- One year ahead inflation expectations rise to 4.0% in March from 2.5% in February
- 3 years ahead Inflation expectations rise to 3.0% vs 2.5% prior
- 5 years ahead rise to 2.4% from 2.3%
- GDP growth seen at -2.1% in year ahead vs -0.9% seen a month earlier
- Full report here
The latest ECB consumer expectations survey for March 2026 was marked by surging inflation expectations and worsening outlook for economic growth. Compared with February, median consumer perceptions of inflation over the past year climbed from 3.0% to 3.5%. More striking, however, was the jump in future expectations; median inflation forecasts for the next 12 months surged to 4.0% from 2.5%, while the three-year outlook rose to 3.0%. Even the long-term five-year forecast saw a slight uptick to 2.4%.
This broad increase in inflation expectations was accompanied by heightened uncertainty, though a consistent demographic trend remained: younger respondents and those in higher-income brackets generally maintained lower inflation expectations than older and lower-income cohorts.
The financial pressure on households is further evidenced by the disconnect between income and spending. While expectations for nominal income growth over the next 12 months remained stagnant at 1.2%, consumers reported a sharp increase in both past and future spending. Perceived nominal spending growth over the previous year rose to 5.1%, and expected spending growth for the year ahead climbed to 4.1%, the highest level recorded since mid-2023. This suggests that consumers anticipate having to allocate more of their unchanged wages toward essential costs, particularly in the lower three income quintiles where spending expectations were highest.
Macroeconomic sentiment has soured alongside these rising costs. Economic growth expectations for the coming year dipped further into negative territory, falling to -2.1% from February’s -0.9%. This pessimism extends to the labor market, where the expected unemployment rate in 12 months’ time increased to 11.3%. While consumers still view the labor market as broadly stable, expecting only a slight rise from the perceived current unemployment rate of 10.6%, there is a clear divide in sentiment based on wealth. Lower-income households anticipate a much harsher job market, with expected unemployment reaching 13.7%, compared to just 9.7% for higher-income respondents.
Finally, the housing and credit sectors are showing signs of increased strain. Expectations for home price growth edged up to 3.7%, while anticipated mortgage interest rates for the year ahead rose to 4.9%. Access to capital is also becoming more difficult; the net percentage of households reporting a tightening of credit access over the past year reached levels not seen since early 2024. Looking forward, consumers are bracing for even tighter credit conditions, suggesting that the combination of high interest rates and stricter lending may continue to weigh on household mobility and major purchases in the months to come.
ECB rate hike expectations rose following the ECB survey. Traders now see 69 bps of tightening by year-end compared to 64 bps on Friday
