European business cycle indicators : 3rd quarter 2024

This special topic investigates the extent to which selling price expectations (SPE) from the harmonised EU programme of business surveys contain leading information for forecasting short-term developments in the Harmonised Index of Consumer Prices (HICP). The analysis is based on a comprehensive econometric investigation into the relationship between selling price expectations and consumer price inflation over different time horizons, forecast models and inflation concepts, across sectors and on aggregate. The models exhibit fairly small forecast errors, despite the fact that they are solely based on SPE data. Starting from the estimated HICP inflation for the euro area in September 2024 (1.8%), forecasts for HICP inflation for the next six months (i.e. October 2024 to March 2025) point to a temporary increase in October 2024 to 2% or above. Thereafter the forecast shows a mild downward trajectory up to January 2025 and a stabilisation at levels below 2% at the end of the forecast horizon.