According to a recent study by the European Central Bank, the median rate of perceived inflation in Europe over the previous 12 months fell to 9.5% in January 2023 from 9.9% in December 2022. (ECB). The median expected for inflation over the next 12 months decreased somewhat from 5% to 4.9%, and the median expectation for inflation over the next three years notably decreased from 3% to 2.5%.
Although uncertainty about inflation predictions for the 12 months prior to January 2023 increased slightly, it largely stayed at the high levels seen since March 2022.
Although there was good agreement amongst income categories regarding views and predictions of inflation, younger respondents (aged 18 to 34) continued to indicate lower inflation perceptions and expectations.
According to the ECB Consumer Expectations Survey, younger respondents (aged 55-70) than older respondents. Consumers predicted their nominal income will increase by 1.3% over the following 12 months in January 2023, up from 1% in December. Respondents whose household incomes were below the median were mostly responsible for this improvement. Nominal spending growth over the previous 12 months was perceived to have grown by around 6.3%. From 4.2% in the previous month, expectations for nominal spending growth over the upcoming 12 months sharply decreased to 3.8%. Older responders were primarily to blame for this reduction (aged 55-70).
Economic growth estimates for the following year ahead of January 2023 are still pointing to a decrease, although they are moving higher to 10% in January, up from 9.2% in October 2022.
