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Firmer Than Expected Inflation Expectations And Softer Growth

EUROZONE DATA
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Eurozone consumer inflation median expectations on both the 1 and 3-year ahead horizon came a touch above expectations; the 1-year ahead print remained at 2.8% Y/Y for the third consecutive month (vs 2.7% consensus - but only from 3 analyst estimates), whilst the 3-years ahead increased to 2.4% Y/Y (vs 2.3% consensus from 5 analyst estimates and prior), as measured by the ECB's CES survey.

  • The 1-year ahead median inflation expectation therefore remained at the lowest level since September 2021, whilst the 3-year measure returned to March's level.
  • Meanwhile, consumer nominal income growth mean expectations for the year ahead decreased to 1.1% from 1.4% in June- the lowest since October 2023.
  • Finally, and of note, the mean expectation for economic growth over year ahead weakened further to -1.0% from -0.9% in June - although still remains higher than March's -1.1% reading. This deterioration is not surprising, following ECB's Lagarde citing downside risks to growth in the July press conference and recent growth-related data consistently printing below expectations in recent months (this is displayed by Citi's economic surprise index which has been falling consistently in the last few months).

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Eurozone consumer inflation median expectations on both the 1 and 3-year ahead horizon came a touch above expectations; the 1-year ahead print remained at 2.8% Y/Y for the third consecutive month (vs 2.7% consensus - but only from 3 analyst estimates), whilst the 3-years ahead increased to 2.4% Y/Y (vs 2.3% consensus from 5 analyst estimates and prior), as measured by the ECB's CES survey.

  • The 1-year ahead median inflation expectation therefore remained at the lowest level since September 2021, whilst the 3-year measure returned to March's level.
  • Meanwhile, consumer nominal income growth mean expectations for the year ahead decreased to 1.1% from 1.4% in June- the lowest since October 2023.
  • Finally, and of note, the mean expectation for economic growth over year ahead weakened further to -1.0% from -0.9% in June - although still remains higher than March's -1.1% reading. This deterioration is not surprising, following ECB's Lagarde citing downside risks to growth in the July press conference and recent growth-related data consistently printing below expectations in recent months (this is displayed by Citi's economic surprise index which has been falling consistently in the last few months).