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The ECB Consumer Expectations Survey for May 2026 showed a mixed but slightly improving outlook for the Eurozone economy. The most notable development was a decline in short-term inflation expectations, suggesting consumers are becoming more confident that price pressures are easing. Median inflation expectations for the next 12 months fell significantly to 3.5% from 4.0% in April, while perceptions of inflation over the previous 12 months remained unchanged at 4.0%. Medium-term inflation expectations remained stable, with expectations for inflation three years ahead holding at 2.9% and five-year expectations unchanged at 2.4%, indicating that longer-term inflation expectations remain well anchored.
On household finances, consumers became somewhat more optimistic about income prospects. Expected nominal income growth over the next 12 months rose to 1.0% from 0.8% in April, pointing to slightly improved wage expectations. At the same time, consumers reported that spending growth over the previous year increased marginally to 5.4% from 5.3%. However, expectations for spending growth over the coming 12 months declined to 3.8% from 4.3%, suggesting households may be planning to moderate consumption as they remain cautious about future economic conditions.
The survey also showed a modest improvement in growth expectations. Consumers still expect the economy to contract over the next 12 months, but they are less pessimistic than before, with expected economic growth improving to -1.7% from -2.2% in April. Despite this improvement, concerns about the labour market persisted. Expectations for the unemployment rate in 12 months rose slightly to 11.3% from 11.2%, remaining above the perceived current unemployment rate of 10.7%. This suggests households still expect some softening in labour market conditions.
Overall, the May 2026 survey suggests that while Eurozone consumers are increasingly confident that inflation is moving lower and economic conditions may be stabilizing, they remain cautious due to weak growth, rising unemployment concerns, and tighter access to credit.
This article was written by Giuseppe Dellamotta at investinglive.com.