Daily Economic Outlook: 23rd October, 2015

At yesterday's ECB press conference, President Draghi acknowledged that the downside risks to euro area growth and inflation had increased, raising the prospect of further stimulus in the near term.

Although official indicators of activity have held up fairly well, the slowing in global activity along with the pass-through from lower commodity prices and the pickup in the euro is likely to slow the pace at which inflation will return to target. 

Current ECB staff projections made last month may already be too positive on the inflation outlook. 

"CPI was anticipated to be 1.7% in 2017, and risks being downgraded further below the 2% target ceiling. In advance of this, today's publication of the Q4 Survey of Professional Forecasters, which currently envisages inflation at 1.6% in 2017 could see a lower inflation profile", notes Lloyds Bank.   

Key to the possibility of further easing by the ECB is also the outlook for economic activity, where today's 'flash' PMIs for October will provide some insight at the onset of Q4. The euro area aggregate readings for both manufacturing and services is expected to soften to 51.8 (prev 52.0) and 53.5 (prev 53.7) respectively, signalling a moderate easing in activity, says Lloyds Bank.