Eurozone consumers fear stagflation in new ECB survey

Consumers in the eurozone expect inflation to stay high and the economic growth to go into reverse over the next year, according to a new survey published by the European Central Bank on Thursday.

The first issuance of the ECB’s Consumer Expectations Survey (CES) for June showed widespread concern for the economic outlook, as Europe navigates the fallout from the Russian invasion of Ukraine.

The monthly survey, which was carried out online among 14,000 people from the eurozone’s six largest economies, would help the ECB pursue its price stability mandate by “improving the analytical basis” for its decision-making, the central bank said in a statement.

It would also improve the ECB’s picture of households’ “financial vulnerabilities” and any “challenges to financial stability”.

At the end of July, the ECB raised its interest rates for the first time in over a decade as it looked to tackle record inflation driven by the soaring cost of energy.

Consumer prices rose at an 8.6-percent pace in the eurozone in July, an all-time high and well above the ECB’s own two-percent target.

Consumers surveyed by the ECB on average expected inflation to sit at five percent in 12 months and 2.8 percent in three years.

They also expected the economy to shrink by 1.3 percent over the next year.

The toxic combination of high inflation and weak economic performance is known as “stagflation”.

In its last set of forecasts published in June, the ECB said it still expected the eurozone to grow by 2.8 percent this year and 2.1 percent in 2023.

Meanwhile, inflation was forecast to sit at 6.8 percent before falling back to 3.5 percent in 2023.