(Bloomberg) -- Euro-area economic confidence dropped to the lowest since 2020 this month as record inflation and the prospect of the first winter in a generation without Russian gas cast a shadow over the region. 

A measure of sentiment compiled by the European Commission fell to 93.7 in September. That’s less than the median forecast in a Bloomberg survey of economists and the lowest since November 2020. The outcome marks the seventh consecutive monthly decline. 

All gauges feeding into the index from services to industry showed deterioration, with consumer sentiment falling the most. Uncertainty among households is at an all-time high.

The outcome illustrates the hit to sentiment after a shutdown of Russian gas flows via the Nord Stream 1 pipeline earlier this month, as well as the mounting economic damage inflicted by the fallout from half a year of war raging just over the region’s frontier.

The survey also showed a pickup in consumer’s inflation expectations, though that gauge remains noticeably lower than a peak earlier this year. 

Policy makers are worried that anticipated price increases might get out of control. Just on Wednesday, European Central Bank President Christine Lagarde told an event in Berlin how closely officials are monitoring measures such as this one.  

“We look at what our scenarios tell us, we do sensitivity analysis, we look at surveys, we try to understand exactly what is in investors’ minds, in consumers’ minds,” she said. “We need to make sure that those inflation expectations stay anchored at 2%.”

With consumer-price increases on the verge of double digits -- the latest data will arrive on Friday -- the ECB has delivered two aggressive interest-rate hikes and has promised more to come.  

Investor currently see a 75% chance of a second 75 basis-point hike being delivered at the next decision on Oct. 27.

Some policy makers are openly calling for such a large hike, a step that would bring the total since July to a combined tally of 2 percentage points.

While economic confidence in the euro area is deteriorating, it is still far higher than the April 2020 low just after the pandemic had forced global lockdowns. Employment expectations remain above the long-term average.

The region’s prospects are likely to keep depressing sentiment further as seasonal cold weather grips the continent. Just this week, the OECD said that “Europe in particular is bearing the cost of the war in Ukraine, and many economies face a difficult winter.”

“Worse times are coming,” the Slovak central bank said on Wednesday.

©2022 Bloomberg L.P.