During the third quarter of 2024, European consumers reported feeling slightly more optimistic about the economy. Stabilizing household finances and reduced inflation concerns drove this increase in optimism. Trading down remained a common behavior, but new data suggests this trend may be shifting.
In the five European nations surveyed (France, Germany, Spain, Italy, UK), although more than half of survey respondents still expressed mixed feelings about the economy, more consumers were optimistic than pessimistic in the third quarter of 2024.
Consumers across all age and income groups reported feeling more optimistic than they did in the second quarter, though optimism was highest among Gen Z.
This may be due to inflation stabilizing in much of Europe and consumers feeling slightly less concerned about international conflicts. The Olympic Games, EuroCup finals, and summer holiday season may have also contributed to the improved consumer sentiment.
In Spain and the United Kingdom, consumer optimism has been reported to grow more in the third quarter than it did in other countries (up 6 percentage points each to 36% and 30%, respectively). Somewhat surprisingly, consumers in France reported an increase in pessimism (up 5 percentage points to 28%), despite playing host to the Olympic Games. This is particularly salient given that pessimism in Italy, Germany, and the United Kingdom fell. France´s current uptick in pessimism could be attributable to frustrations that consumers there are feeling after the snap elections, which took place in late July, argues McKinsey.
Most consumers in Europe (82 percent) either increased or maintained their spending from the second quarter, although slightly fewer (77 percent) said they increased or maintained their income. Indeed, nearly a third of consumers stated they started tracking their expenses more carefully.
In the third quarter of 2024, consumer optimism in Europe grew slightly, attributable to improved feelings about the economic and geopolitical climate. The tourism sector rebounded strongly over the past several months, supporting economic growth and providing a cushion against broader economic uncertainties. However, consumers remain cautious heading into the fall. So long as inflation continues to gradually decline, consumers in Europe may experience a modest increase in purchasing power, which may then translate into stable spending.
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