Shops expect to raise prices; households are holding back on big buys

Every month the European Commission asks managers and households across the EU how things look. Thursday’s October results carry two lines worth reading together.

The first is about prices. Managers’ selling-price expectations “increased considerably” in all four business sectors: industry by 3.4 points, retail by 2.8, construction by 2.4 and services by 2.1, all further above their long-term averages¹. Consumers’ sense of how much prices rose over the past twelve months jumped by 3.9 points, while their expectations for the next twelve months stayed “unchanged at a high level”¹.

The second is about households. EU consumer confidence fell by 1.2 points, the second fall in a row, because people judged their household’s past and expected finances more harshly and planned fewer major purchases¹. Retail confidence dropped by 1.7 points¹. ING’s economists put it plainly: consumers are “shying further away from major purchases”². The overall sentiment indicator fell 0.6 points to 96.9 in both the EU and the euro area; in Germany it edged down by 0.7¹.

There is a brighter line too. Employment expectations rose, to 98.9 in the EU and 98.2 in the euro area¹. Firms are more inclined to hire than they were in September.

On Thursday the European Central Bank left its rates unchanged; the deposit rate stays at 2.50%³. Its statement noted: “Energy prices have continued to rise”³. For you, that means no new push from Frankfurt this time on what banks pay on savings or charge on new loans.

What can you do with this? Surveys measure intentions, not prices. Germany’s flash inflation figure arrives on Friday and will show what actually happened. Until then, if you are planning a large purchase, a written quote with a date is worth more than any expectation, including the shop’s. Nothing here is investment advice.