By William Horobin
Confidence in the euro-area economy unexpectedly rose in September as consumers turned more optimistic about the outlook and construction companies saw employment prospects improve.
The European Commission’s monthly sentiment gauge rose to 117.8 from 177.6, a small gain that masks trouble in services, retailing and industry, with manufacturers lowering production expectations amid persistent supply bottlenecks.
The European economy is entering a phase of uncertainty after a strong performance this summer when governments lifted most Covid restrictions. Growth in services is slowing as the sector nears normal, while material shortages and transport delays are hitting factories and a jump in energy prices threatens to strip away more momentum.
Selling-price expectations rose across industry, services and retail, leaving consumers to anticipate an increase in inflation pressures. Consumer-price growth is currently running at 3% and expected to pick up further.
Half of total inflation today is due to energy, according to European Central Bank President Christine Lagarde. While governments have already reacted by earmarking billions of euros of public money for mechanisms to mitigate higher heating costs for consumers, the Frenchwoman has played down concerns, arguing there are no signs the increase in inflation is broad-based.
Consumers are responding by showing more willingness to make major purchases. With unemployment falling following the end of restrictions and furloughed workers returning to their jobs, they’re also more optimistic about their future financial situation.
A gauge measuring employment expectations across all sectors of the economy reached its highest level in about three years.
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