Euro area confidence dips in September, price expectations climb

Fresh sentiment figures for the euro area have been released:

• Economic sentiment came in at 97.9, below the 99.0 forecast, with the prior reading at 98.4
• Industrial sentiment registered -3.8 against an expected -4.7; the previous figure was -5.0, revised
• Services sentiment stood at 6.1 compared to the 6.5 estimate, with an earlier 5.6, revised
• Consumer inflation expectations rose to 35.2, up from 33.0
• Selling price expectations advanced to 20.3, versus a revised 16.9 previously

The overall picture is hardly encouraging: economic confidence slipped to 97.9 in September, falling short of forecasts and staying below the long-run average of 100.

Still, this should not necessarily be read as a clear decline in the euro area economy. Industrial confidence improved notably from August, and services sentiment also moved higher, even if it missed expectations.

That points to an uneven recovery rather than a sudden downturn, which aligns with some of the more resilient activity data seen of late.

For the ECB, though, the more notable figures appear further down the list.

Consumer inflation expectations climbed to 35.2 from 33.0, and selling price expectations jumped to 20.3 from a revised 16.9. These are only survey balances, but the trend is what stands out.

That gives the ECB a somewhat uncomfortable combination based on these numbers. Economic confidence is mostly lacking momentum, yet businesses and consumers are increasingly worried about price pressures.

This is just one survey, of course. But it does little to back a more dovish stance. If anything, the rise in price expectations strengthens the case for the ECB to stay cautious, particularly as it watches how higher energy costs feed into broader inflation.