Euro area inflation expectations rise for second month

Median inflation expectations in the Eurozone rose for the second consecutive month to 3.1% in April 2025, up from 2.9% in March, marking the highest reading since February 2024.

Euro area inflation expectations rise for second month

The uptick suggests persistent concerns among consumers about elevated price pressures, despite the European Central Bank's tightening measures and signals of a moderating economic environment. In tandem, uncertainty surrounding inflation expectations over the next 12 months also increased, reaching levels last seen in June 2024, pointing to heightened volatility in household outlooks and possible sensitivity to incoming economic data or geopolitical developments. Longer-term inflation expectations remained steady. The three-year-ahead outlook was unchanged at 2.5%, indicating that while short-term inflation risks have intensified, consumers still expect inflation to gradually ease toward the ECB's target over time. Similarly, expectations for inflation five years ahead remained anchored at 2.1% for the fifth consecutive month, a sign of sustained confidence in the central bank's ability to eventually stabilize prices.

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Elsewhere, consumers revised down their nominal income growth expectations for the next 12 months, which dipped to 0.9% from 1.0% in March, possibly reflecting growing pessimism about wage gains amid economic headwinds. In contrast, expected nominal spending growth climbed to 3.7% from 3.4%, highlighting a disconnect that could imply a reliance on savings or credit to maintain consumption levels — or a belief that higher prices will continue to drive spending regardless of income trends. Economic sentiment took a sharper turn downward, with growth expectations for the next 12 months becoming more negative, falling to -1.9% in April from -1.2% in March. This signals mounting fears of a potential recession or prolonged stagnation across the bloc. Additionally, labor market expectations worsened slightly, as the anticipated unemployment rate for the next year edged higher to 10.5% from 10.4%, suggesting that households foresee continued softness in job creation and potential layoffs as firms navigate a challenging macroeconomic landscape.