Consumers in the eurozone and the U.K. are seeing a “slowly improving” outlook due to rising disposable incomes and indications that interest rates may have peaked, according to Barclays analysts.
After years of negative impacts from the COVID-19 pandemic and soaring energy prices, European households are beginning to recover, the analysts noted on Wednesday. Retailers are reporting increased trading activity, supported by better real wages, falling inflation, and a strong labour market.
Barclays forecasts real private consumption to grow at a quarterly rate of around 0.3% and a cumulative 2% increase from Q2 2023 to Q4 2025 in both regions.
A forthcoming rate-cutting cycle in the eurozone and the U.K. is expected to further ease pressures on households. The European Central Bank has already announced a 25-basis point rate cut, reducing borrowing costs. Although the Bank of England is expected to hold rates steady in its next meeting, future reductions are anticipated.
However, ongoing political uncertainties in France and the U.K. could dampen consumer spending in the short term. Candidates in both countries have pledged to prioritize consumer issues.
