Eurozone growth to slow as second wave concerns intensify
|Economic sentiment in the Eurozone improved in September, but at a slower pace. With new local restrictive measures being taken to contain second waves of the virus, downside risks to the outlook are becoming more significant for the fourth quarter.
The Economic sentiment indicator for the eurozone increased from 86.8 to 90.2 in September, indicating that the economic recovery continues albeit at a slower pace.
This paints a slightly better picture than the PMI - which indicated stagnation in September – but given that the PMIs literal interpretation of the index has been slightly off for extraordinary peak Covid-19 cases months, we think the gradual increase in the ESI and German IFO survey are more accurate in indicating the current direction of the eurozone economy.
Especially interesting is the stark difference between the sentiment indicator and PMI for the service sector. The PMI showed a decline in services, while the improvement in economic sentiment was mainly due to a large improvement in the service sector. Businesses became more upbeat about activity in the last few months, which confirms the expected strong rebound in GDP for 3Q. The expectations for the months ahead are still weak though, as they show a slight decline in September, which could reflect second wave concerns.
Surveys show a similar picture regarding manufacturing, as the ESI also confirms a continued recovery for the sector. Order books continue to recover and stocks of finished products are declining, indicating that the months ahead are likely to see continued growth for the sector.
More measures are being taken to tackle the virus, which will not necessarily have a strong impact on the 3Q growth figures, but will be very relevant for GDP growth in 4Q.
Read the original analysis: Eurozone growth to slow as second wave concerns intensify
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.