Recent activity indicators have provided mixed messages about euro-zone growth. The Composite PMI fell to an 18-month low in September, whereas the EC’s Economic Sentiment Indicator (ESI) reached a nine-month high. (See Chart.) There are some signs that the upbeat message provided by the ESI will prove more prescient. But September’s rise in inflation is set to be followed by further increases in the coming months, which will weigh on growth in consumers’ real disposable income and thus suggests that the euro-zone’s consumption-led GDP growth will slow over the rest of this year and next.
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