ECB: Consumer Expectations of Inflation in One Year and Three Years Down

12 January 2023

By David Barwick – FRANKFURT (Econostream) – The European Central Bank’s consumer expectations survey, released Thursday for the fifth time, showed the trend of previous months being bucked as expectations in November of inflation in one year as well as three years ahead declined.

‘The prolonged rise in perceived inflation over the previous 12 months came to a halt, with the median rate remaining at 9.9%’, as in October, still clearly above 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, as in previous releases. ‘Median expectations for inflation over the next 12 months decreased from 5.4% to 5.0%, while expectations for inflation three years ahead edged down from 3.0% to 2.9%.’

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 0.9% in November (above October’s 0.7% and September’s 0.6%, but below the 1.0% recorded in August).

Expectations of nominal spending growth over the next 12 months decreased for the first time since mid-2021, standing at 4.3% after 4.7% in October, 4.5% in September and August and 4.2% in July, the ECB said.

Meanwhile, expectations of economic growth over the next 12 months rebounded somewhat in November to -2.0% after -2.6% in October, -2.4% in September, -1.7% in August and -1.9% in July, the ECB said.

‘Consistent with the higher expectations for economic growth, expectations for the unemployment rate 12 months ahead edged down to 12.4%, compared with 12.5% in October’, 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 (11.8%).’