Further Signs Consumer Confidence Rising On Waning Inflation (1/2)

The November ECB Consumer Expectations Survey released today reinforced the theme that eurozone confidence has bottomed. It showed the first decline in 1-year ahead median inflation expectations since May 2022, to to 5% from 5.4%, while the 3-year ahead inflation expectation dipped to 2.9% from 3.0%.

• The moderation in inflation expectations is key for overall economic confidence. Cost of living concerns are paramount for Eurozone consumers, and surveys including the ECB's continue to suggest that those concerns probably peaked in Q3 2022 or early Q4 (the European Commission's consumer confidence survey has seen similar recent results through December).
• The general growth outlook is becoming less pessimistic against that backdrop. 1-year ahead growth expectations rose to -2.0% from -2.6%.
• Mean income expectations 1-year ahead were +0.9% vs +0.7% prior. But the drop in inflation expectations exceeded that fall.
• And expectations for the unemployment rate in the next 12 months dipped to 12.4% from 12.5% - albeit above the 11.8% that respondents perceived the current unemployment rate to be (the actual figure is 6.5%).
• Although the ECB survey showed 1-year ahead nominal spending expectations slipping (+4.3% vs +4.7% prior), this is probably explained largely by the decline in inflation expectations (both dropped by 0.4pp).

Source: ECB