Eurozone | Rising headwinds will test post-winter optimism

The ZEW and the Sentix for November surprised on the upside, showing that
investors are increasingly confident about the future even though current
developments remain challenging. A fall in market inflation expectations was
the most notable detail, and is in line with our view that the current inflationary pressures, although sizeable, are transitory and will ease materially over H2 next year. The EC’s forecasts go in the same direction.

What you will learn:

• However, the economic environment will remain tough in the meantime. Eurozone industrial production fell again in September as supply bottlenecks and high input prices continued to limit production.
• Moreover, final inflation data for Spain and Germany showed high energy prices keep pushing up consumer inflation to levels not seen in decades.
• The Covid-related risks are also returning to the headlines, with governments announcing localised measures as new infections are increasing rapidly again, although remaining relatively low.