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ECB survey shows lower 12-month inflation expectations in July
Median perceived inflation over the prior 12 months fell to 3.5%, while unemployment expectations stayed at 11.2% and home price growth held at 3.4%.
The ECB’s Consumer Expectations Survey for July showed easing inflation perceptions and expectations. The median rate of perceived inflation over the previous 12 months decreased to 3.5% from 3.6% in June, and median expectations for inflation over the next 12 months fell to 2.9% from 3.0%.
Consumers also trimmed their views on inflation further out. Median expectations for inflation three years ahead dropped to 2.7% from 2.8%, while inflation expectations for five years ahead were unchanged at 2.4%, and uncertainty about next year’s inflation remained higher than it was before the start of the Middle East war.
The survey pointed to a slightly worse labor market sentiment even as unemployment expectations were steady. Expectations for the unemployment rate 12 months ahead were unchanged at 11.2%, but quarterly data indicated weakening sentiment, with the expected probability of finding a job falling to 30.8% in July from 32.1% in April.
On the household outlook, consumers’ expectations for nominal income growth declined to 1.0% from 1.1%, while expected nominal spending growth for the next 12 months stayed at 3.6%. In housing, consumers expected their home price to rise by 3.4% over the next 12 months, unchanged from June.