Bert Colijn

Production fell by 0.3% month-on-month, which is quite the poor start to the third quarter. Forward-looking indicators don’t show much of a turnaround, adding to worries about decelerating GDP growth in the eurozone

As the Olympic flame was extinguished, so was eurozone optimism. The August uptick in the PMI was met by a sharp decline in September. The PMI now stands at 48.9, which indicates contraction according to the survey. This further fuels growth concerns in the bloc as inflation worries fade

Previous cycles show that a month to a quarter after the first cut there tends to be confirmation from the data that things are not great, and if anything is getting worse. That tends to expose the upside move in yields to the new reality that the Federal Reserve still has considerable work to do. It results in a leg lower in yields, and leads to the basic truism of most previous cycles – even if yields initially back up, they ultimately fall back down again, and typically to much lower levels to where they were at the moment the Fed initiated their cuts, as can be gleaned from the chart above. That's the strongest argument against the notion that a material break above 4% is likely.

Money growth and bank lending both picked up somewhat in August. But the pace of lending generally remains sluggish as interest rates and economic uncertainty are both high. With growth slowing and inflation back close to target, this will fuel further debate on the pace of European Central Bank rate cuts

The Economic Sentiment Indicator dropped from 96.5 to 96.2 in September. Weaker growth prospects and easing inflation concerns show a clear turning in eurozone sentiment at the moment, which adds dovish pressure on the ECB

While no turnaround is expected in the immediate future, there are some green shoots visible for industry in 2025. However structural factors are weighing on the manufacturing sector, which will limit the scope of any rebound

A strong 1.8% month-on-month increase in production provides some support for third-quarter growth expectations after some dismal survey readings, but longer term issues for the industry sector have yet to be resolved

Demand for loans has improved among both households and corporates, while credit standards have stopped tightening after two years. This indicates that monetary easing – and the prospect of more easing to come – are resulting in cautiously improving investment expectations

The luxury of labour hoarding is coming to an end in the eurozone as corporate profits dwindle. And that’s going to mean wage growth will ease, unemployment will tick up and we’ll see more bankruptcies too. A terrible prediction? We’re actually just getting back to normality

The luxury of labor hoarding is coming to an end in the eurozone as corporate profits dwindle. And that's going to mean wage growth will ease, unemployment will tick up and we'll see more bankruptcies too. A terrible prediction? We're actually just getting back to normality.