Consumer inflation perceptions rise, growth outlook darkens
Euro area consumers reported higher perceived inflation in April, while their economic growth expectations for the next 12 months turned more negative. This is according to the latest ECB Consumer Expectations Survey.
Inflation perceptions climb
In April, median perceived inflation over the past 12 months increased significantly to 4.0 percent, up from 3.5 percent in March.
Median expectations for inflation over the next 12 months remained unchanged at 4.0 percent.
However, expectations for inflation three years ahead decreased slightly to 2.9 percent from 3.0 percent, while five-year ahead expectations held steady at 2.4 percent.
Uncertainty about short-term inflation expectations remained elevated.
Lower-income consumers continued to report higher inflation perceptions and expectations than higher-income groups, and younger respondents reported lower figures than older ones.
Separately, nominal income growth expectations for the next 12 months decreased to 0.8 percent from 1.2 percent in March, while spending growth expectations increased to 4.3 percent from 4.1 percent.
Growth outlook dims, credit access tightens
Consumer expectations for economic growth over the next 12 months became more negative, falling to -2.2 percent in April from -2.1 percent.
Despite this, the expected unemployment rate in 12 months' time decreased slightly to 11.2 percent.
Housing price growth expectations remained unchanged at 3.7 percent, and mortgage interest rate expectations held steady at 4.9 percent.
However, the net percentage of households reporting tighter access to credit over the past 12 months increased to its highest level since February 2024.
Expectations for future credit tightening also rose to a peak since October 2023, and credit applications declined to a three-year low.
Consumers feel the squeeze
The survey paints a picture of consumers grappling with persistent inflation perceptions and a worsening economic outlook, despite some easing in long-term price expectations.
This disconnect between perceived and expected inflation, coupled with tightening credit, suggests a cautious consumer sentiment that could weigh on future spending.
For policymakers, these results highlight the challenge of anchoring expectations and managing the real-world impact of economic conditions on households.