Consumer Inflation Expectation

Consumer Inflation Expectation is Question 6 of the EU harmonised consumer survey, run by the European Commission DG ECFIN. It asks households how consumer prices will develop over the next 12 months. Answers form a balance statistic, the gap between positive and negative shares, scored from -100 to +100 in points. It is not actual inflation, tracked by HICP or CPI, the consumer price indices, nor a forecast rate in percent.

It enters neither the consumer confidence indicator nor the ESI. The programme began in 1961 and added consumers in 1972, with national institutes meeting harmonised rules and grants covering at most 50% of costs. Replies break down by income, occupation, work status, education, age and sex.

National institutes collect replies in the first two to three weeks of each month under a common timetable. Consumer results are generally due 7 working days before month end. Full results appear two working days before month end, except December in early January. Quarterly content folds into the January, April, July and October issues, sent in two press releases.

Flash confidence, an early headline read, comes about one week earlier. Each release adds ESI, the broad sentiment index, EEI, the jobs outlook, price views, annex tables, free series and the Business Climate Indicator. Revisions follow fixed rules: Dainties seasonal smoothing with few backward changes, yearly weight updates and corrected errors.

Moves reflect shifts across its six reply options, weighted by household spending across Member States. It enters neither the consumer confidence indicator nor the ESI, and no target or neutral threshold applies.

• Increase more rapidly: full positive weight; prices rise faster than over the past 12 months.
• Increase at same rate: half positive weight; prices keep rising at the past pace.
• Increase at slower rate: zero weight, though prices still rise, but more slowly.
• Stay about same: half negative weight; prices hold broadly flat.
• Fall: full negative weight; outright price drops.
• Do not know: in the 100 base with zero weight.

The release of 30 March 2022 put EU expectations at 59.8, up 21.2 points from 38.6 in February, an all-time high. It followed 4 flat months at 40.6, 37.9, 39.8 and 38.6 from November to February. Sentiment slid as ESI fell 5.3 points to 107.5, consumer confidence lost 9.4 points and EEI eased 1.1 points to 114.9.

Past price views kept their steady climb since January 2021 to 61.0 in March. Firms' 3-month selling-price expectations hit unprecedented highs in all surveyed sectors. Since 2000 the balance low is -9.2 and the mean is 20.3, so 59.8 was the peak. The gap shows forward expectations can spike while backward views trend smoothly.

1. National shares: institutes tally replies into six reply shares that sum to 100, including undecided answers.
2. National balance: the balance equals full positive plus half same-rate minus half steady minus full falls, in points. For example, 20, 30, 25, 10, 5 and 10 shares give 20 plus 15, or 35, minus 10, or 25 points.
3. EU aggregation: each Member State share is averaged by household spending weight, smoothed as a two-year moving average and updated each January. For example, 70% weight at 10% with 30% at 30% gives 16%.
4. Seasonal adjustment: balances pass through Dainties, a filter removing normal seasonal swings with few backward changes.
5. Scale: scores run from -100, all most negative, to +100, all most positive.