What: European consumer spending shows signs of recovery in Q2-2025, with UK SMI reaching 101.3 and Eurozone rising to 97.4, driven by weather effects and shifting seasonal patterns.

Why it is important: This recovery signals a significant shift in European retail dynamics, where external factors like weather and seasonal events are increasingly influential in shaping consumer behavior and retail performance.

Consumer spending across Europe demonstrated encouraging momentum in the second quarter of 2025, with both the UK and Eurozone showing signs of improvement. The UK's Spending Momentum Index reached 101.3, indicating expansion compared to the previous year, with discretionary spending rising significantly by 5.2 points to 106.4 and non-discretionary spending increasing by 3.4 points to 102.2. The Eurozone, while still below the expansion threshold, showed positive movement with the SMI rising 2.6 points to 97.4. This improvement was particularly evident in non-discretionary spending, which increased by 3.6 points to 101.2, driven by a notable 8.7-point surge in April. Record-breaking heat across Europe during April influenced shopping patterns, prompting early seasonal purchases in categories such as garden furniture and summer apparel. The timing of Easter and school holidays further contributed to the quarter's performance, especially affecting food, travel, and leisure categories.

IADS Notes: The Q2-2025 improvement in consumer spending momentum aligns with broader retail trends observed across Europe. As reported in June 2025, BCG's analysis showed 40% of consumers maintaining optimism despite economic pressures, while the National Retail Federation's forecast of 2.7-3.7% growth for 2025 confirms the gradual recovery. The significant impact of April's record-breaking heat on seasonal retail parallels earlier observations from 2024 about weather's increasing influence on shopping patterns. Regional variations remain pronounced, with French department stores showing resilience at 1.7% growth in January 2025, while the UK's May 2025 performance revealed a complex picture with food sales rising 3.6% against non-food's 1.1% decline. The contrast between discretionary and non-discretionary spending reflects June 2025 findings showing 73% of European consumers adapting to higher prices, though premium segments maintain strength. These patterns, combined with the calendar effects noted in February 2025's French retail analysis showing a 13% decline in traditional sales periods, demonstrate how seasonal and environmental factors are reshaping European retail dynamics.

Europe Spending Momentum Index