INSIGHTS
- The median perceived inflation rate for the euro region increased from 8.7% in February to 9.9% in March 2023.
- The projected rate of inflation for the upcoming year has climbed to 5%.
- Expectations for economic growth decreased marginally.
- In March 2023, the euro area’s views of nominal expenditure growth over the preceding 12 months improved to 7.1%.
The European Central Bank (ECB) conducted a study, and the results showed that the median rate of perceived inflation for the Euro Area over the preceding 12 months climbed from 8.7% in February to 9.9% in March 2023. Furthermore, from 4.6% in February to 5% in March, the median projection for inflation over the coming 12 months increased. Expectations for inflation over the next three years grew as well, rising from 2.4% to 2.9%.
Notably, especially over the three-year horizon, inflation forecasts stayed far below the perceived previous inflation rate. Since the survey’s inception in April 2020, uncertainty about inflation estimates for the next 12 months has increased to its highest level. Although there was strong agreement throughout income levels on views and expectations of inflation, younger respondents (ages 18 to 34) continued to express lower perceptions and expectations than older respondents (ages 55 to 70).
The forecast for economic growth for the next year dropped marginally from -0.9% in February to -1% in March 2023. The projection for the unemployment rate over the next 12 months climbed to 11.7% from 11.5 in February, in keeping with these weaker expectations for economic development. Consumers still anticipate that the real unemployment rate will be greater than the perceived current rate of 11.3%. According to the ECB’s Consumer Expectations Survey, the lowest income quintile reported the greatest actual and perceived unemployment rates.
Consumers anticipated a rise in their nominal income of 1.3% over the following year, up from a prediction of 1.2% in February. In March 2023, the expected nominal income growth for consumers 55 and older decreased, whilst it rose for consumers between the ages of 18 and 34. From 6.6 percent in February, perceptions of nominal expenditure growth over the preceding 12 months increased to 7.1 percent. From 3.9 percent in February, expectations for nominal expenditure growth over the upcoming year rose to 4.1 percent. Across income and age categories, the changes in perceptions and expectations for nominal expenditure were essentially consistent.
By- Mansi Patil
