Europe's perceived annual inflation stays at 8% in Jun '23: ECB Survey

09 Aug '23

2 min read

Pic: Shutterstock/marekusz

Insights

In June 2023, Europe's median perceived inflation rate remained at 8.0 per cent, but expectations for future inflation fell.
Over the next 12 months, it dropped to 3.4 per cent from 3.9 per cent, and for three years ahead, to 2.3 per cent.
Unemployment rate expectations remained at 11.0 per cent, while that of economic growth improved slightly.

Europe’s median rate of perceived inflation over the previous 12 months was unchanged at 8.0 per cent in June 2023, as per a European Central Bank (ECB) survey. However, median expectations for inflation over the next 12 months decreased further to 3.4 per cent, from 3.9 per cent in May, and those for inflation three years ahead also declined, easing to 2.3 per cent from 2.5 per cent in May. Having fallen in the previous two months, uncertainty about inflation expectations over the next 12 months was unchanged.

Inflation expectations remained well below the perceived past inflation rate, particularly at the three-year horizon. 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), according to the ECB Expectations Survey.

Consumers expected their nominal income over the next 12 months to increase by 1.2 per cent, as in May. Perceptions of nominal spending growth over the previous 12 months decreased further to 6.7 per cent, from 6.8 per cent in May. Expectations for nominal spending growth over the next 12 months also decreased further to 3.4 per cent, from 3.5 per cent in May, their lowest level since March 2022. The drop in expectations for nominal spending growth was observed among both younger (aged 18-24) and older (aged 55-70) respondents.

Economic growth expectations for the next 12 months were slightly less negative, standing at -0.6 per cent, compared with -0.7 per cent in May. Expectations for the unemployment rate 12 months ahead were unchanged at 11.0 per cent. Consumers continued to expect the future unemployment rate to be only slightly higher than the perceived current unemployment rate at 10.9 per cent, implying a broadly stable labour market. Compared with March 2023, expectations for economic growth were 0.4 percentage points less negative and expectations for the unemployment rate 0.7 percentage points lower, reflecting more positive sentiment about the expected economic outlook.

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