Euro area consumers see 3.1% inflation in Aug, long-term outlook up

The expectations for three years ahead were unchanged at 2.5 per cent. Expectations for inflation five years ahead increased to 2.2 per cent, from 2.1 per cent in July, reaching the highest value observed since August 2022. Uncertainty about inflation expectations over the next 12 months increased slightly in August.

The respondents of the survey in lower income quintiles continued to report on average slightly higher inflation perceptions and short-horizon expectations than those in 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 increased to 1.1 per cent in August, from 0.9 per cent in July. Perceived nominal spending growth over the previous 12 months went up to 5.0 per cent, from 4.7 per cent in July, with respondents in the lowest three income quintiles showing slightly higher expectations than those in the highest two quintiles. Expected nominal spending growth over the next 12 months remained at 3.3 per cent in August, unchanged from July.

The economic growth expectations for the next 12 months remained stable in August at -1.2 per cent. Expectations for the unemployment rate 12 months ahead increased to 10.7 per cent in August, from 10.6 per cent in July. As in previous months, lower-income households expected the highest unemployment rate 12 months ahead (12.6 per cent), while higher-income households expected the lowest rate (9.3 per cent).

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 net percentage of households reporting a tightening (relative to those reporting an easing) of access to credit over the previous 12 months increased, as did the net percentage of households expecting tighter credit conditions over the next 12 months.

ALCHEMPro News Desk (SG)