The ECB publishes its June consumer expectations survey, reflecting a drop in perceived past inflation and one-year expectations, while income expectations rise and spending expectations fall.
Perceived inflation among eurozone consumers has significantly moderated in June, according to the latest Consumer Expectations Survey (CES) from the European Central Bank (ECB) published this Thursday. The median perceived inflation over the past twelve months fell to 3.6%, down from 4.0% recorded in May.
Inflation expectations for the next twelve months also decreased, from 3.5% to 3.0%. Looking ahead three years, the median expectations slightly dropped from 2.9% to 2.8%, while five-year expectations remained stable at 2.4%.
Uncertainty about expected inflation over the next twelve months decreased for the second consecutive month, although the ECB notes that it remains above the level prior to the onset of the Middle East war. Households with lower incomes continue to report higher perceptions and expectations of inflation than those with higher incomes, and young people aged 18 to 34 perceive less inflation than those over 35.
Income and consumption
In terms of income, expectations for nominal income growth over the next twelve months slightly increased, from 1.0% in May to 1.1% in June. In contrast, the growth of nominal spending perceived over the past twelve months fell from 5.4% to 5.1%, and nominal spending expectations for twelve months also decreased, from 3.8% to 3.6%.
Households in the three lowest income quintiles expect slightly higher spending growth than those in the two highest quintiles, reflecting differential pressure on household budgets according to income level.
Labour market and housing
Expectations for economic growth over the next twelve months improved slightly, from -1.7% in May to -1.4% in June, although they remain in negative territory. The expected unemployment rate for twelve months decreased by a tenth, to 11.2%, down from 11.3% the previous month.
Households with lower incomes expect an unemployment rate of 13.8% in a year, while those with higher incomes estimate it at 9.7%. Consumers believe that future unemployment will be only slightly higher than the current rate (10.7%), suggesting a stable view of the labour market.
In the housing market, expectations for house price growth over the next twelve months decreased to 3.4% in June, down from 3.6% in May. Again, lower-income households expect a greater increase (3.7%) than higher-income households (3.2%).
Expectations regarding mortgage rates for twelve months increased to 5.0%, up from the previous 4.9%. Lower-income households expect a rate of 5.8%, compared to 4.4% for higher-income households. The net percentage of households reporting a tightening in access to credit over the past twelve months decreased in June, as did the percentage expecting a further tightening in the next twelve months.
The ECB survey, which gathers the opinions of consumers across the eurozone, provides insights into future price developments and confidence. The moderation of short-term inflation expectations could ease pressure on the central bank to maintain a restrictive monetary policy, although the persistence of medium-term inflation (2.8% in three years) remains above the 2% target.
You may also like
