Eurozone Consumer Inflation Expectations Ticked Up in August -October 11, 2023 at 07:19 am EDT

By Ed Frankl and Hans Bentzien

Eurozone consumer expectations for inflation rose marginally in August, still well above the European Central Bank’s target of 2%, with expectations for the bloc’s economy growing gloomier still.

Consumers expect prices to rise by 3.5% in the next twelve months, a little higher than the 3.4% recorded in July, according to the ECB’s latest consumer survey published Wednesday.

On a three-year horizon, expectations in August were for inflation to be at 2.5%, from 2.4% in July.

The ECB itself expects inflation at 3.2% for 2024 and 2.1% for 2025, according to its latest forecasts published in September.

The response comes after the central bank signaled that it had likely reached the peak in its hiking cycle at its meeting last month, when it raised its key interest rate to 4.0%, as inflation showed signs of sustained falls and signals grew stronger of a slowdown in the 20-nation bloc’s economy.

Consumer prices rose 4.3% on year in September, less than the 5.2% in August, preliminary estimates from the European Union’s statistics agency Eurostat showed late last month.

However, consumers expect their incomes to rise by 1.2% over the next year, better than the 1.1% in July.

Still, consumers expected the economic situation in the euro area to become gloomier in the next twelve months, seeing gross domestic product declining by 0.8% and unemployment at this point next year at 11.1%, from 0.7% and 11.0% in the prior month respectively.

By contrast, the ECB sees the eurozone economy growing 1.0% in 2024 and 1.5% in 2025, with unemployment increasing from 6.4% in August to average 6.7% in both 2024 and 2025.

Write to Ed Frankl at [email protected] and Hans Bentzien at [email protected]

(END) Dow Jones Newswires

10-11-23 0718ET