Notable Dip In Inflation Expectations Over 1- and 3-Year Horizons

Eurozone consumer inflation expectations fell sharply in November, as measured by the ECB's CES survey. As usual, we wouldn't read deeply into the month-to-month survey results, but in isolation the latest reading suggests that public inflation expectations are less likely to restrain ECB policymakers from easing policy in 2024.

• The most notable pullback was in the 12-month ahead median expectation of 3.2% (from 4.0% in both Sept and Oct), marking the lowest since the Russia-Ukraine conflict began in February 2022.
• But each of the other key metrics showed progress as well: the 12 month mean expectation dropped to 0.5pp to 5.1% (lowest since Jul 2023), while the longer-term metrics also showed notable falls: 3-year ahead median down 0.3pp to 2.2% (lowest since Feb 2022), with the 3-year mean down 0.3pp to 4.0% (lowest since Jul 2023).
• Spanish inflation expectations remained an outlier to the upside (12-month ahead inflation seen at close to 5%), but respondents in the all 6 economies in the survey (incl Germany, Italy, Belgium, France, Netherlands) saw flat/lower expectations over a 3-year horizon.

Elsewhere in the survey, household spending and income expectations were relatively steady, as were economic growth expectations for the next 12 months.

• Employment expectations were steady, if anything with a bias toward greater strength vs previous months (eg median probability of finding a job ticked higher).
• One unusual standout was a jump in the percentage who applied for credit over the previous 3 months to a survey high just below 18% (which in turn appeared to be driven by rises in Spain and Germany), alongside drops in perceived access to credit.

Source: ECB CES, MNI