Eurozone consumers have revised their inflation expectations downward for the upcoming 12 months and adopted a less pessimistic view of the economic outlook, although concerns about unemployment persist, according to the European Central Bank’s monthly survey released on Tuesday.
The median anticipated inflation rate over the next year decreased to 2.9 percent from 3.0 percent in March, marking the lowest rate since September 2021.
The ECB, aiming to maintain inflation at 2 percent, has indicated a potential interest rate cut in June. However, future monetary easing remains uncertain due to recent data pointing to persistent inflation in sectors like services and wage growth.
This suggests that policymakers are unlikely to pursue additional easing measures beyond June at this time.
Inflation expectations for three years ahead softened to 2.4 percent from 2.5 percent in March, according to the survey.
The median perceived inflation rate over the past 12 months remained steady at 5.0 percent. "Younger respondents continued to report lower inflation expectations than older respondents, although inflation perceptions among different age groups showed convergence," the ECB noted.
The survey further highlighted that consumers’ income growth expectations for the next 12 months held steady at 1.3 percent, while their spending expectations remained unchanged at 3.6 percent. Economic growth expectations for the coming year improved to -0.8 percent from -1.1 percent in the previous survey.
Conversely, expectations for the unemployment rate 12 months ahead increased to 10.9 percent from 10.7 percent in March. Consumers anticipate the future unemployment rate to be only marginally higher than the current perceived rate of 10.6 percent, indicating a relatively stable labor market, according to the ECB.
The rise in concerns about job security and the decline in optimism about finding employment in the next three months partly explain the increase in unemployment expectations. Additionally, house price growth expectations for the next 12 months rose to 2.6 percent from 2.4 percent in March, as indicated by the survey.
