Consumers anticipate easing price pressures as short-term inflation expectations fall sharply, while growth outlook improves modestly.
Eurozone consumers lowered their inflation expectations for the next 12 months to 3.5% in May, down from 4.0% in April, according to the ECB’s latest survey. Perceptions of past inflation remained steady at 4.0%, while medium-term expectations held at 2.9% for three years ahead and 2.4% for five years, signaling anchored long-term views.
The survey also revealed cautious optimism on household finances, with expected nominal income growth rising to 1.0% from 0.8%. However, planned spending growth for the next year declined to 3.8% from 4.3%, reflecting lingering economic caution. Growth expectations improved slightly, though consumers still anticipate a contraction over the next 12 months.
Markets may interpret the drop in inflation expectations as a sign of easing price pressures, potentially influencing ECB policy outlook.