The European Commission’s September sentiment survey won’t stand in the way of market pricing for a more aggressive pace of ECB rate cuts. The Economic Sentiment Index (ESI) was 96.2, below consensus and last month’s 96.5 and the long-run average of 100. 

• The indicator has essentially flatlined through this year, peaking at 96.5 last month and troughing at 95.5 in February.
• Industrial sentiment fell by 1 point to -10.9, its lowest since July 2020. This follows weakness in the September flash manufacturing PMI.
• Services sentiment remains the only major sub-component in expansionary territory, rising 0.3 points to 6.7.
• Expected retail and services prices eased in September, the former to its lowest since March 2021. This is likely a function of weak household demand and lower corporate pricing power across the region.
• The expected employment indicator was little changed at 99.5, with industry/retail sectors expecting lower employment and services/construction higher.
• After rising by 3.6 points in August (likely an Olympic-induced bounce), the French ESI pulled back 1.4 points to 97.2. German sentiment also fell 1.2 points, while Italy (+1.2) and Spain (+1.9) outperformed.