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

8 August 2023

By David Barwick – FRANKFURT (Econostream) – The European Central Bank’s consumer expectations survey, released Tuesday, showed expectations in June of inflation in one year as well as three years ahead down versus May.

Although there was no change in the median rate of perceived inflation over the previous 12 months, at 8.0% for the second month in a row (8.9% in April), median expectations for inflation over the next 12 months fell substantially, coming in at 3.4% after 3.9% in May and 4.1% in April.

Median expectations for inflation three years hence were also down, at 2.3% after 2.5% in both May and April.

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 over the next 12 months at 1.2% in June, the same as in May and a tick above April’s 1.1%.

Expectations of nominal spending growth over the next 12 months fell to their lowest level since March of last year, registering 3.4% after 3.5% in May, the ECB said.

‘Economic growth expectations for the next 12 months were slightly less negative, standing at -0.6%, compared with -0.7% in May’, the ECB reported. ‘Expectations for the unemployment rate 12 months ahead were unchanged at 11.0%. Consumers continued to expect the future unemployment rate to be only slightly higher than the perceived current unemployment rate (10.9%), implying a broadly stable labour market.’

‘Compared with March 2023, expectations for economic growth were 0.4 percentage points less negative and expectations for the unemployment rate 0.7 percentage points lower, reflecting more positive sentiment about the expected economic outlook’, the ECB said.