Despite EC downgrade of growth outlook, inflation outlook remains elevated: +5.6% in 2023 (previous +5.8%) and +2.9% in 2024

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Renta 4: European stock markets open without major movements (Eurostoxx futures +0.2%, S&P -0.1%), in a session that is expected to be transitional as we await the week’s big releases: US CPI (Wednesday) and the ECB (Thursday).

In the background, new negative news on the cycle, with the European Commission revising downwards its eurozone growth forecasts for 2023 to +0.8% versus +1.1% previously and 2024 to +1.3% versus +1.6%, while considering that the risks to growth are still on the downside. Of note are the downward revisions for Germany (2023 -0.4% versus +0.2% previously, 2024 +1.1% versus +1.4%) and Italy (+0.9% versus +1.2% and +0.8% versus +1.1%), which contrast with the upward revisions for 2023 in Spain (+2.2% versus +1.9% but slightly downward in 2024 +1.9% versus +2%) as well as in France (+1% versus +0.7% in 2023 but +1.2% versus +1.4% in 2024). Today’s German September ZEW (survey of financial analysts and institutional investors) could show weakness towards 2020 lows.

Despite the generalised downward revision of the growth outlook, the European Commission’s inflation estimates remain high: +5.6% in 2023 (previous +5.8%, moderated by the impact of tighter financial conditions) and +2.9% in 2024 (versus +2.8% previously), with a positive (upward) contribution of energy costs that would be offset by lower food and non-energy industrial goods prices. In this sense, it is worth highlighting yesterday’s rise in gas prices, which brings the increase to +15% in the last three days in the European benchmark. Today we will have the final CPI for August in Spain (+2.6% year-on-year overall, but +6.1% year-on-year core).

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.