What does the latest survey reveal about consumer expectations and what messages does the European Central Bank receive for monetary policy decisions in the coming period.
Higher inflation in the next 12 months is expected by European consumers, who do not foresee an increase in incomes, but higher expenses.
At the same time, they expect a slowdown with an increase in unemployment. House price growth will be slightly lower and mortgage rates, which will continue to get more expensive.
These are the main conclusions of the ECB survey published today on the expectations of European consumers for the next twelve months.
As the ECB reports, the results help to analyze the data for interest rate decisions more effectively, as they take into account weak points such as household income and any effects on the banking system.
Inflation
Consumer-perceived inflation was running at 7.2% in June, and they expect prices to rise further with inflation over the next 12 months running at 5%. Over three years, Europeans forecast inflation of 2.8%, up from the 2.5% they forecast in May. Inflation uncertainty has stabilized since March.
Income and consumption
Expectations for nominal income growth remain highest for consumers aged 18-34 (at 1.8%) and those on very low incomes. Perceptions of nominal spending growth over the past 12 months continued to rise to 5%.
Labor market and development
Expectations for the annual growth rate in June were slightly more negative than in May, at -1.3%. Consumer growth expectations turned negative in March 2022.
Expectations for the unemployment rate rose to 11.5%, close to levels recorded earlier in the year. In April 2022, quarterly data showed that respondents who were unemployed had reduced their expectations of finding a job in the next three months from 26.7% in January to 23.8%.
The expected probability of losing a job over the next three months also fell to 9.5% from 10.3% in January.
Housing and financing
Consumers’ estimates of their home price increase over 12 months fell marginally to 3.3%. After the momentum of 2021, expectations have stabilized since October of the same year.
Expectations for mortgage rates over the next 12 months continued to see a rise to 4%, compared to January (3.3%), when the lowest level was seen.
Consumers’ perceived conditions of access to finance in the past 12 months narrowed marginally and expectations for the next 12 months remained broadly unchanged.
The proportion of consumers who say they have applied for a loan in the past three months fell by 1 percentage point, from 13.7% in January to 12.7% in April 2022.
The Consumer Expectations Survey (CES) is a monthly online survey that collects information on the perceptions and expectations of consumers in the euro area about their household finances, the price level, access to finance etc.
The survey is currently based on a sample of 14,000 citizens aged 18 and over from six euro area countries: Belgium, Germany, Spain, France, Italy and the Netherlands. However, the aim is to expand the research to all Eurozone countries.
Source: Capital
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