Consumer confidence plays an important role in determining economic activity. Thanks to timely availability and close co-movement with economic activity, analysts and policymakers closely monitor consumer confidence indicators to help them assess the strength of the economy (Barsky and Sims, 2012; Dees and Brinca, 2013; Ludvigson, 2004). They typically summarise information about consumers’ perceptions of current and future economic conditions and expectations for households’ financial situations and their spending plans. In this box, we present a new consumer confidence indicator (CCI) derived from the ECB’s Consumer Expectations Survey (CES) and use additional microdata to explore the relationship between consumer confidence and actual spending at the household level.
The CES-based consumer confidence indicator (CES CCI) captures individuals’ perceptions of economic conditions and their financial outlook. The CES CCI employs a methodology that closely mirrors that of the European Commission’s well-established consumer confidence indicator (EC CCI), ensuring a robust, standardised framework for measuring consumer sentiment.[1] The CES CCI is based on four qualitative survey questions on respondents’ past and future personal financial situations, aggregate economic growth expectations for the next 12 months and intentions to make major purchases over the next 12 months.[2] Equal weights are assigned to the response score of each question. The weighted scores for the four questions are aggregated to calculate an individual confidence score. The population-weighted sum of all individual confidence scores is then used to obtain the indicator score. A key feature of this methodology is the capacity to calculate from the individual survey observations a specialised consumer confidence indicator for any socio-demographic group. In addition, consumer confidence can be decomposed additively into contributions associated with each of its four components. Thus, the indicator also offers a perspective on both individual financial circumstances and the general economic outlook.
Consumer confidence remains in negative territory in 2025.[3] The CES CCI aligns closely with the well-established EC CCI, as can be seen in Chart A, panel a. Since its trough in October 2022, the CES CCI has increased by 19 index points; aggregate consumer confidence had improved slightly in the second half of 2024, but this was followed by a drop in April 2025 and a partial recovery in May. These fluctuations highlight the evolving nature of consumer sentiment in response to changing economic conditions.
Consumer confidence can be analysed by income quintile and degree of financial literacy. There is a stark difference in CCI levels between households in the top 20% and the bottom 20% income brackets, as shown in Chart A, panel a. This can be explained by the fact that high-income respondents are more optimistic in all four dimensions captured by the indicator. The largest share of the difference comes from their relative optimism in terms of planned major purchases (as also shown in Chart B, panels b and c). Another differentiating factor for individual consumer confidence is the level of financial literacy (Chart A, panel b). Here, respondents with higher levels of financial literacy have a higher level of confidence on average but are also more responsive to shifts in economic conditions (e.g. during the 2022-23 inflation surge).
Chart A
Evolution of the consumer confidence indicator
a) CES CCI and EC CCI for the euro area
(score)
b) CES CCI, by degree of financial literacy
(score)
Sources: ECB (CES) and European Commission.
Notes: In panel a), the correlation between CES CCI and EC CCI is 0.94. Income quintiles are calculated from reported net household income by country and wave. The alignment of the axes between the CES CCI and the EC CCI is based on their approximate long-term averages, reflecting differences in the construction of response scores for each indicator. In panel b), financial literacy is divided into two groups: individuals gaining a score of 4 on a scale of 0-4 in the CES financial literacy “quiz” (high literacy) and those gaining any lower score (low literacy). The latest observations are for May 2025.
Decomposing the CES CCI into its four components shows that scores on aggregate economic expectations and planned consumption vary the most over time. The evolution of consumer confidence among households is shaped primarily by expectations about the economy and planned major purchases (Chart B, panel a). While expectations about future economic conditions influence all households, planned consumption plays a more significant role in capturing the confidence of high-income households (Chart B, panels b and c). In recent months developments have been mainly linked to subdued expectations on the economy, with strong volatility evident in April 2025 following the recent trade tensions.
Chart B
CCI components
a) Decomposition of CES CCI into contributing components
(scores)
b) Decomposition of CES CCI for households in bottom 20% income bracket
(scores)
c) Decomposition of CES CCI for households in top 20% income bracket
(scores)
Source: ECB (CES).
Notes: CES CCI calculated from individual survey responses. The aggregate CES CCI score is the weighted average across individuals. The indicator can be decomposed into its four contributing questions. For the decomposition, each contributing question is divided by four to obtain the post-weighted values. In panels b) and c), income quintiles are calculated from reported net household income by country and wave. The latest observations are for May 2025.
