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Euro zone consumers brace for recession and high inflation – ECB survey
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FRANKFURT (Reuters) – Consumers in the euro zone are bracing for the economy to shrink and for high inflation to continue eating into their income in the next year, a European Central Bank survey showed on Thursday.
FRANKFURT (Reuters) – Consumers in the euro zone are bracing for the economy to shrink and for high inflation to continue eating into their income in the next year, a European Central Bank survey showed on Thursday.
The Consumer Expectations Survey, used by policymakers for input in their deliberations and published on Thursday for the first time, showed households were beginning to lose faith in the ECB’s ability to bring inflation back down to its 2% goal.
The poll, carried out in June, showed the median consumer expected prices to grow by 5% over the following year and saw inflation at 2.8% in three years’ time.
This compares to expectations for nominal income to grow by 0.9% and spending by 3.9%, implying a large dent in households’ ability to save.
Consumers also expected the economy to contract by 1.3% in the coming 12 months.
By comparison, the ECB expects inflation to average 6.8% in 2022 before falling to 3.5% in 2023 and 2.1% in 2024. It sees growth at 3.7% this year, 2.8% next year and 1.6% in 2024.
The ECB raised interest rate by 50 basis points last month and guided for more hikes in the months ahead to fight record-high euro zone inflation, which hit 8.9% last month.
It cited “anchoring…inflation expectations” as one of the reasons for the move.
For the survey, the ECB interviews around 14,000 adults each month from Belgium, Germany, Spain, France, Italy and the Netherlands. These countries represent 85% of the euro area’s GDP and 83.8% of its population.
(Reporting By Francesco Canepa; Editing by Bernadette Baum)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to maintain economic stability.
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity.
A consumer expectations survey gathers information on how consumers feel about the economy, including their expectations for inflation, income, and spending, which can influence economic policy and market trends.
Financial stability refers to a condition where the financial system operates effectively, with institutions able to withstand economic shocks, ensuring the smooth functioning of financial markets and the economy.
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