Growth Outlook Turns Increasingly Pessimistic As Credit Tightens (2/2)

Overall while the 1Y inflation expectations jump in the September Consumer Expectations Survey might give ECB policymakers some concern, it looks like an outlier, with the economic / jobs / credit outlook consistent with an economy that is grappling with weakening demand and tighter financial conditions.

• Consumers surveyed saw economic growth over the next 12 months at -1.2% vs -0.8% prior. Again Spain was an outlier to the upside, with growth expectations remaining positive while most other countries' respondents saw growth falling further negative.
• It should be noted that the net percentage of respondents seeing positive minus shrinking growth ahead has been negative since Mar 2022 (start of the Ukraine-Russia war) - it fell to the most pessimistic level of 2022 in September (net -15pp, with 39.2% seeing a shrinking economy ahead, vs 24.2% seeing growth and 36.6% no change).
• Against this backdrop, consumers showed marginally more concern on jobs, with mean year-ahead unemployment rate expectations up 0.3pp to 11.4% (alongside a rise in perceived past 12-months also of 0.3pp to 11.1%).
• Expected credit access over the next 12 months is at the survey high in terms of tightness (net percentage 24% = harder minus easier); the survey for the past 12 months (backward-looking) was similar.
• Year-ahead income growth expectations were unchanged, but spending growth expectations ticked higher.

Source: ECB, MNI