Euro zone economic sentiment falls sharply as inflation expectations rise

A shopper pays with a euro bank note in a market in Nice, France. REUTERS/Eric Gaillard/File photo

BRUSSELS  -Euro zone economic sentiment fell sharply and by more than expected in September, data showed on Thursday, as confidence dropped among companies and consumers, who are also downbeat about price trends in the coming months.

The European Commission’s monthly economic sentiment index fell to 93.7 points in September from a downwardly revised 97.3 in August, compared with a decline to 95.0 forecast by economists polled by Reuters.

Confidence fell in all economic sectors, including industry, services, retail trade and among consumers, Commission’s data showed, amid a rise in inflation expectations across the board.

The fall in sentiment was most pronounced among manufacturers and consumers, with industry managers lowering their expectations for future production and exports.

Households’ confidence fell to -28.8 points from -25.0, as consumers expected a worsened financial situation over the next months and forecast cuts in their plans on major purchases.

Inflation expectations rose in all surveyed sectors after falling in previous months despite European Central Bank’s pledge to fight spiraling prices with multiple interest rate increases.