The latest euro area sentiment readings are out:
- Economic sentiment 97.9 vs 99.0 expected; Prior 98.4
- Industrial sentiment -3.8 vs -4.7 expected; Prior -5.0 (R)
- Services sentiment 6.1 vs 6.5 expected; Prior 5.6 (R)
- Consumer inflation expectations 35.2; Prior 33.0
- Selling price expectations 20.3; Prior 16.9 (R)
The headline isn’t particularly encouraging as economic confidence slipped to 97.9 in September, missing expectations and remaining below the long-term average of 100.
That being said, I wouldn’t read this as a straightforward deterioration in the euro area economy either. Industrial sentiment actually improved notably from August, while services confidence also edged higher despite falling short of expectations.
That suggests the recovery remains uneven rather than suddenly rolling over, which broadly fits with some of the more resilient activity signals we’ve seen recently.
But for the ECB though, the more interesting numbers sit further down the list above.
Consumer inflation expectations climbed to 35.2 from 33.0, while selling price expectations jumped to 20.3 from a revised 16.9. While these are just survey balances, the direction is what matters most.
That leaves the ECB facing a slightly uncomfortable mix based on the numbers we’re seeing. Economic confidence is struggling to build momentum for the most part, yet businesses and consumers are becoming more and more concerned about price pressures.
Now, this may just be one survey’s worth of data. However, it does little to support a more dovish shift. If anything, the jump in price expectations reinforces the argument for the ECB to remain cautious. That especially as the central bank continues to watch how higher energy costs feed through into broader inflation pressures.
This article was written by Justin Low at investinglive.com.