Economy
Inflation and its effect on consumption
Inflation reduces households’ purchasing power and, together with the uncertainty it creates, tends to slow consumption, especially of non-essential goods.
When prices rise faster than incomes, consumption suffers. We explain how it works and what it means for companies.
How inflation affects consumption
- Loss of purchasing power: the same money buys less.
- Uncertainty: households postpone purchases and save.
- Basket reshuffle: essentials are prioritised.
The role of interest rates
Central banks usually target around 2% annual inflation and raise rates to cool demand when it spikes. In March 2022, Spain reached 9.8% inflation, the highest since 1985.
Why ENET Consulting
Inflation does not hit all sectors or segments equally. Measuring how your specific customer reacts is the best defence.
Frequently asked questions
Why does inflation reduce consumption?+
Because it lowers purchasing power and raises uncertainty, leading households to postpone purchases and prioritise essentials.
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Read more →How is inflation affecting your customers? We measure it for you.
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