ECB survey: Median 12-month consumer inflation expectations fall to 2.5%

The European Central Bank’s latest consumer survey did not show a broad-based easing in household inflation expectations. In data published on June 1, the ECB said euro area consumers’ median expectation for inflation over the next 12 months was unchanged at 4.0% in April, while the three-year expectation slipped to 2.9% from 3.0% and the five-year measure held at 2.4%. That mix matters because the ECB has been watching whether the spring jump in energy prices and war-related shocks would spread from short-term fears into medium-term expectations. In a Reuters interview published on May 26, ECB Executive Board member Isabel Schnabel said the central bank’s own Consumer Expectations Survey had shown medium-term expectations rising and the distribution shifting to the right, which she said had often been read as an early warning of de-anchoring risks. (ecb.europa.eu) ### Why does the April survey look less benign than the headline suggests? April’s survey followed a sharp deterioration in March. On April 28, the ECB said median one-year inflation expectations had jumped to 4.0% in March from 2.5% in February, while the three-year measure rose to 3.0% from 2.5%. April did not reverse that move in the near term; it only trimmed the medium-term reading by 0.1 percentage point. (ecb.europa.eu) The ECB also said perceived inflation over the previous 12 months rose again in April, to 4.0% from 3.5% in March. Uncertainty about inflation expectations over the next 12 months remained unchanged at what the central bank called an elevated level. ### What else did households say about income, spending and jobs? (ecb.europa.eu) Consumers’ nominal income growth expectations fell to 0.8% in April from 1.2% in March, according to the ECB. At the same time, expected nominal spending growth rose to 4.3% from 4.1%, and perceived spending growth over the previous 12 months increased to 5.3% from 5.1%. (ecb.europa.eu) Economic growth expectations also weakened. The ECB said households expected the economy to contract by 2.2% over the next 12 months, compared with a prior expectation of a 2.1% decline. Expected unemployment 12 months ahead eased slightly to 11.2% from 11.3%, while the perceived current unemployment rate was 10.5%. (ecb.europa.eu) ### Which households are still the most worried about prices? Lower-income respondents continued to report slightly higher inflation perceptions and expectations than higher-income households, the ECB said. Younger respondents aged 18 to 34 again reported lower inflation perceptions and expectations than respondents aged 35 to 54 and 55 to 70. (ecb.europa.eu) Those cross-currents are consistent with the ECB’s broader use of the survey as a check on whether price pressures are spreading unevenly through the euro area consumer base. The survey page says the CES is designed to collect high-frequency information on household perceptions, expectations and behavior across euro area countries. (ecb.europa.eu) ### Why are policymakers still sounding cautious? Schnabel said in the Reuters interview that the main policy question was whether the energy-price shock would feed into broader inflation and second-round effects. She cited firms’ selling-price expectations, inflation expectations and wages as key indicators the ECB was monitoring. (ecb.europa.eu) The ECB’s Governing Council next meets for a monetary policy session on June 10 and June 11 in Frankfurt, with a press conference scheduled for June 11, according to the central bank’s calendar. (ecb.europa.eu 1) (ecb.europa.eu 2)