Euro area inflation expectations ease in May: ECB survey

Expectations for inflation over the next year declined to 2.8 per cent, down 0.3 percentage points (pp) from April, while three-year-ahead expectations dipped slightly to 2.4 per cent. Five-year-ahead expectations stayed constant at 2.1 per cent for the sixth straight month, reinforcing the trend of stable long-term inflation outlooks.

Inflation expectations in the euro area eased in May, with the median perceived rate steady at 3.1 per cent, the lowest since 2021, and one-year-ahead expectations falling to 2.8 per cent, per ECB.
Long-term expectations remained stable.
Inflation uncertainty declined, while economic growth outlook improved to -1.1 per cent.
Expected unemployment fell slightly to 10.4 per cent.

The data also indicated a drop in inflation uncertainty, reversing April’s uptick. Notably, inflation perceptions and short-term expectations were consistently higher among lower income groups compared to higher income quintiles.

Meanwhile, younger respondents (18–34) continued to report lower inflation perceptions than older age groups, although the gap has narrowed compared to previous years, ECB said in a press release.

Expected nominal spending growth over the next 12 months declined to 3.5 per cent in May from 3.7 per cent in April, with the decline observed across most income levels except the lowest.

On the economic front, consumer sentiment showed improvement. Expectations for economic growth over the coming year turned less pessimistic, rising from -1.9 per cent in April to -1.1 per cent in May.

Unemployment expectations also softened slightly, with the anticipated jobless rate 12 months ahead falling to 10.4 per cent from 10.5 per cent. Consumers expect future unemployment to remain close to current levels, suggesting a relatively stable labour market outlook, added the release.

Fibre2Fashion News Desk (SG)