Eurozone Sentiment Points To Further Inflation Easing In The Short Run

By Bert Colijn of ING Economics

Friday, September 27, 2024 5:28 AM EST

The Economic Sentiment Indicator dropped from 96.5 to 96.2 in September. Weaker growth prospects and easing inflation concerns show a clear turning in eurozone sentiment at the moment, which adds dovish pressure on the ECB.

Selling price expectations in line with further easing of inflation

Inflation prints for Spain and France have come in very soft this morning, likely resulting in a first sub-2% eurozone inflation print for September. While this is related to base effects and inflation is expected to tick up again towards the end of the year, the question is by how much this can happen. Petrol prices have dropped significantly in recent weeks on the lower oil price, which limits the prospects of a headline inflation rebound. For the European Central Bank, a lot of focus will be on whether core inflation will come down though, with services inflation as its main concern.

Today’s ESI shows that selling price expectations for services continued to moderate slightly. Our expectations are that services inflation should drop to just above 3% in early 2025, down from 4.1% in August. Where lower energy prices may therefore impact headline inflation now, we expect a more gradual easing of core inflation in the months ahead.

ECB consumer expectations for inflation also fall

Meanwhile, the ECB also released its Consumer Expectations Survey for August this morning. This showed that perceived inflation continued to fall and that inflation expectations also dropped. Inflation expectations for the coming 12 months eased from 2.8 to 2.7% and for the next three years, consumers now expect inflation to come in at 2.3%. This indicates that inflation expectations for consumers seem well anchored at the moment.

Growth worries slowly take centre stage again

While the ESI dropped from 96.5 to 96.2 in September, this was not as large a downturn as the PMI showed. Still, all main eurozone surveys for September have now come in weak and this means that with inflation relatively benign, the focus of policy makers is shifting from inflation to growth worries at this point. For the ECB, this means that the pressure to lower interest rates from current restrictive levels quickly will increase.

More By This Author:

Asia Morning Bites For Friday, Sept 27
Asia Week Ahead: Regional Inflation And Trade Data In Focus Ahead Of China’s Golden Week
Eurozone Bank Lending Continues To Recover Slowly

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.

The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.

Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.

less

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.