The M&G YouGov Inflation Expectations Survey – Q4 2014

Today we launch the next edition of M&G YouGov Inflation Expectations Survey which polled over 8,200 consumers across the UK, Europe and Asia.

The Q4 report reveals that consumers’ short-term inflation expectations continue to moderate across most regions, although they remain well above current inflation levels. Long-term expectations remain resilient despite this year’s low inflation environment.

Short-term inflation expectations in the UK fell to 2% in November, having been 2.2% in August. The latest figure is the lowest in the last three quarters since a matching 2.0% in February 2014. In Europe, short-term inflation expectations fell in Spain, Austria and Switzerland, remained stable in Italy and Germany at 2%, and increased in France (from 1% to 1.5%).

Over a 5-year period, expectations remain unchanged at 3%, a sign that consumers still lack confidence in the Bank of England’s ability to achieve price stability.  Similarly, in Europe, inflation expectations have progressively fallen through 2013/2014 with unemployment, fiscal austerity and an overvalued currency weighing on domestic consumption and exports. However, long term expectations remain firmly above the European Central Bank’s 2% inflation target in all surveyed countries.

In Asia, the gauge for short-term inflation falls to a record low of 3% in Singapore. However, over a five-year period, expectations have risen back to 5%, the average reading since the start of the survey. The outlook for inflation is concerning in Hong Kong where one-year expectations rise from 4% to 4.7% and the long-term gauge remains unchanged at 5%.

The findings and data from our Q4 survey is available in our latest report here or via @inflationsurvey on Twitter.