Thursday, September 29, 2022 7:01 AM EST
The drop from 97.3 to 93.7 in the eurozone economic sentiment indicator indicates a likely contraction in the economy in the third quarter. Selling price expectations have been on the rise again, increasing the risk of a longer period of stagflation in the eurozone economy.
Unsplash
The eurozone economy is slowing rapidly as high prices reduce business activity and dampen consumer demand. We expect that a recession could, therefore, have already started.
For industry, production expectations dropped sharply in September. Backlogs of work have fallen as new incoming orders disappointed in recent months and in some industries production is reduced as high energy costs impact the profitability of production. With energy costs still at unsustainably high levels for some industrial sectors, this is adding to the bleaker outlook for industrial production.
For the services sector, confidence fell even more as the post-pandemic catch-up demand is fading and the purchasing power squeeze is starting to bite. The services indicator dropped from 8.1 to 4.9 as businesses indicate that demand has recently weakened and they are becoming gloomier about demand in the months ahead.
Despite the clear slowing of the economy, selling price expectations are increasing again as businesses face higher energy costs again due to the spike in prices in August. This is particularly worrisome as it could prolong a period of stagflation in the eurozone economy. For the ECB, the path is already quite clear: the central bank is set to hike in the coming meetings regardless of a slowing economy. The increase in selling price expectations will only strengthen that view for the October meeting.
More By This Author:
Spanish Inflation Falls Sharply In September U.S. Housing Recession Is Already Here Resistance (To Dollar Strength) Is Futile
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.
