Consumer Inflation Expectation

Consumer Inflation Expectation gauges what euro area households expect for prices over the next 12 months. Arabic financial media call it consumer price expectations.

It is Question 6 of the monthly consumer survey run by DG ECFIN, the European Commission department for economic and financial affairs. Households pick from 6 fixed answers, from faster rises to falling prices, and the headline is their balance, the gap between positive and negative replies. Policymakers watch it because expectations feed wage- and price-setting, a key channel carrying policy rates to prices.

The survey runs monthly: fieldwork covers the first two to three weeks, and national results reach the Commission 7 working days before month-end. Full results appear 2 working days before month-end, except December results, which arrive in early January. A Flash read, an early confidence estimate, lands about one week earlier, near the 20th.

The full release also covers economic sentiment, employment expectations and selling-price expectations, and small revisions can follow, with each country's consumption weight updated each January. Charts, annex tables and long time series come free with each release.

The index has no sub-indices; it is 1 survey question, so answers to that question are what move it.

• Increase more rapidly (+1): full weight on the positive side.
• Increase at the same rate (+1/2): half weight on the positive side.
• Increase at a slower rate (neutral): no weight, yet it still means rising prices.
• Stay about the same (-1/2): half weight on the negative side.
• Fall (-1): full weight on the negative side.
• Do not know (excluded): skipped in the balance count.

The March 2022 survey came out on 30 March 2022, after Russia's invasion of Ukraine. Its balance leapt from 37.7 in February to 59.8 in March, the highest reading since 2000. The jump shows how uncertainty can lift expected prices even as sentiment sours.

It also fits the series' habit of moving with actual inflation, the HICP index published by Eurostat, rather than ahead of it. Its quantitative replies tend to run above actual inflation.

1. Country shares: Each country counts the % of respondents picking each of the 6 answers, and the shares sum to 100%.
2. Euro area average: Countries combine with consumption weights, each country's share of private final consumption at constant prices, smoothed over 2 years.

Weights update each January.

1. Balance: Combine shares as fastest plus half of same-rate, minus half of flat and all of fall, dropping "do not know" replies.

Example: 15% fastest, 25% same-rate and 20% slower-rate face 15% flat and 10% fall, with 15% undecided. Then (15 + 12.5) - (7.5 + 10) = +10.0 percentage points.

1. Seasonal adjustment: The euro area balance is seasonally adjusted with Dainties, a filter that strips regular seasonal swings.

Its end filter uses only past data, so new months barely revise history.