less dynamism
After restrictions ended and the year began with a sense of renewed outlook, events such as Russia’s invasion of Ukraine rose to the foreground. Household budgets tightened, especially in families with limited liquidity, making prudent spending a priority. One effect observed is that incomes with little room for savings delay purchases of durable goods like home appliances or cars.
A study by Carmen Martínez-Carrascal from the Bank of Spain’s Directorate General for Economy and Statistics concluded that the war’s spillover significantly altered how families viewed their future spending, interrupting the expected recovery in consumer activity that had been projected as nominal gains.
In practical terms, since March, households have revised their nominal spending plans downward in light of the crises faced. The war’s impact on confidence, anticipated income changes, inheritance expectations, and access to credit — all set against higher inflation — helped shape these revised plans for the near term.
Data from the European Central Bank’s Survey of Consumer Expectations shows inflation rose gradually through 2021, and the effect on price expectations didn’t appear all at once. Yet, in the second half of the previous year, the shift became clearer. Short-term inflation expectations moved more noticeably than medium-term ones, signaling a shift in how households anticipated future costs.
When the war began, forecasts for households’ financial situations worsened on a per-household basis. Those with liquidity gaps and outstanding debt tended to offer less positive views about the future trajectory of their wealth, reflecting increased caution amid uncertainty.
The study also confirms that nominal spending expectations remained more positive among the two top income quintiles than in other groups, continuing the pattern seen in prior months. This tendency survives when looking at spending in real terms, likely because higher-income families tend to enjoy more stable and transferable earnings, which fosters greater optimism about future spending ability.
Conversely, items most affected by the pandemic’s disruption — particularly those tied to social activities such as entertainment, travel, and cultural experiences — remain vulnerable to the wobble of confidence and the easing of restrictions. Those with greater saving capacity can cushion some of these needs, while higher savings enable more resilient expenditure levels during uncertain times.
Another factor to consider is how war’s uncertainty weighs on discretionary spending. Confidence wanes and perceptions of family finances deteriorate, dampening demand for durable goods, which are especially sensitive to rising uncertainty, wealth declines, or weaker purchasing power. Families have moderated their expectations for purchases like household equipment and automobiles in recent months, and the trend has sharpened since the outbreak of conflict.
Holidays are not for everyone
In contrast, expectations for future vacation spending continued to improve in a context where pandemic restrictions largely eased. Yet, gains were more modest for the lowest-income groups, who have the least capacity to benefit from savings and surpluses.
When energy costs rise, households with modest liquidity tend to cut back on other expenditures to cope. In contrast, families with a larger buffer did not significantly alter their outlays beyond necessities, absorbing the higher energy bills by temporarily reducing their savings rate to meet rising costs.
Overall, these dynamics illustrate how inflation, geopolitical shocks, and varying levels of liquidity shape spending plans across income groups. The willingness to commit to durable purchases such as appliances and vehicles depends not only on current income but also on expectations about future income, credit access, and the perceived stability of prices. The broader implication is a cautious consumer environment where saving behavior remains a critical buffer against uncertainty, and which can slow the pace of economic recovery for households at lower income levels. [Source: Bank of Spain study on inflation, war impact, and household expectations]