Eurozone consumers brace for recession and high inflation: ECB survey

CONSUMERS in the eurozone 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 (ECB) survey showed on Thursday (Aug 4).

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 per cent goal.

The poll, carried out in June, showed the median consumer expected prices to grow by 5 per cent over the following year and saw inflation at 2.8 per cent in 3 years' time.

This compares to expectations for nominal income to grow by 0.9 per cent and spending by 3.9 per cent, implying a large dent in households' ability to save.

Consumers also expected the economy to contract by 1.3 per cent in the coming 12 months.

By comparison, the ECB expects inflation to average 6.8 per cent in 2022 before falling to 3.5 per cent in 2023 and 2.1 per cent in 2024. It sees growth at 3.7 per cent this year, 2.8 per cent next year and 1.6 per cent 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 eurozone inflation, which hit 8.9 per cent last month.

It cited "anchoring...inflation expectations" as 1 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 per cent of the euro area's GDP and 83.8 per cent of its population. REUTERS