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.

The first few months after the eurozone economy reopened after strict lockdowns showed a fast rebound in activity. Today’s ESI indicates that the eurozone economy is already showing signs of rebound fatigue in September and second wave worries add to expectations of further slowing of economic growth.

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
 

Content disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more here: https://think.ing.com/content-disclaimer/

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD drops below 1.1850 amid growing covid concerns

EUR/USD has dropped under 1.1850 as European coronavirus cases hit records. France exceeded 50K daily cases and Spain announced a state of emergency. US fiscal stimulus talks remain stuck ahead of the elections. 

EUR/USD News

GBP/USD pressured towards 1.3000 amid downbeat market mood

GBP/USD has been extending its losing streak amid a surge in COVID-19 cases in the UK and elsewhere. Investors are shrugging off reports of progress in Brexit talks. 

GBP/USD News

XAU/USD pushed and pulled in jittery market conditions

The price of gold has been testing the bearish commitments above the $1,900 psychological level following a brief spell below it, printing a low of $1,891.50.

Gold News

Bitcoin vs gold: Safe haven battle

A new idea has been floating around in Safe Haven Trading. Well, it’s not entirely new, but it’s quite controversial to say the least. For the longest time, gold has been considered to be the purest form of safe haven trading. 

Read more

WTI heavily on the back foot, but right tail remains fat

The coronavirus pandemic gets a new lease of life on the commodities market's risk barometer and at the time of writing, WTI is trading at $38.52 and has travelled from a high of $39.72 to a low of $38.31.

Oil News

Forex Majors

Cryptocurrencies

Signatures