EC Economic Sentiment Faltering Despite CPI Outlooks Cooling

EUROZONE MAY ECONOMIC SENTIMENT 96.5 (FCST 98.8); APR 99.0r

EUROZONE MAY FINAL CONSUMER CONFIDENCE -17.4 (= FLASH); APR -17.5

• Deteriorating demand conditions saw economic confidence for the euro area moderate by 2.5 points to 96.5 in May, falling more than the 0.5-point decline anticipated by consensus.
• The May slide follows four months of the index largely stalling and indicates below-average sentiment back around December levels due to a broad-based fall in perceptions of both past and expected production levels across sectors.
• The slump in retail trade sentiment led the fall, followed by declines in services and industry. Construction sentiment was only marginally weaker in May and remains the only indicator above the long-run average.
• Consumer confidence was confirmed up a mere 0.1pp at -17.4 in May as expectations for personal finances and the general economic conditions inched up. However, major purchase intentions faltered somewhat and unemployment concerns ticked up, indicating consumption is likely to remain pressured as uncertainty prevails.
• On a brighter note,12-month consumer price expectations continued to cool swiftly to the lowest since 2020, despite the latest ECB survey seeing expectations tick up. This alongside a decline in selling price expectations across industry, services and retail will be positive news for the ECB as they grapple with sticky-core CPI concerns.