Eurozone economic sentiment deteriorates further in September

Eurozone economic sentiment deteriorated further in September, but employment expectations remained relatively robust.

The European Commission’s economic sentiment indicator for the eurozone declined by 3.6 points to 93.7, coming in below consensus expectations for a reading of 95.0, while the ESI for the EU fell 3.5 points to 92.6.

The data showed that confidence fell across the board, in industry, services, retail and among consumers.

Meanwhile, the employment expectations index fell more moderately, by 1.2% to 106.7 in the eurozone and by 0.8 points to 106.4 in the EU, remaining markedly above the long-term average.

Melanie Debono, senior Europe economist at Pantheon Macroeconomics, said the fall in the ESI, to its lowest since November 2020, confirms the message from the PMIs, that eurozone activity is losing pace fast.

"We already knew that consumer confidence, which accounts for 20% of the index, fell. Today’s release shows that business confidence soured too at the end of Q3, pegged back by weakness across the board," she said.

"The industrial sentiment index fell to -0.4 from 1.0 in August, as production expectations fell on the back of another slide in export orders. Meanwhile, the services gauge slid to 4.9 from 8.1; the retail and construction indices also declined. And the bad news doesn’t end there; firms’ selling price expectations rose, which suggests that the risks to inflation figures remains to the upside and stagflation is here to stay.

"Overall, these data are consistent with our view that the EZ economy is in a downturn and, if anything, suggest that the risks to our call for a 0.3% quarter-on-quarter fall in GDP are to the downside."