ECB: Consumer Expectations of Inflation in a Year Down Again

6 February 2024

By Isabel Teles – FRANKFURT (Econostream) – The European Central Bank’s expanded consumer expectations survey, released Tuesday, showed December medium expectations of inflation in one year down from 3.5% to 3.2%, the third consecutive fall.

Expectations of inflation in three years increased marginally, from 2.4% to 2.5%.

‘Inflation expectations at the one-year horizon declined to their lowest level since February 2022, 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 declined from 7.6% in November to 6.9% in December, the report said.

Perceptions of nominal spending growth over the last 12 months decreased from 6.9% in November to 6.8% in December.

This edition of the survey was based on some 19,000 responses from, as usual, Belgium, Germany, Spain, France, Italy and the Netherlands, as well as five newly added countries: Ireland, Greece, Austria, Portugal and Finland.

Consumer expectations for both nominal income growth and nominal spending growth over the next 12 months remained stable at 1.2% and 3.6%, respectively, the report said.

The survey showed expectations for the unemployment rate 12 months ahead down from 11.4% to 11.2%, while economic growth expectations for the next 12 months remained unchanged at -1.3%.

‘Consumers continued to expect the future unemployment rate to be slightly higher than the perceived current unemployment rate (10.8%), implying a broadly stable labour market. The lowest income quintile continued to report the highest expected and perceived unemployment rates’, the ECB said.

According to the report, expectations for mortgage interest rates 12 months ahead declined from 5.5% in November to 5.3% in December and expectations of home price increases for the next 12 months fell from 2.4% in November to 2.2% in December.

‘Perceived access to credit over the previous 12 months tightened compared with November, reaching a high, while access to credit was expected to become marginally easier over the next 12 months compared with November’, the ECB said.