Euro area consumers expect higher inflation, slower growth ahead: ECB

Median perceived inflation over the past 12 months rose to 3.5 per cent in March from 3.0 per cent in February. Short-term inflation expectations increased sharply, with one-year ahead expectations climbing to 4 per cent from 2.5 per cent, while three-year expectations rose to 3 per cent from 2.5 per cent. Longer-term expectations edged up slightly to 2.4 per cent from 2.3 per cent, ECB said in a press release.

Euro area consumers grew more pessimistic in March 2026 as inflation expectations rose, with one-year ahead forecasts reaching 4 per cent, as per ECB.
Spending expectations strengthened, while income outlook remained unchanged.
Growth expectations fell to -2.1 per cent and unemployment expectations increased.
Consumers also expected higher house prices and mortgage rates, signalling a cautious outlook.

Across income groups, lower-income households continued to report slightly higher inflation perceptions and expectations than higher-income groups, although the overall trend of rising expectations was broadly consistent. Younger respondents reported lower inflation expectations than older cohorts.

Consumers’ income outlook remained subdued. Expected nominal income growth over the next 12 months was unchanged at 1.2 per cent. However, spending expectations strengthened, with expected spending growth rising to 4.1 per cent from 3.5 per cent, the highest level since May 2023. Perceived spending growth over the past year also increased to 5.1 per cent.

Economic sentiment weakened further. Growth expectations for the next 12 months fell deeper into negative territory at -2.1 per cent, compared with -0.9 per cent in February. At the same time, the expected unemployment rate 12 months ahead rose to 11.3 per cent from 10.8 per cent, with lower-income households anticipating higher joblessness than higher-income groups.

The ECB said the results point to a more cautious consumer outlook, marked by rising inflation concerns, resilient spending expectations, and a deteriorating view of economic growth and labour market conditions.

Fibre2Fashion News Desk (SG)