Fitch Ratings-London/Paris-03 June 2025: Household consumption in the euro area will continue its recovery, Fitch Ratings says in a new report. However, the imposition of tariffs by the US will reduce global economic activity and trade volumes, and the first gauges of consumer sentiment since the announcement showed confidence weakening. On the plus side, a sea change in Germany’s fiscal policy – bringing higher government investment – will add to demand from 2026.
With inflation at the ECB’s target of 2%, real wages are growing, restoring compensation per employee in real terms to just below its pre-pandemic level. We expect further real income gains in 2025, but the labour market is softening and forward-looking gauges of wage growth are pointing to a deceleration. Unemployment is close to a record low at 6.2% and we expect only a mild rise in 2025 despite weak growth.
Banks are starting to ease credit standards and they expect stronger loan demand. Rates on new loans are falling. With more rate cuts projected to come from the ECB, we think interest service as a share of household income is close to a peak in the euro area.
Household balance sheets are relatively strong in aggregate. Debt as a share of disposable income is at its lowest since 2004. Debt service has risen, but interest payments as a share of income are unlikely to rise much further.
The performance of consumer ABS securities remains fairly solid. Fitch believes low unemployment and falling interest rates will support borrower incomes, and keep credit card default and charge-off rates to manageable levels in 2025. Lower rates and firm labour markets are also supporting RMBS performance. Despite downward revisions, we expect consumer-facing corporates to post slightly stronger revenue growth than in 2024.
Información extraída de: https://www.fitchratings.com/research/sovereigns/eurozone-household-consumption-to-continue-recovery-amid-global-economic-shocks-03-06-2025
