The European Central Bank released its September 2026 Consumer Expectations Survey, showing a slight uptick in perceived and expected inflation. The median rate of perceived inflation over the previous 12 months rose to 3.6% from 3.5% in August, while median expectations for inflation over the next 12 months increased to 3.1% from 3.0%. Longer-term expectations remained stable, with three-year ahead inflation unchanged at 2.9% and five-year ahead expectations holding at 2.5%. Uncertainty regarding short-term inflation expectations increased slightly but remains elevated compared to pre-conflict levels in the Middle East.
Economic outlooks among consumers deteriorated further. Expectations for economic growth over the next 12 months fell to -1.5%, down from -1.2% in August. Concurrently, the expected unemployment rate 12 months ahead rose to 11.3% from 11.0%. Despite this increase, households anticipate the future unemployment rate will be only marginally higher than the current perceived rate of 10.6%, suggesting a view of broadly stable labor market conditions. Income expectations saw a modest improvement, with nominal income growth expectations rising to 1.1% from 1.0%.
Housing and credit conditions showed mixed signals. Consumers expect home prices to rise by 3.5% over the next 12 months, up from 3.4% in August. Mortgage interest rate expectations remained unchanged at 4.9%. However, perceptions of credit access tightened; the net percentage of households reporting tighter credit conditions over the past year increased, as did those expecting further tightening in the coming 12 months. Demographic disparities persisted, with lower-income respondents reporting higher inflation perceptions and unemployment expectations than their higher-income counterparts.
The divergence between short-term inflation uncertainty and stable long-term expectations suggests that consumers are reacting to immediate geopolitical and economic shocks without fundamentally altering their belief in the ECB’s medium-term anchoring capacity. While the slight rise in perceived inflation to 3.6% indicates persistent price pressures, the unchanged five-year expectation of 2.5% reflects continued confidence in eventual normalization. This dynamic complicates policy communication, as the central bank must address present-day cost-of-living concerns without undermining the credibility of its longer-term stability framework.
The simultaneous decline in growth expectations to -1.5% and the rise in projected unemployment to 11.3% highlight growing recessionary fears among households. These negative macroeconomic forecasts contrast with the relatively stable labor market perception, where expected unemployment is seen as only slightly above current levels. This tension may indicate that consumers anticipate a soft landing or limited job losses despite contracting output. For policymakers, the tightening credit conditions reported by households serve as a critical transmission mechanism signal, potentially amplifying the impact of monetary policy on consumption and investment even if headline inflation metrics appear contained.
