FRANKFURT (Reuters) – Inflation expectations among euro zone consumers continued to rise in September, even as economic growth and income forecasts declined markedly, a new European Central Bank survey showed on Wednesday.
Inflation has been hitting new records month after month, raising fears that wages, still growing relatively slowly, will eventually follow, setting off a hard-to-beat wage-price spiral.
But the survey appears to indicate that inflation and income growth will remain misaligned, offering some relief for the ECB, which has already raised rates by 200 basis points in three months in its fastest tightening cycle on record.
Euro zone consumers see inflation at 7.3% in the 12 months ahead, up from 6.9% they anticipated in August, the ECB said in its Consumer Expectations Survey.
Three years out, inflation expectations rose to 4.8% on average from 4.7%, suggesting little confidence among consumers that the ECB will manage to get price growth back to its 2% target by then.
Longer term inflation expectations have been rising for the past 18 months, with consumers becoming more pessimistic about price growth well before Russia’s war in Ukraine.
Households expected their incomes to increase just 0.6% over the next year, a drop from 1% a month earlier, while spending expectations were steady, suggesting that consumers expect to dip into their savings.
Among the bloc’s biggest countries, Spanish consumers expect the best income growth while Italians see the lowest.
Consumers are also more pessimistic about economic growth.
The survey showed consumers expect the economy of the 19-country currency bloc to shrink by 2.4% in the next 12 months, the ECB said, a significant decline from the 1.7% contraction foreseen in August.
(Reporting by Balazs Koranyi; Editing by Catherine Evans)