The PMI numbers out of the Euro Area last week were consistent with sluggish growth, with slight contraction in the manufacturing sector compensated by somewhat livelier services data. As to the former, we are yet to see any clear signs of impetus from the massive German stimulus package announced almost six months ago, which is not overly surprising given the time lag inherent in fiscal stimulus, particularly infrastructure spending – we are not expecting this to be reflected in the data in earnest until early 2026.
Euro Area inflation expectations have edged up, and though they remain relatively contained, this probably means that further European Central Bank rate cuts are off the table. September inflation data on Wednesday should be a non-event. The core inflation rate, which is arguably the most closely watched of the two by ECB officials, is expected to remain unchanged slightly above the bank’s target for the fifth consecutive month.