Archive

EA: Disinflationary Gravity in Sep-23

• EA inflation slowed by 0.9pp to 4.3% in Sep-23, 0.2pp beyond the Consensus expectation after they overcompensated for August’s upside. There was little news for us again.
• Underlying inflationary pressures are running much closer to the target than last year, so broad base effects dragged core inflation down to 4.5%, 0.3pp under the consensus.
• Another substantial drop in October will only be confirmed after the ECB’s 26 October decision, but recent weakness will likely keep its policy on hold then.

By Philip Rush

Euro area inflation 4.3% y-o-y (consensus 4.5) in Sep-23

- Euro area inflation stood at 4.3% year-on-year in September 2023, slightly below the consensus expectation of 4.5%, indicating a slower pace of price increases.
- The current inflation rate is the lowest growth since October 2021, but still remains higher than the long-run average by 2.08 percentage points.

EA Slowdown Exaggerated in Summers

• PMIs place the Euro area as the global epicentre of current weakness, which is as bad as last year. Similarity may not be a coincidence: the trough may be imminent.
• 2020’s crash appears to be polluting the seasonal adjustment of many datasets. The ESI fell less in lockdown and looks less distorted. Indeed, it has proven resilient recently.
• Monetary policy should be more sensitive to unemployment and inflation. We still expect no more ECB rate hikes and a final 25bp step from the BoE in November.

By Philip Rush

Euro area ESI 93.3 (consensus 92.5) in Sep-23

- The Euro area Economic Sentiment Indicator (ESI) for September 2023 exceeded market expectations at 93.3, indicating a slight improvement from the previous reading of 93.6.
- However, the ESI remains at its lowest level since November 2020 and is significantly below both its long-run average (6.41 points under) and the average of the past year (3.00 points under). This underscores the prevailing negative sentiment and challenges in the Euro area's economic landscape.