Spanish and euro area households’ response to rising prices

Abstract

Rationale Faced with the recent inflationary episode, households have employed different strategies to adjust their consumption, saving and labour supply decisions in response to higher prices. This article discusses what those strategies have been and how they have varied based on household characteristics. Takeaways •The strategies most widely used by households to cope with the price increases, both in Spain and in the euro area, were shopping around for better alternatives (e.g. offers) and reducing their saving and spending levels. •Spanish households have resorted to credit and increased their labour supply (by taking a second job or working longer hours) to cushion the impact of higher prices on consumption more than their euro area counterparts. This is especially true among households with low liquidity buffers. •Young people, women, people with a lower educational level and those living in rented housing have showed a greater propensity to work more hours to cope with inflation.