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29 Sep 2014
Poor Eurozone economic sentiment data suggests slowing recovery - ING
FXStreet (Łódź) - Martin van Vliet from ING believes that the decline of Eurozone economic sentiment from 100.6 in August to 99.9 in September is another sign of a slowdown in the recovery in the region and justifies ECB's decision to announce further measures at its September monetary policy meeting.
Key quotes
"The decline in overall sentiment was mainly driven by a deterioration in the consumer and retail trade sector. Sentiment in the export-sensitive industrial sector also slipped, while confidence in the services and construction sector actually improved somewhat. "
"Importantly, consumers’ inflation expectations also continued their slide – thereby following the example of financial market participants (the 5/5yr forward inflation swap rate has been trading below 2% since September 10th)."
"This will not be greeted with much enthusiasm by the ECB, although it must be said that consumers’ inflation expectations tends to lag developments in actual inflation."
"The country breakdown, meanwhile, revealed that the decline in sentiment was fairly broad-based."
"Economic sentiment in the region as a whole is clearly heading south again."
"However, even though consumers and businesses are turning more cautious again, they have not become gloomy. Indeed, the overall sentiment index remains close to its long-term average (100) and is still at a level consistent with quarterly gains in GDP of a little over 0.2%."
"What is more, barring a new shock, the latest bout of monetary easing and the weakening of the euro should arrest the slide in sentiment and help revive ‘animal spirits’."
"But we can’t be sure, and even so, ultra-loose monetary policy alone may not be enough to generate a strong, self-sustainable recovery. Governments will have to do their bit as well."
Key quotes
"The decline in overall sentiment was mainly driven by a deterioration in the consumer and retail trade sector. Sentiment in the export-sensitive industrial sector also slipped, while confidence in the services and construction sector actually improved somewhat. "
"Importantly, consumers’ inflation expectations also continued their slide – thereby following the example of financial market participants (the 5/5yr forward inflation swap rate has been trading below 2% since September 10th)."
"This will not be greeted with much enthusiasm by the ECB, although it must be said that consumers’ inflation expectations tends to lag developments in actual inflation."
"The country breakdown, meanwhile, revealed that the decline in sentiment was fairly broad-based."
"Economic sentiment in the region as a whole is clearly heading south again."
"However, even though consumers and businesses are turning more cautious again, they have not become gloomy. Indeed, the overall sentiment index remains close to its long-term average (100) and is still at a level consistent with quarterly gains in GDP of a little over 0.2%."
"What is more, barring a new shock, the latest bout of monetary easing and the weakening of the euro should arrest the slide in sentiment and help revive ‘animal spirits’."
"But we can’t be sure, and even so, ultra-loose monetary policy alone may not be enough to generate a strong, self-sustainable recovery. Governments will have to do their bit as well."