Journal of the European Economic Association

Monetary policy and housing investment in the euro area and the United States

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Thursday, May 18, 2023
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Key Points: 

The impact of higher energy prices on services and goods consumption in the euro area

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Monday, January 16, 2023
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= The impact of higher energy prices on services and goods consumption in the euro area =

Key Points: 
  • = The impact of higher energy prices on services and goods consumption in the euro area =
    Published as part of the ECB Economic Bulletin, Issue 8/2022.
  • The recent increase in real consumer spending in the euro area masks heterogeneous developments in individual consumption components.
  • [2] This box aims to quantify the impact of the recent increase in energy prices on real consumer spending in the euro area.
  • [3] Developments in real private consumption in the euro area
    (Q4 2019 = 100)

    Sources: Eurostat and ECB calculations.

  • The recent sharp increase in energy prices has had a significant impact on households’ real disposable income.
  • Energy supply shocks only had a negligible negative impact on services consumption, meaning that this component increased substantially following the reopening of the economy in spring 2022.
  • The relatively strong reaction of durable goods consumption in response to the increase in energy prices is likely due to the fact that households are able to use their existing stock of durable goods without an immediate impact on their welfare.
  • [7] Moreover, given the heightened uncertainty due to the energy price fluctuations, households may have decided to postpone irreversible purchases of durable goods.

Motor vehicle sector: explaining the drop in output and the rise in prices

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Friday, November 11, 2022
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This box discusses the structural and cyclical factors behind the notable drop in euro area motor vehicle output since mid-2018 and the recent marked increase in car prices.

Key Points: 
  • This box discusses the structural and cyclical factors behind the notable drop in euro area motor vehicle output since mid-2018 and the recent marked increase in car prices.
  • Euro area motor vehicle output fell by 30.4% between June 2018 and August 2022, of which around 10% occurred before the start of the pandemic and 20% after.
  • Industrial production of motor vehicles across economies
    (index: January 2018 = 100)

    Sources: Eurostat, Federal Reserve System, Japanese Ministry of Economy, Trade and Industry and Statistics Korea.

  • The decline in motor vehicle activity began in mid-2018, driven by a drop in demand for cars with a combustion engine.
  • Before the pandemic euro area car producers had intensified their efforts to increase local production and sales of hybrid and electric cars.
  • However, the relatively higher prices of these models contained demand and the required changes in factories entailed production shortfalls.
  • The lockdowns caused motor vehicle output to fall in the second quarter of 2020.
  • Car output and changes in car prices contribution of shocks
    a) Motor vehicle production
    (percentage deviation from trend)

    b) Car prices
    (year-on-year percentage point deviation from trend)

    Sources: Eurostat, S&P Global and ECB staff calculations.

  • Notes: The model includes motor vehicle industrial production, car prices, Purchasing Managers Index (PMI) suppliers delivery times and energy prices.
  • Sign restrictions at impact: demand shocks imply car prices (+), motor vehicle production (+), and PMI suppliers delivery times (-); supply chain disruption shocks imply car prices (+), motor vehicle production (-) and PMI suppliers delivery times (-); energy shocks imply car prices (+), motor vehicle production (-) and energy prices (+); other supply shocks imply car prices (+) and motor vehicle production (-).
  • [5] Since the summer of 2021 the extraordinary increase in energy costs has also contributed to the decline in motor vehicle output (Chart B, panel a).
  • [7] Car prices increased markedly as a result of supply chain disruptions, high energy costs and, to a smaller extent, a rise in demand.