Euro area economic sentiment index falls further in September

The European Commission’s business and consumer sentiment index falls again in September. The headline economic sentiment index dropped further by 0.7 points to a fifteen0month low of 110.9. The fall was partially because of the fading consumer sentiment for which the decline in the flash index to a 17-month low of -2.9 was affirmed. But, tallying with the fall in the flash euro area manufacturing PMI, the Commission’s index of industrial sentiment, which had reached a series high in January, also dropped to the lowest level since May 2017, partially because of lower production expectations.

However, confidence among retailers and services companies rose, although remaining some way down on their levels early in the year. And the survey’s measure of construction sector sentiment rose to a series high. Among the large member states, the softening was concentrated disproportionately in France and Spain, but Italian confidence also deteriorated again to the lowest in over one year.

Furthermore, employment intentions in services softened remarkably. Looking at the prices, the ECB might see the rise in consumer price expectations to the highest since the beginning of 2013 as reflecting rose sentiment in its ability to meet its inflation target. Nevertheless, with household sentient increasingly weak in certain member states, perceptions of rising inflation might also have added to the downgrade in sentiment in consumers’ future financial position as well as their diminished willingness to make future purchases.

“Overall, therefore, while still consistent with ongoing expansion, today's Commission survey results added to evidence of an ongoing loss of economic momentum. And so, it reaffirmed our view that the ECB's latest forecast, which envisages quarterly GDP growth stepping up from 0.4 percent Q/Q in Q3 and Q4 to 0.5 percent Q/Q in each quarter of next year, is overoptimistic”, stated Daiwa Capital Market Research in a report.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bearish at -127.634, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 112.179. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex