The ECB’s Consumer Expectations Survey for March shows a sharp deterioration in the inflation-growth balance, with households bracing for higher prices while becoming more pessimistic about the economic outlook.
Median inflation expectations for the next 12 months surged from 2.5% to 4.0%, while three-year expectations rose from 2.5% to 3.0%. Even five-year expectations edged higher from 2.3% to 2.4%, pointing to growing concerns about longer-term price stability.
The increase in inflation expectations was accompanied by a notable rise in uncertainty, suggesting that households are struggling to assess the near-term path of prices amid ongoing volatility. At the same time, nominal income growth expectations remained unchanged at 1.2%, indicating that consumers do not expect wages to keep pace with rising inflation.
Despite this squeeze, expected spending growth increased from 3.5% to 4.1%, the highest level since May 2023. This divergence suggests that consumption may be driven more by necessity and price effects rather than underlying demand strength, as households anticipate higher costs in the months ahead.
Meanwhile, the broader economic outlook weakened significantly. Growth expectations fell from -0.9% to -2.1%, while expectations for the unemployment rate rose from 10.8% to 11.3%.
| Indicator | Previous | Latest |
|---|---|---|
| 1-Year Inflation Expectations | 2.5% | 4.0% |
| 3-Year Inflation Expectations | 2.5% | 3.0% |
| 5-Year Inflation Expectations | 2.3% | 2.4% |
| Income Growth Expectations (12m) | 1.2% | 1.2% |
| Spending Growth Expectations (12m) | 3.5% | 4.1% |
| Economic Growth Expectations (12m) | -0.9% | -2.1% |
| Unemployment Expectations (12m) | 10.8% | 11.3% |
