ECB: Again, Consumer Expectations of Inflation in One Year Rise, But 3-Year Expectations Unchanged

7 December 2022

By David Barwick – FRANKFURT (Econostream) – The European Central Bank’s consumer expectations survey, released Wednesday for the fourth time, confirmed the trend of previous months, as expectations in October of inflation in one year rose anew whilst expectations of inflation three years ahead remained unchanged.

‘Perceived inflation over the previous 12 months continued to rise, with the median rate now standing at 9.9%’, up from 8.1% in September, 8.0% in August and 7.9% in July, the ECB said.

‘Inflation expectations remained well below the perceived past inflation rate, particularly at the medium-term horizon of three years’, it said, repeating verbatim the September release. ‘Median expectations for inflation over the next 12 months increased from 5.1% to 5.4%, while expectations for inflation three years ahead were unchanged at 3.0%.’

The survey, based on some 14,000 responses from Belgium, Germany, Spain, France, Italy and the Netherlands, also showed overall expectations for nominal income growth 12 months ahead at 0.7% in October (above September’s 0.6%, but below 1.0% in August and 0.8% in July).

Expectations of nominal spending growth over the next 12 months were at 4.7%, up from 4.5% in September and August and 4.2% in July, the ECB said.

Meanwhile, expectations of economic growth over the next 12 months decreased further in October, sinking to -2.6% after -2.4% in September, -1.7% in August and -1.9% in July, the ECB said.

‘Consistent with the lower expectations for economic growth, expectations for the unemployment rate 12 months ahead rose to 12.5%, up from 12.2% in September’, 11.9% in August and 12% in July, the ECB said. ‘Consumers continued to expect the future unemployment rate to be higher than the perceived current unemployment rate (11.7%).’

‘However, survey data available at a quarterly frequency showed that in October unemployed respondents raised their expected probability of finding a job in the next three months to 27.9%, up from 27.3% in July’, the ECB noted. ‘Employed respondents, in turn, slightly reduced their expected probability of losing their job in the next three months to 9.2%, down from 9.4% in July.’