[9]  Uncertainty about growth That said, these shocks also have implications for growth and, as such, they can weigh on the medium-term inflation outlook. So what are we seeing in this regard? The external supply shocks hitting the euro area are affecting spending. Rising import prices represent a terms of trade “tax” which reduces the total income of the economy.
Households are seeing their real income being squeezed. Real wage growth has been negative for two consecutive quarters. And consumer surveys suggest that households are expecting their real income and consumption to decline further over the next year. Firms are trying to protect their margins by raising prices, but this uncertain environment is also leading them to delay investment decisions.