21.12.2022

WHAT ARE EUROPEANS' EXPECTATIONS FOR INFLATION AND INCOMES

Consumer expectations for the rate of inflation over the next 12 months rose from September, while they remained unchanged for the next 3 years, the European Central Bank (ECB) said in its October 2022 survey of consumer sentiment.

The aggregate level of expectation is for inflation to grow by 5.4 percent over the next 12 months, while in the previous period consumers' expectations were for an increase of 5.1 percent. As for its growth over the 3-year period, expectations remain unchanged at 3 percent. Uncertainty about the rate of inflation over the next 12 months has increased significantly since the start of the war in Ukraine, the ECB reports.

Consumer expectations for growth in spending and income in nominal terms over the next 12 months are rising. Expected growth in spending continues to outpace that of income.

Consumers expect their nominal incomes to rise by 0.7 percent in this period, while in September their forecasts were for an increase of 0.6 percent. In terms of their nominal spending, consumers expect them to increase by 4.5 percent over the next 12 months, compared to a forecast in September for growth of 4.7 percent.

Expectations for the rate of economic growth over the next 12 months are falling (from -2.4 per cent in September to -2.6 per cent in October), while consumers are predicting that unemployment growth will increase over this period. Expectations increase to 12.5 percent from 12.2 percent in September.

Consumers expect the market price of their homes to increase at a slower rate over the next 12 months. In October, the forecasts were for a price increase of 3.0 percent, while in September they were for a price increase of 3.4 percent.

Consumer expectations are for a continued increase in mortgage interest rates to an average level of 4.7 percent.