ECB: Consumer Expectations of Future Inflation Virtually Unchanged

23 February 2024

By Isabel Teles – FRANKFURT (Econostream) – The European Central Bank’s consumer expectations survey, released Friday, showed that in January, median expectations of inflation over the next 12 months rose slightly from 3.2% to 3.3%, while expectations over the next three years remained stable at 2.5%.

The perceived inflation of the past 12 months registered the fourth consecutive fall, from 6.9% to 6%.

‘Inflation expectations at the one-year and three-year horizons remained well below the perceived past inflation rate. Uncertainty about inflation expectations over the next 12 months remained unchanged’, the ECB said.

This was the second edition of the expanded survey, based on some 19,000 responses from, as usual Belgium, Germany, Spain, France, Italy, the Netherlands and, since December, Ireland, Greece, Austria, Portugal and Finland as well.

According to the report, consumer expectations of nominal income growth remained stable at 1.2%. Expectations for nominal spending growth 12 months ahead rose slightly from 3.6% in December to 3.7% in January, while perceptions of nominal spending growth over the past 12 months fell to the lowest since October 2022 (from 6.8% to 6.6%).

The survey showed that economic growth expectations for the 12 months ahead rose from -1.3% in December to -1.1% in January, while expectations for the unemployment rate in the same period fell from 11.2% to 10.9%.

‘Consumers continued to expect the future unemployment rate to be slightly higher than the perceived current unemployment rate (10.6%), implying a broadly stable labour market. However, quarterly data show that unemployed respondents reported an increase in their expected probability of finding a job over the next three months, which rose to 30.5% in January 2024, from 27.6% in October 2023’, the ECB said.

The expected probability of job loss over the next three months,a quarterly indicator, fell from 9% in October to 8% in January among employed respondents, the report said.  

According to the survey, expectations for mortgage interest rates 12 months ahead declined from 5.3% in December to 5.1% in January and expectations of home price increases for the next 12 months remained unchanged at 2.2%.

‘Perceived access to credit over the previous 12 months eased slightly compared with December, and access to credit was expected to become easier over the next 12 months compared with December. At the same time, the share of consumers who reported having applied for credit during the past three months, which is measured on a quarterly basis, declined to 16.8% in January, from 17.3% in October’, the ECB said.