Consumers in the euro area have raised their expectations for further inflation over the next 12 months, as well as across three-year and five-year time horizons, a new report by the European Central Bank has found.
The ECB’s latest Consumer Expectations Survey was conducted in August among around 19,000 adults across 11 euro-area countries: Belgium, Germany, Ireland, Greece, Spain, France, Italy, the Netherlands, Austria, Portugal and Finland.
Median perceived inflation over the previous 12 months remained at 3.5%, unchanged from July. However, median expectations for inflation during the following 12 months increased to 3.0%, from 2.9% in July. Expectations three years ahead increased to 2.9%, from 2.7%, while expectations five years ahead increased to 2.5%, from 2.4%.
‘Uncertainty about expectations for inflation over the next 12 months decreased, but remained higher than the level prevailing before the start of the conflict in the Middle East,’ the ECB said.
‘Respondents in the bottom income quintile continued to report higher inflation perceptions and expectations, on average, than those in the top quintile. Younger respondents (aged 18-34) continued to report lower inflation perceptions and expectations than older respondents (aged 35-54 and 55-70).’
Income growth
Expectations for nominal income growth over the next 12 months were unchanged (at 1.0%), as were expectations for spending growth.
Expectations for economic growth over the following 12 months were also unchanged (at -1.2%), while consumers’ expectations for the unemployment rate in 12 months declined to 11.0%, from 11.2% in July.
Housing expectations
Housing expectations were broadly stable. Consumers in the euro area expected house prices to increase by 3.4% over the following 12 months, unchanged from July. There was a notable difference between income groups – households in the lowest income quintile expected house-price growth of 4.0%, compared with 3.2% among the highest income quintile.
Expected mortgage interest rates over the following 12 months were also unchanged at 4.9%. Again, income differences were significant. Households in the highest income quintile expected mortgage rates of 4.4%, while those in the lowest quintile expected rates of 5.7%.
‘The net percentage of households reporting a tightening (relative to those reporting an easing) of access to credit over the previous 12 months declined compared with July, as did the net percentage of households expecting tighter credit conditions over the next 12 months (relative to those expecting an easing),’ the ECB said.
The next Consumer Expectations Survey release, covering September fieldwork, is scheduled for 23 October. Read more here.