Consumer confidence at the individual level is closely related to the actual consumption of households. A unique feature of the CES is that it makes it possible to understand how individual consumer confidence relates to self-reported total consumption per household, which is measured by a sequence of quarterly questions in the survey. Unlike Barsky and Sims (2012), the CES CCI relies on individual-level data. The left-hand side of Chart C, panel a), illustrates the association between individual total consumption growth and changes in individual consumer confidence by income quintile, controlling for a series of individual characteristics. On average, a 10 point change in CES CCI score at the individual level is associated with a 1.2% change in individual consumption. Beyond that, the change in consumption for households in the top 20% income bracket increases to about 1.6% for the same increase in confidence. As shown on the right-hand side of Chart C, panel a), the positive association between changes in confidence and consumption growth stems almost entirely from the discretionary component of total consumption.[4] This component also accounts for a larger share of total consumption among high-income households. This finding coincides with recent findings on non-essential consumer spending (Andreolli et al., 2024), which is more procyclical and accounts for a higher share in the consumption basket of high-income households.
Recent developments in consumer confidence, especially for households in the top 20% income bracket, point towards muted consumption growth overall in 2025.[5] Using the quintile-specific estimates together with the shares of each income quintile in aggregate consumption makes it possible to compute the marginal impact of a change in confidence on aggregate consumption, all else being equal (Chart C, panel b). This exercise shows that a 10 point decline in the CES CCI score typically corresponds to a decline of 1.3% in aggregate consumption, with the highest quintiles accounting for more than half of the impact.
Chart C
Impact on consumption of a change in CES CCI score
a) Effect on individual consumption of a 10 point change in CES CCI score
(percentages)
b) Aggregate consumption shares and CES CCI score, by income quintile
(percentages)
Source: ECB (CES).
Notes: Income quintiles calculated from reported net household income by country and wave. In panel a), coefficients are derived from a linear regression of year-on-year change in log individual consumption on year-on-year change in CCI score with income quintile interactions, controls and country/wave fixed effects. The yellow whiskers indicate the 90% confidence intervals of the estimated coefficients. In panel b), to compute the decomposition, the share of aggregate consumption of each income quintile is multiplied by the CCI effect on individual consumption (previous regression coefficient).
References
Andreolli, M., Rickard, N. and Surico, P. (2024), “Non-Essential Business Cycles”, CEPR Discussion Papers, No 19773, Centre for Economic Policy Research.
Baptista, P., Dossche, M., Hannon, A., Henricot, D., Kouvavas, O., Malacrino, D. and Zimmermann, L. (2025), “The transmission of monetary policy: from mortgage rates to consumption”, Economic Bulletin, Issue 4, ECB.
Barsky, R.B. and Sims, E.R. (2012), “Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence”, American Economic Review, Vol. 102, No 4, pp. 1343-77.
Baumann, A., Caprari, L., Kocharkov, G. and Kouvavas, O. (2025), “Are real incomes increasing or not? Household perceptions and their role for consumption”, Economic Bulletin, Issue 1, ECB.
Dees, S. and Brinca, P. (2013), “Consumer confidence as a predictor of consumption spending: Evidence for the United States and the Euro area”, International Economics, Vol. 134, pp. 1-14.
Ludvigson, S.C. (2004), “Consumer Confidence and Consumer Spending”, Journal of Economic Perspectives, Vol. 18, No 2, pp. 29-50.
See DG-ECFIN (2025), “The Joint Harmonised EU Programme of Business and Consumer Surveys – User Guide”, European Commission.
For their past financial situation (12 months ago) and future financial situation (12 months ahead), respondents rate their conditions using the following options: “Much worse”, “Worse”, “Same”, “Better” and “Much better”, which correspond to response scores of -1, -½, 0, ½ and 1 respectively. Similarly, for expectations on the aggregate economy 12 months ahead, respondents choose between “Shrink”, “Same” and “Grow”, which are assigned response scores of -1, 0, and 1 respectively. Lastly, respondents answer “Yes” or “No” for intentions to make major purchases 12 months ahead, which correspond to response scores of -1 and 1 respectively.
The indicator is based on weighted net balances, meaning that negative values indicate a higher volume of negative responses. The zero for the CES CCI corresponds to the historical average of -11 for the EC CCI. Consequently, the curve for the EC CCI is aligned with -11.
Consumption is split into two groups: (1) discretionary, and (2) necessities. Discretionary includes spending on recreation, travel, restaurants and bars, larger household items, luxury items and car purchases, while necessities are defined as spending on housing, utilities, food and health.
The impact of consumer confidence on consumption complements other channels that contribute to the muted response of consumption (see Baumann et al. (2025) for the impact of income misperceptions and Baptista et al. (2025) for the impact of the cash flow channel via mortgages).