ECB Economic Bulletin Pre-Release: Consumers Cope with Inflation by Adjusting Consumption
20 March 2024
By Aurėja Bobelytė – VILNIUS (Econostream) – Consumers’ main strategy to cope with inflation is by adjusting their consumption, according to an Economic Bulletin paper pre-released by the European Central Bank on Wednesday.
‘The predominant response to elevated prices was to shop around, followed by trading down to lower quality product varieties and reducing the quantities purchased’, the ECB said.
The authors also found that households with constrained budgets were more likely to adjust their shopping and saving patterns in response to inflation compared to those with unconstrained budgets. Middle-income consumers reduced their saving rates the most as a consequence of higher prices.
According to the paper, the consumption of food or equipment has experienced a downward adjustment due to large price increases.
According to the ECB, '[t]he decline in the household saving rate over the last two years mainly reflects an increase in spending on recreation and travel, rather than on necessities.'
‘The largest income gains were reported by consumers in the lower-income quintiles, in line with increases in the minimum wage in euro area countries over the past two years’, the ECB said.