Uncertainty about euro area 12-month inflation expectations falls

The figure three years ahead edged up for the second consecutive month to 2.5 per cent in August from 2.4 per cent in July. Inflation expectations remained well below the perceived past inflation rate, particularly at the three-year horizon.

Uncertainty about inflation expectations over the next 12 months declined to the lowest level observed since March 2022.

The development of inflation perceptions and expectations remained closely aligned across income groups, although younger respondents (aged 18-34) continued to report lower inflation perceptions and expectations than older respondents (aged 55-70), an ECB said in a release.

Consumers expected their nominal income over the next 12 months to increase by 1.2 per cent, slightly more than July’s 1.1 per cent. This increase was primarily driven by respondents from the lowest income quintile, whereas consumers’ expectations in the highest income quintile decreased slightly on average.

Perceptions of nominal spending growth over the previous 12 months decreased to 6.4 per cent in August from 6.7 per cent in July. The drop in perceived nominal spending growth was mainly concentrated among younger (aged 18-34) and older (aged 55-70) respondents.

Expectations for nominal spending growth over the next 12 months decreased somewhat to 3.3 per cent in August from 3.4 per cent in July. This decrease was observed solely among younger respondents.

Economic growth expectations for the next 12 months were slightly more negative, standing at minus 0.8 per cent in August compared with minus 0.7 per cent in July.

Expectations for the unemployment rate 12 months ahead increased to 11.1 per cent in August compared with 11 per cent in the previous three months.

Consumers continued to expect the future unemployment rate to be only slightly higher than the perceived current unemployment rate (10.8 per cent), implying a broadly stable labour market.

Fibre2Fashion News Desk (DS)