Despite a slight increase in confidence among Eurozone investors and analysts, our barometer dropped 3 points this month, to settle at +23. This is mainly due to the decline in morale in Luxembourg’s industrial sector.
Locally, this morale is mixed. Up in the financial and construction sectors, but down in industrial and non-financial services. Second quarter STATEC figures also point to some slightly negative signs. Non-financial revenues are down by approximately 1% compared to the first quarter, and the dynamism of labour market is slowly fading, with the ratio between new job offers and declarers of unemployment no longer rising. The news is not all bad however, with the country’s robust financial sector continuing along its growth path. Net assets of collective investment schemes reached a record 3.96 billion euros, and Standard and Poor’s reaffirmed Luxembourg's "AAA" rating, with a stable perspective.
Regionally, Eurozone confidence remains high. Rising from the drastic drop last month, the ZEW index rose by 2.4 points to settle at 31.7. Additionally, the OECD revised its forecasts up by 0.3%, with real GDP growth now expected to reach 2.1% this year. Finally, the PMI remain high, although the service index dropped slightly. Apart from the very slight depreciation at the end of September, the Euro's strength has unavoidable disinflationary effects. Core inflation stands at 1.1% year-on-year in September, below its expected 1.2% and well below the ECB’s inflation target of 2%. In the context of disinflationary growth, which is somewhat debated in the economic community, the ECB should be cautious about reducing quantitative easing in 2018.