Germans cut back more than Britons: how the fuel-price shock is changing consumer behavior

It’s been two months since the outbreak of war in the Persian Gulf. With global energy prices sharply higher, high-frequency card-spending data shows us how households across advanced economies have already modified their behavior.

Broadly, consumers are reallocating spending away from discretionary categories — but the scale of adjustment differs across countries.

Germany and Britain are both wealthy northern European nations. But Germans are facing a notably bigger hit from fuel bills than Britons have experienced so far, and are cutting back on non-essentials as a result.

The first chart uses Fable Data to compare spending share changes for different categories relative to the pre-war period (roughly the month of February, given we’re using a 4-week rolling average).

Germans are reducing their entertainment and vacation-related travel, as might be expected. But Britons appear to be holding on to their pre-war preferences; those categories have barely declined. This could be due to a greater level of post-pandemic savings, or a greater willingness to run down those savings buffers.

Meanwhile, Germans might be redirecting some of that discretionary spending to local restaurants and beer gardens. Spending in this category has jumped, unlike its British equivalent.

The second and third charts drill down into German and British card spending to show week-by-week change. It’s notable that total card spending also remains above pre-war levels, implying households are not (yet) fully offsetting the fuel shock by cutting their overall consumption; this also likely reflects a seasonal upturn after the post-Christmas lull, however.

We turn to the US in our fourth chart. Americans pay much less to fill up their vehicles than Europeans do, but given the lower tax take, geopolitical shocks can have more of a direct impact on pump prices.

With gasoline prices surging, Americans appear to be cutting back the most at the grocery store and pharmacies. (These categories are falling both in value and transaction-volume terms.)

Seasonal trends for more home-renovation and sporting-goods spending in springtime are holding so far.

It’s notable that inflation-adjusted fuel spending has also increased in the US. This could reflect “precautionary” purchases by consumers expecting even more expensive gasoline down the road.