Eurozone consumers significantly increased their inflation expectations in August. According to a survey conducted by the European Central Bank (ECB), inflation expectations for the next 12 months rose to 3 percent, up from 2.9 percent in July.
Increase in Long-Term Inflation Expectations
Inflation expectations for the next three years have also significantly increased, reaching 2.9 percent, an improvement from 2.7 percent last month. Additionally, forecasts for the next five years rose to 2.5 percent, up from 2.4 percent the previous month.
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Meanwhile, the average inflation rate that consumers have experienced over the past 12 months remained unchanged at 3.5 percent. According to the ECB report, uncertainty regarding inflation expectations for the next year has decreased, but it remains above the level recorded before tensions in the Middle East.
Differences in Expectations Based on Income Groups and Age
Consumers in lower income groups continue to report higher inflation expectations and sentiments compared to higher income groups. Additionally, consumers aged 18 to 34 have lower expectations compared to older respondents.
Expectations for nominal income growth in the next 12 months remained stable at 1 percent, while forecasts for expense growth also remained at 3.6 percent. Consumers' assessment of their expense growth over the past year increased from 5.1 percent to 5.2 percent.
Economic expectations for the next 12 months remained at negative 1.2 percent, while the predicted unemployment rate decreased to 11 percent from 11.2 percent. In this survey, consumers expect housing prices to increase by 3.4 percent in the coming year, while mortgage rates remain stable at 4.9 percent.
This survey was conducted between August 6 and 24 among approximately 19,000 adults in 11 Eurozone countries.
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