ECB Consumer Inflation Expectations Steady - a Lull Before the Storm? (1/2)

The ECB Consumer Expectations Survey saw some signs of improvement from the July slump. However, with CPI surging to 10.0% in the September flash, upticks in optimism appear fleeting.

• Income & consumption grew, nominal income (+1.0% over 12-months) and spending growth expectations increased to a fresh high of 5.8% (up from 5.4% in July). As these rates are nominal, this constitutes another marked increase in living costs and implies more of a contraction in household purchasing power than growth-inducing improvements in consumption.
• Labour & growth outlooks saw marginal improvement, with 12-month economic contraction outlooks edging up to a pessimistic -1.7% from -1.9% in July. Unemployment expectations edged down, yet consumers continue to await an increase in unemployment. The robust labour market and record-low unemployment rate provide substantial confidence in the current ECB hiking cycle.
• Mortgage rate expectations increased to 4.4% for 12 months ahead, 1.1pp higher than levels at the beginning of 2022. Credit access is anticipated to tighten further, which implies further cooling of investment.