Euro area's inflation expectations decrease further in May: ECB survey

Median expectations for inflation three years ahead decreased to 2.3 per cent from 2.4 per cent in April. Notably, inflation expectations at both the one-year and three-year horizons remained below the perceived past inflation rate. Uncertainty about inflation expectations over the next 12 months decreased to its lowest level since February 2022, following the Russian invasion of Ukraine. Inflation perceptions and expectations remained relatively consistent across different income groups, with younger respondents (aged 18-34) continuing to report lower inflation expectations than older respondents (aged 35-54 and 55-70).

Consumer expectations for nominal income growth slightly decreased to 1.2 per cent, down from 1.3 per cent in April. Meanwhile, perceptions of nominal spending growth over the previous 12 months decreased to 5.9 per cent from 6.3 per cent in April. Expectations for nominal spending growth over the next 12 months also declined to 3.3 per cent, from 3.6 per cent in April. Spending expectations remained closely aligned across all income groups, as per the survey.

Economic growth expectations for the next 12 months remained unchanged at minus 0.8 per cent. However, expectations for the unemployment rate 12 months ahead decreased slightly to 10.7 per cent from 10.9 per cent in April. Consumers continued to expect the future unemployment rate to be only slightly higher than the perceived current unemployment rate of 10.4 per cent, indicating a broadly stable labour market. The survey highlighted that the lowest income quintile continued to report the highest expected and perceived unemployment rates, along with the lowest economic growth expectations.

Fibre2Fashion News Desk (DP)