ECB: Consumer Expectations of Future Inflation Unchanged

5 December 2023

By Isabel Teles – FRANKFURT (Econostream) – The European Central Bank’s consumer expectations survey, released Tuesday, showed October medium expectations of inflation for the next 12 months and three years ahead unchanged at 4% and 2.5%, respectively, compared to September.

‘Inflation expectations, particularly at the three-year horizon, remained well below the perceived past inflation rate. Uncertainty about inflation expectations over the next 12 months remained unchanged’, the ECB reported.

Perceived inflation over the past 12 months decreased from 8% in September to 7.8% in October, the report said.

The survey, based on some 14,000 responses from Belgium, Germany, Spain, France, Italy and the Netherlands, showed overall expectations for nominal income increase over the next 12 months (1.1%) was marginally lower than September (1.2%).

Whereas expectations for nominal spending growth over the next 12 months declined from 3.4% to 3.3% in October, the perception over the past 12 months increased to 6.3% from 6.2%, the report said.

Compared with September, economic growth expectations for the next 12 months fell slightly from -1.2% to -1.3%.

Perceived unemployment rate decreased to 10.9% from 11.1%, while expectations for employment for the next 12 months were stable at 11.4% in October.

‘Quarterly data showed that respondents who were unemployed reported an increase in their expected probability of finding a job over the next three months, which rose to 27.7% in October, from 22.9% in July. By contrast, employed respondents reported that the expected probability of job loss over the next three months increased to 8.8% in October, from 8.2% in July’, the ECB said.

In October, consumers expected an increase of 2% in the price of their home for the next 12 months. In September, the expectation was of a 2.2% increase, the report said.

According to the survey, expectations for mortgage interest rates 12 months ahead remained unchanged at 5.4%, which was the highest level ever registered.

‘Perceived access to credit over the previous 12 months tightened once again compared with September, as did expectations for access to credit over the next 12 months, with both indicators reaching new highs since the start of the survey’, the ECB said.

Another indicator that reached the highest level since the survey started was the share of consumers that reported having applied for credit during the past three months. Measured quarterly, it rose from 14.8% in July to 17.7% in October, the report said.