Europeans are pessimistic about the economy

By Chrysostomos Tsoufis

We may be in the last calendar month of fall and with very good temperatures for the season, but in the psychology of European citizens, winter already prevails, as shown by the data of the quarterly survey carried out by the economists of the European Central Bank on a sample of 18,000 people from Germany, France, Belgium, Italy , Spain and the Netherlands.

Inflation – as “felt” by consumers – in the previous 12 months continued to grow at an average rate of 8.1% while there is pessimism about the next 12 months with the average estimate rising to 5.1% from 5% in the August survey. The survey shows that older people, 55-70 years old, are much more pessimistic about inflation than younger respondents.

Deterioration of prospects is also observed in terms of income. Consumers estimate that their incomes will rise by just 0.6% over the next 12 months – up from 1% in August – in the shadow of estimates that want the Eurozone economy to grow by half a unit at most in 2023. Here again, the deterioration of the outlook is greater for the 55-70 age group and for households belonging to roughly the middle of the income scale. Despite this differentiation, expectations regarding nominal consumption remained unchanged while, as is reasonable, the youngest adult age group (18-34 years) is the one that declares that they will spend less.

The picture of economic development could not be a contradiction. Expectations for the next 12 months have deteriorated to -2.4% from 1.7% in August. And fatally, citizens expect an increase in unemployment, with the rate increasing to 12.2% from 11.9% three months ago. Of particular interest is that the prospect of unemployment is much higher – 3.3 points – for those in the bottom income quintile than for those in the top.

Consumers estimate that in the next 12 months the increase in the price of their real estate will remain at 3.4%. At the same time they expect mortgage rates to rise further to 4.5%, 1.2 points higher than the start of this year.

According to the research, while in the previous 12 months consumers estimated that their access to bank loans would become more difficult, for the next 12 months they are optimistic that their lending conditions will become easier.

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