Economic outlook continues to darken

The unveiling of the ECB’s new bond purchase programme may have provided markets with a lift, but further declines in business and consumer sentiment suggest that the overall eurozone economic outlook has worsened. The sharp fall in the EC Economic Sentiment Indicator (ESI) in September means that the index now points to annual falls in GDP of around 2.5%. With a number of euro-zone economies recently announcing more austerity measures, the euro-zone looks on track to fall deeper into recession. We are still pencilling in a 2.5% fall in GDP in 2013, significantly worse than our forecast for a 0.7% drop this year.