ECB Says Consumer Inflation Expectations Continue To Fall

4 April 2023

By Xavier D’Arcy – FRANKFURT (Econostream) – According to the European Central Bank’s latest Consumer Expectations Survey results, released on Tuesday, euro area citizens’ perceptions of inflation continued to decline in February.

The survey results showed that consumers’ median rate of perceived inflation over the previous 12 months declined to 8.7% from 9.5% in January. Meanwhile, expectations for inflation three years ahead fell from 2.5% to 2.4%. Expectations for inflation over the next 12 months also fell, to 4.6% from 4.9%.

Consumer expectations for growth and unemployment improved, the survey showed. Despite still indicating a contraction, consumers revised upwards their projections for economic growth within the next year to -0.9% as opposed to -1.2% in January. Correspondingly, expectations for the unemployment rate in 12 months decreased to 11.5%, compared to the previous forecast of 11.6% in January.

The survey, based on some 14,000 responses from Belgium, Germany, Spain, France, Italy and the Netherlands, showed overall expectations for nominal income growth 12 months ahead at 1.2% in February, down from 1.3% in January. This decline was primarily driven by respondents with household incomes below the median, the ECB said.

In a potential sign that inflation is a growing burden on households’ budgets, consumer perceptions of nominal spending growth over the previous 12 months rose to 6.6%, from 6.3% in January. Expectations for nominal spending growth over the next 12 months also rose slightly to 3.9%, from 3.8% previously.

House price growth expectations strengthened somewhat, according to the survey, with consumers expecting an increase of 2.6% in the price of their home over the next 12 months, compared with 2.5% in January.

Expectations for mortgage interest rates 12 months ahead increased slightly to 5.0%, which was 1.7 percentage points higher than at the beginning of 2022, the ECB said.