Eurozone consumer confidence fell to minus 16.5 in September, sliding one full point from August as surging energy prices and utility bills weighed on household sentiment across the 21-nation currency area. The European Commission reported that the flash consumer-confidence indicator dropped this month, damaged by rebounding energy prices following escalated military action in the Middle East.
The decline came in steeper than expected. A consensus of economists polled by The Wall Street Journal had anticipated a less severe drop to minus 16.0. Prior to September, consumer confidence had climbed for four consecutive months, reaching its highest level in August since February before the war in Iran broke out and sharply weakened sentiment.
Decline Follows Four Months of Recovery
The European Commission noted that Consumer confidence veered away from its long-term average again, after four months of recovery.
According to Jack Allen-Reynolds of Capital Economics, the barometer’s drop shows that household moods soured again as fuel prices climbed about 6% during the month, accompanied by lower equity prices and higher utility bills.
Despite the setback, Allen-Reynolds noted in a client note, But as long as oil and natural gas prices don’t rise a lot further, we think that household consumption will continue to increase.
Upcoming Data and Monetary Policy Focus
The consumer sentiment data precedes a purchasing managers’ index release scheduled for Wednesday. That release will reflect how businesses are responding to higher energy prices, alongside the European Central Bank’s interest-rate hike implemented earlier in the month.
Claus Vistesen, an economist at Pantheon Macroeconomics, stated that Upside surprises in the September PMIs and [for inflation] likely would prompt the ECB to follow through with a hike next month, but we still think December is the more likely timing for the bank’s next move.