Higher 1-Year Inflation Expectations Look Driven By Spanish Jump (1/2)

Today's ECB Consumer Expectations Survey release for September suggested an ongoing steady deterioration in growth and labour market expectations as monetary tightening bites, with the noticeable rise in median expectations for inflation over the coming 12 months to 4.0% from 3.5% in August potentially an outlier.

• The rise in median inflation expectations over the next year looks to have underpinned by a jump in Spanish expectations from 3.1% to near 4.8% - the 1.7pp jump was the 2nd biggest in the survey's short 3-year history (vs Mar 2022's 2pp).
• This is potentially due to actual Spanish Y/Y inflation drifting higher on energy base effects over the preceding months, vs declines elsewhere in the euro area.
• The other major countries were relatively steady on the 1-year expectations front - Belgium and Germany were up 0.2pp, France up 0.4pp, Italy up 0.1pp, offset by the Netherlands down 0.4pp. See chart.
• So while the 4% median for the survey is the highest since April, it's hard to conclude that the rise is on the basis of a broad increase in public expectations.
• On a 3-year forward basis, we saw modest ticks higher in inflation expectations in Belgium and, again, Spain, though these were flat/lower in Italy, Germany, the Netherlands, and France.

Source: ECB, MNI