Consumer perceptions about inflation have become moderately more pessimistic across the EU, according to the latest Consumer Expectations Survey published by the European Central Bank (ECB).
As the latest survey, which gauged consumer expectations in April, found, median consumer perceptions of inflation over the previous 12 months rose significantly, to 4.0% in April from 3.5% in March. However, inflation expectations for the coming year remained unchanged at 4.0%.
Longer-term inflation expectations eased slightly, however. Consumers’ expectations for inflation three years ahead fell to 2.9% from 3.0%, while five-year inflation expectations remained stable at 2.4%.
Household expectations
The ECB noted that lower-income households generally reported ‘slightly higher inflation perceptions and expectations than those in higher-income quintiles’. Younger respondents continued to expect lower inflation than older age groups.
Consumers have also become slightly more pessimistic about the economy. Median expectations for economic growth over the next 12 months declined to -2.2% from -2.1% in March.
At the same time, expectations for the unemployment rate one year ahead improved marginally, falling to 11.2% from 11.3%. Lower-income households continued to expect significantly higher unemployment levels than higher-income groups.
The survey also revealed mixed labour market sentiment. Unemployed respondents reported a higher perceived probability of finding a job within three months, rising to 32.1% in April from 30.1% in January.
However, employed respondents also perceive a greater risk of losing their jobs, with expected job-loss probability increasing to 8.8% from 8.2%.
Income expectations weakened further. Consumers’ expectations for nominal income growth over the next 12 months fell to 0.8% in April from 1.2% in March.
Household spending
Despite weaker income expectations, households anticipated stronger spending growth. Expected nominal spending growth over the next year increased slightly to 4.3% from 4.1%, while perceived spending growth over the previous year rose to 5.3%.
Housing expectations were broadly stable. Consumers continued to expect their homes to increase in value by 3.7% over the next 12 months, unchanged from March.
Mortgage rate expectations also remained unchanged at 4.9%, although lower-income households expected higher borrowing costs than wealthier households.
‘The net percentage of households reporting a tightening (relative to those reporting an easing) of access to credit over the previous 12 months increased further, reaching the highest level since February 2024,’ the ECB noted. ‘Similarly, the net percentage of households expecting tighter credit conditions (relative to those expecting an easing) over the next 12 months rose further to the highest level since October 2023.’
The ECB’s Consumer Expectations Survey is conducted monthly among around 19,000 adults across 11 euro area countries. Read more here.
