Euro Area Economic Sentiment August 2022

Euro Area: Economic sentiment falls further in August

August 31, 2022

Sentiment in the Eurozone fell to 97.6 in August from 98.9 in July. The index therefore moved further below its long-run average of 100.

Sentiment in the industry and services sectors declined. However, sentiment in the construction and retail services improved slightly. Moreover, employment expectations gained some marginal ground. Additionally, consumer sentiment strengthened in the month. Meanwhile, selling price expectations moderated in all sectors.

In terms of specific countries, sentiment decreased in France, Germany, Italy and the Netherlands, while it ticked up in Spain.

Bert Colijn, senior economist at ING, commented:

“Most notable from the survey is that selling price expectations from both manufacturers and service providers have been falling for four months in a row now. Generally correlated with core inflation, this begs the question of whether peak inflation is indeed drawing closer. The question here is how the next jump in gas and electricity prices will put pressure on margins, which could lead to more pressure on core inflation in the months ahead. But the rapidly slowing economy is clearly cooling inflation prospects as well.”

FocusEconomics Consensus Forecast panelists expect fixed investment to expand 3.6% in 2022, which is unchanged from last month’s forecast. For 2023, panelists see fixed investment increasing 3.3%. FocusEconomics Consensus Forecast panelists expect private consumption to expand 4.2% in 2022, which is down 1.1 percentage points from last month’s forecast. For 2023, the panel expects private consumption to rise 2.4%.

Author: Massimo Bassetti, Senior Economist

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