Wednesday, March 30, 2022 11:10 AM EST
Image Source: Pexels
Large jumps in selling price expectations are triggering further concern about eurozone core inflation in the coming months. Meanwhile, the reopening of many service sectors as Covid restrictions end is, at least for now, lessening the economic impact of the Ukraine war
Economic sentiment fell by 5.4 points to 108.5 in March. The largest drop in confidence was among consumers, but manufacturing businesses also saw industrial confidence drop markedly. It's not so much due to recent developments in production, but expectations fell significantly. Order books remain well filled, but supply chain problems are already causing production shutdowns here and there, which is a reason for pessimism about the months ahead.
The service sector is set to rebalance some of the negative impacts of manufacturing production hiccups in March. The positive impact from the reopening of economies has boosted recent demand for service sector businesses and despite high prices, demand expectations continue to improve for the months ahead. If they are right to be optimistic remains to be seen as inflation is set to trend far higher than we see already.
Indeed, the most important takeaway from the survey is that selling price expectations for both services and industry are soaring at the moment. The higher input costs due to jumps in energy prices and further supply chain problems translate into higher core inflation in the short term. This brings further upside to our eurozone inflation expectations which were already above 7% for March.
In the coming months, expect purchasing power to be squeezed substantially, together with production hiccups thanks to renewed supply chain problems. We expect that combination to cause GDP growth to turn negative in 2Q, followed by recovery. So while economic activity may have been supported by services activity in 1Q, things are looking worse for the months ahead.
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 ...
more
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.
