Europe's inflation perceptions hold steady at 3.1% in July: ECB survey

Expectations for three years ahead increased to 2.5 per cent, from 2.4 per cent in June. Expectations for inflation five years ahead were unchanged at 2.1 per cent for the 8^th consecutive month. Uncertainty about inflation expectations over the next 12 months remained at its lowest level since January 2022, the ECB Consumer Expectations Survey results for July 2025 found.

Lower income quintiles continued to report on average slightly higher inflation perceptions and short-horizon expectations than higher income quintiles, a trend observed since 2023. However, the broad evolution of inflation perceptions and expectations remained relatively closely aligned across income groups. Younger respondents (aged 18-34) continued to report lower inflation perceptions and expectations than older respondents (aged 35-54 and 55-70), albeit to a lesser degree than in previous years.

Consumers’ nominal income growth expectations over the next 12 months decreased to 0.9 per cent in July, from 1 per cent in June. Perceived nominal spending growth over the previous 12 months fell to 4.7 per cent, the lowest level since March 2022. Conversely, expected nominal spending growth over the next 12 months increased to 3.3 per cent in July, from 3.2 per cent in June. This increase was mainly driven by the lowest two income quintiles.

Economic growth expectations for the next 12 months became more negative, decreasing to -1.2 per cent in July from -1 per cent in June. Expectations for the unemployment rate 12 months ahead increased to 10.6 per cent in July, from 10.3 per cent in June.

Consumers continued to expect the future unemployment rate to be only slightly higher than the perceived current unemployment rate (10.1 per cent), suggesting a broadly stable labour market outlook.

The quarterly data showed that unemployed respondents reported a slightly higher expected probability of finding a job over the next three months, increasing from 21.9 per cent in April to 22.6 per cent in July. Employed respondents reported that their expected probability of job loss over the next three months increased to 8.7 per cent in July, from 8.4 per cent in April.

ALCHEMPro News Desk (SG)