ECB Survey of Professional Forecasters Shows Near-Term Inflation Higher, but Medium Term Stable

15 April 2022

By David Barwick – FRANKFURT (Econostream) – Professional forecasters now expect inflation this year and next to be higher than they anticipated three months ago, but are sticking to their previous prediction regarding medium-term HICP, the European Central Bank said on Friday.

According to the ECB’s survey of professional forecasters (SPF) for 2Q, the projection for average euro area 2022 inflation was 6.0% and thus twice that recorded in 1Q, while 2023 HICP was seen at 2.4%, one third higher than in January.

Expectations for 2024 were an unchanged 1.9%, and longer-term expectations, understood to refer to 2026, stood at 2.1%, versus 2.0% in 1Q.

The SPF outcome suggests that for this year and next, professional forecasters differ with the view from the Eurotower. The ECB’s latest forecasts called for HICP of 5.1% in 2022 and a mere 2.1% in 2023.

However, the last projection exercise of the ECB had a cut-off date in very early March, whereas the SPF was conducted between April 1 and 4. The next ECB forecasts, to be published on June 9, are apt to include substantial revisions with respect to the near term in particular.

According to the ECB, survey participants attributed high inflation mainly to cost-push factors, ‘and considered that the conflict in Ukraine had re-ignited and amplified price pressures that had started to show signs of peaking.’

Survey respondents adjusted down their forecasts for GDP growth this year to 2.9% (from 4.2%) and next year to 2.3% (from 2.7%), but were slightly more optimistic than in 1Q about 2024 GDP, estimated at 1.8% (versus 1.7%).

Longer-term growth expectations stood at 1.4% in 2Q, down from 1.5% in 1Q.

Although about a quarter of participants expected at least one quarter of economic contraction this year, only 4% anticipated back-to-back quarterly declines.

‘Notwithstanding the downward revision to expected GDP growth, unemployment rate expectations were revised down further, by between 0.1 and 0.3 percentage points for all horizons’, the ECB said. ‘Respondents expect the unemployment rate to decline from 6.9% in 2022 to 6.6% by 2026. Longer-term unemployment expectations are at their lowest level for 15 years.’