FRANKFURT, Germany – Eurozone consumers are prepared for a contracting economy and high inflation to continue to weigh on earnings next year, a European Central Bank survey showed Thursday.
A survey of consumer expectations, used by policymakers as input to deliberations and first released on Thursday, showed households were beginning to lose confidence in the ECB’s ability to bring inflation down to its 2% target.
A poll conducted in June found that the median consumer expected prices to rise by 5% in the following year, with 2.8% inflation three years later.
This indicates a significant decline in households’ saving capacity compared to expectations of a 0.9% increase in nominal income and a 3.9% increase in spending.
Consumers also expect the economy to contract by 1.3% over the next 12 months.
By comparison, the ECB expects inflation to slow to an average of 6.8% in 2022, 3.5% in 2023 and 2.1% in 2024. We expect growth of 3.7% this year, 2.8% next year and 1.6% in 2024.
The ECB hiked interest rates by 50 basis points last month, leading to more rate hikes in the coming months to combat record eurozone inflation, which reached 8.9% last month.
He cited “anchoring…inflationary expectations” as one of the reasons for the move.
For this study, the ECB interviews approximately 14,000 adults each month in Belgium, Germany, Spain, France, Italy and the Netherlands. These countries account for 85% of the Eurozone’s GDP and 83.8% of its population.