Euro area consumers’ inflation expectations moderated in July, according to the European Central Bank’s latest Consumer Expectations Survey released on Friday.
Median perceived inflation over the previous 12 months declined to 3.5% from 3.6% in June. One-year-ahead inflation expectations fell to 2.9% from 3.0%, while three-year expectations decreased to 2.7% from 2.8%. Five-year expectations held steady at 2.4%, unchanged from June.
Uncertainty surrounding one-year-ahead inflation expectations remained elevated compared with pre-Middle East conflict levels. Lower-income households continued to report higher inflation perceptions and expectations than higher-income groups, while younger respondents maintained lower inflation views than older cohorts.
Nominal income growth expectations for the next 12 months softened to 1.0% from 1.1% in June. Perceived nominal spending growth over the past year held at 5.1%, and expected spending growth over the next year remained unchanged at 3.6%. Spending expectations were marginally higher among the lowest three income quintiles compared with the top two.
Economic growth expectations for the next 12 months improved to -1.2% from -1.4%, while the anticipated unemployment rate 12 months ahead was unchanged at 11.2%. Lower-income households projected the highest unemployment rate at 13.5%, compared with 9.4% among higher-income groups. Labour market sentiment showed signs of weakening, with unemployed respondents’ job-finding probability dropping to 30.8% in July from 32.1% in April, while employed respondents’ perceived risk of job loss rose to 9.8% from 8.8%.
Housing market expectations remained stable, with consumers anticipating a 3.4% increase in home prices over the next year, unchanged from June. Mortgage interest rate expectations for 12 months ahead fell to 4.9% from 5.0%. Lower-income households expected higher mortgage rates at 5.7%, compared with 4.4% for higher-income groups.
Credit access tightened slightly over the past year, while expectations for future credit conditions eased marginally. The share of consumers applying for credit in the past three months rose to 14.3% from 13.4% in April.
The survey, conducted between July 2 and 27, covers approximately 19,000 consumers across 11 euro area countries. The next release is scheduled for September 18, 2026.
