Economic sentiment deteriorated slightly at quarter-end. The headline gauge dipped 0.3 points from a marginally weaker revised August print to 96.2, only a 2-month low and just a tick below the market consensus but still well short of its 100 long-run average.

At a sector level, confidence worsened in industry (minus 10.9 after minus 9.9) and retail (minus 8.5 after minus 7.9) but improved in services (6.7 after 6.4), construction (minus 5.8 after minus 6.3) and in the household sector (minus 12.9 after minus 13.5).

Regionally, national sentiment weakened in France (97.2 after 98.6) and Germany (89.3 after 90.5), the latter hitting a 7-month low, but was more optimistic in both Italy (100.2 after 99.0) and, in particular, Spain (107.3 after 105.4). Accordingly, among the four larger economies, only Spain and Italy are now on the right side of the common 100 historic mean.

Inflation expectations were moderately favourable. Hence, while expected selling prices were unchanged (6.2) in manufacturing, they eased marginally in services (12.2 after 12.4) and inflation expectations in the consumer sector (10.9 after 11.3) saw their lowest level since last December. Planned major purchases (minus 16.0 after minus 15.8) also hit a 3-month low.

The September update leaves overall economic sentiment on a flat and soft trend that warns of continued sluggish household spending over at least the near-term. Consequently, with inflation expectations behaving themselves, speculation about another ECB cut as soon as next month is likely to grow. Indeed, today's report reduces the Eurozone RPI to minus 25 and the RPI-P to minus 29, both measures showing recent economic activity in general falling quite well short of market expectations.

Economic sentiment in September is expected to decline by 0.3 points to 96.3 from August's 96.6 which, despite rising 0.6 points to its highest level since May last year, extended a long flat trend well short of the 100 long-run average.

Released by the European Commission, the economic sentiment index (ESI) provides a broad measure of both business and consumer sentiment. Results are available for all participating countries and aggregated to the Eurozone and European Union level. The survey is very detailed and offers information on demand, output and inflation.

The survey offers key sentiment data across the European Union and the Eurozone region. Data are available for each country and are aggregated for both the Eurozone and EU. It is conducted by the European Commission rather than Eurostat, the compiler of most other EMU data. The index is a broad measure of both business and consumer sentiment in the EU members. Because of its coverage of all the EU countries it is highly regarded in the financial markets as a good indicator of the mood of consumers and industry in each country. It is also normally a good indicator of quarterly GDP.

Confidence indicators are calculated for industry, services, construction, retail trade and consumers. In turn, they are combined into an overall composite number, the economic sentiment indicator (ESI). The data are seasonally adjusted and defined as the difference (in percentage points of total answers) between positive and negative answers. The survey also covers other areas of the economy that are not explicitly included in the ESI. In particular, responses to questions about the inflation outlook are used by the ECB as one means of measuring inflationary expectations.