Consumer inflation expectations decline, income growth outlook improves

Euro area consumers reported a decrease in perceived inflation over the past twelve months, falling to 3.0 percent in January from 3.2 percent in December.

Short-term inflation expectations for the next twelve months also declined by 0.2 percentage points to 2.6 percent.

While three-year inflation expectations remained stable at 2.6 percent, five-year expectations saw a slight reduction from 2.4 percent to 2.3 percent.

The survey highlighted persistent differences across income groups, with lower income quintiles consistently reporting higher inflation perceptions and expectations.

Conversely, expectations for nominal income growth over the next twelve months improved, rising from 1.1 percent in December to 1.2 percent in January, a trend primarily driven by higher income households.

Expectations for nominal expenditure growth in the coming twelve months remained constant at 3.4 percent.

Expectations for economic growth over the next twelve months remained unchanged at -1.1 percent in January, with the unemployment rate outlook also holding steady at 11.0 percent.

A positive shift in labor market sentiment was observed, as unemployed respondents reported an increased likelihood of finding a job within three months, rising from 24.5 percent in October to 30.1 percent.

In the housing market, consumers expected their home prices to increase by 3.7 percent over the next twelve months, a slight rise from 3.6 percent in December, while mortgage rate expectations remained at 4.7 percent.

The net share of households reporting tighter credit access in the past twelve months increased, as did the share expecting more difficult access in the coming twelve months.