous economic shocks are shaping consumer expectations and fears of stagflation.
- ▪The European Central Bank reports a 'double scar' affecting consumer perceptions due to past inflation and geopolitical issues.
- ▪Euro area households are more sensitive to the financial impacts of the Iran war, influenced by previous economic challenges.
- ▪Inflation expectations rose by 2.5 percentage points following the outbreak of conflict in the Middle East.
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A "double scar" of past inflation woes and geopolitical trauma is warping how consumers view the economy and threatening a drop-off in retail spending, new research from the European Central Bank showed.According to ECB researchers, euro area households have become more sensitive to the financial consequences of the Iran war due to cumulative economic wounds left behind by the post-pandemic inflation surge and the 2022 invasion of Ukraine, which resulted in soaring energy prices.
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