ECB: Inflation Expectations One Year Ahead Unchanged for Third Month in a Row

23 August 2024

By Isabel Teles – FRANKFURT (Econostream) – The European Central Bank’s latest consumer expectations survey, released Friday, showed that consumer expectations of inflation one year ahead remained stable for the third month in a row.

‘Median expectations for inflation over the next 12 months remained unchanged at 2.8% for the third consecutive month, having fallen in May to their lowest level since September 2021. Median expectations for inflation three years ahead edged up by 0.1 percentage points in July to 2.4%’, the ECB reported.

The uncertainty about inflation expectations one year ahead remained unchanged once again at the lowest level since February 2022, the survey showed.

Perceived inflation over the past 12 months declined further, from 4.5% in June to 4.1% in July, according to the survey.

Nominal income growth expectations decreased from 1.4% in June to 1.1% in July, and the expectations for nominal spending growth fell slightly from 3.3% in June to 3.2% in July, the survey found.

According to the survey, over the past 12 months, perceptions of nominal spending growth decreased from 5.8% in June to 5.4% in July.

Expectations for the unemployment rate one year ahead remained stable at 10.6% in July, the survey showed.

‘Consumers continued to expect the future unemployment rate to be only slightly higher than the perceived current unemployment rate (10.1%), implying a broadly stable labour market’, the ECB said.

Expectations for economic growth over the next 12 months became more negative, standing now at -1%, versus -0.9% in June and -0.8% in May, the survey showed.

The survey reported that consumer expectations of home price increases one year ahead fell back in July to 2.6% – the same level registered in May after a slight pickup to 2.7% in June –, and that expectations for mortgage interest rates 12 months ahead remained unchanged at 4.8%.

‘The net percentage of households reporting a tightening (relative to those reporting an easing) in access to credit over the previous 12 months declined further, as did the net percentage of those expecting a tightening over the next 12 months’, the ECB said. ‘Both indicators remained close to levels last seen in the second quarter of 2022.’

Measured quarterly, the share of consumers who reported having applied for credit during the past three months increased from 16.8% in April to 17.2% in July, according to the survey.