Lower inflation for the next twelve months as well as the upcoming three years is anticipated by European citizens in the latest survey conducted by the ECB on consumer expectations.

The results of the June survey, released yesterday, also indicate that European consumers do not expect changes in their income over the next 12 months, nor alterations in employment levels. However, they anticipate a further reduction in their consumer spending. Regarding the housing market, estimates suggest stability in housing prices for the next 12 months and a slight decline in housing interest rates.

Specifically, the ECB's survey reveals the following expectations among European consumers:

For inflation, the median rate of their estimated inflation for the past 12 months remained unchanged at 8.0%. However, the median expectations for inflation over the next 12 months decreased further to 3.4% in June, down from 3.9% in May, and the projected inflation rates for the next three years also decreased, dropping to 2.3% from 2.5% in May. 

Overall, inflation expectations remain notably lower than previous indicators, especially over the three-year horizon. This holds true across almost all income groups, although younger individuals (ages 18-34) continue to predict lower inflation than older individuals (ages 55-70).

Regarding their income, European consumers reported expecting a 1.2% increase in their nominal income over the next 12 months (the same estimate as in May). However, they anticipate a decrease in consumer spending to 6.7% from 6.8% in May. Expectations for an increase in their nominal expenditures over the next 12 months also declined further to 3.4%, down from 3.5% in May, the lowest level since March 2022. This estimate applies to both younger (ages 18-24) and older (ages 55-70) respondents.

Expectations for economic growth over the next 12 months were slightly less negative, settling at -0.6% compared to -0.7% in May. Expectations for the unemployment rate in the next 12 months remained unchanged at 11.0%. Consumers continue to anticipate that the future unemployment rate will only be slightly higher than the current rate of unemployment (10.9%), indicating a generally stable job market. 

In comparison to March 2023, expectations for economic growth were 0.4 percentage points less negative and expectations for the unemployment rate were 0.7 percentage points lower, reflecting a more positive sentiment regarding anticipated economic prospects.

Finally, concerning the housing market, European consumers stated that they expect their house prices to increase by 2.1% over the next 12 months, stabilizing at a low level for two years. Expectations for housing loan interest rates for a 12-month horizon slightly decreased to 5.0%, from 5.1% in May. This decline is primarily due to expectations among middle and higher income groups. As for credit accessibility over the next 12 months, estimates remained generally unchanged.

Source: brief.com.cy