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The Riksbank’s report on household indebtedness underscores the magnitude of the problem and the need for it to be addressed. But we continue to think that the Bank will cut interest rates as deflationary fears prove to be more critical. … Deflation to …
7th May 2014
March’s retail sales data suggested that the euro-zone economic recovery may finally be broadening out to include households, while the final PMIs for April pointed to a stronger pace of recovery at the start of Q2. … Euro-zone Retail Sales (Mar.) & …
6th May 2014
The euro-zone’s upcoming bank stress tests are likely to be more effective than the region’s earlier attempts. But the euro-zone financial system will heal only slowly, remaining a drag on the recovery for a while yet. Meanwhile, last week brought good …
5th May 2014
The improvement in investor sentiment towards the euro-zone has allowed even beleaguered Cyprus to tap the markets for funding. But the nation remains a long way from replicating Ireland’s ‘clean exit’ from its bail-out. Indeed, we think that Cyprus will …
2nd May 2014
Although progress is still slow, the latest euro-zone fiscal data provided more evidence that peripheral governments are gradually strengthening their fiscal positions. … Euro-zone Fiscal Monitor …
March’s euro-zone unemployment figures maintained the picture of a gradual, but painfully slow, improvement in labour market conditions across the currency union. … Euro-zone Unemployment (Mar.) & Final Manu. PMI …
We doubt that recent events and data releases have been significant enough to ensure more policy action from the ECB at its May meeting. But developments in the inflation outlook and in money markets suggest that the Bank’s two “contingencies” for further …
1st May 2014
Although survey measures of short-term inflation expectations have fallen sharply, medium-term forecasts have so far remained well anchored. However, with deflationary pressures building, a de-anchoring of medium-term expectations is a clear danger in the …
Figures released today showed the Belgian recovery gaining a little momentum in the first quarter. But sharp falls in sentiment in March and April suggest that growth may yet slow later this year. … Belgian recovery likely to remain …
30th April 2014
The prospect of early elections in Slovenia is unlikely to spark significant market pressures. But it highlights how a dysfunctional political system is undermining the country’s economic reform efforts. … Slovenia’s political crisis shows flagging …
April’s inflation figures might have eased some of the immediate pressure on the European Central Bank (ECB) to provide more policy support, but they did not alter the big picture of growing deflation dangers in the currency union. … Euro-zone Flash CPI …
March’s euro-zone monetary data underlined the continued weakness of the region’s financial system and will help to maintain the pressure on the ECB to ease monetary policy further over the coming months. … Euro-zone Monetary Indicators Monitor …
29th April 2014
The unexpected fall in the EC’s Economic Sentiment Indicator (ESI) in April might be a warning not to expect too much from the euro-zone recovery and further highlights the risk of deflation in the region. … Euro-zone EC Survey …
Data released last week suggested that the euro-zone recovery gained more traction at the start of Q2. But there remains a worrying divergence between France and Germany which risks holding back the broader recovery. Meanwhile, last week’s successful bond …
28th April 2014
The prolonged deterioration in Finland’s labour market may finally be coming to an end, according to data published earlier this week. But we suspect that employment will pick up very slowly at best. … Labour market still a constraint on Finland's …
25th April 2014
The prolonged deterioration in Finland’s labour market may finally be coming to an end, according to data published earlier this week. But we suspect that employment will pick up very slowly at best. … Labour market still a constraint on Finland’s …
April’s Ifo survey supported the message from other recent surveys that the steady recovery in the German economy has continued into the second quarter. But a further marked acceleration seems unlikely. … German Ifo Survey …
24th April 2014
Despite the euro-zone composite PMI rising in April to its highest level in nearly three years, economic growth is not yet strong enough to diminish fears of deflation. … Euro-zone Flash PMIs …
23rd April 2014
The European Central Bank (ECB) appears finally to be seriously considering the option of implementing quantitative easing (QE). While we have long argued that QE in the euro-zone was a more likely option than commonly thought, there are many …
22nd April 2014
A negative interest rate on banks' excess reserves at the ECB might have some effect on banks' behaviour and at least prove that the ECB is prepared to follow its dovish words with action. But it must be just one part of a policy package that also …
21st April 2014
Although France’s short-term outlook remains weak, the new French Government’s recent policy announcements provide hope that France is slowly tackling its significant competitiveness problems. … France’s reform effort inches …
16th April 2014
The ECB’s battle against deflation is turning into a fight to lower the euro exchange rate. But it is far from clear that the central bank will act sufficiently to bring the currency down far enough. … Can the ECB get the euro …
15th April 2014
April’s ZEW survey brought further evidence of strength in the German economy. But the fall in expectations raises some concerns over the medium-term outlook. … German ZEW Survey (Apr.) & Euro-zone Trade …
Austria is likely to remain one of the best performing euro-zone core economies over the coming years. Even so, the banking sector remains a weak spot and is particularly exposed to an intensification of the crisis in Ukraine. … Austria’s recovery still …
Recent speeches from officials suggest that the ECB has finally accepted that the threat of deflation in the euro-zone warrants further policy action. But it is far from clear that any action will be both early and decisive enough to prevent a sustained …
14th April 2014
February’s euro-zone industrial production figures confirmed that the sector has made a weak start to 2014 and highlighted the slow and fragile recovery both in industry and in the euro-zone economy as a whole. … Euro-zone Industrial Production …
Greece’s return to the bond markets last week might appear to mark the end of the euro-zone crisis which began when the true extent of the same country’s fiscal problems came to light in 2010. But given continued doubts about fiscal sustainability and …
Greece’s successful bond issue highlights the progress that the country has made in recent years. But an increased use of market funding creates its own risks for Greece’s recovery. … Greece's return to the market may not be all …
10th April 2014
The recovery in the European economy appears to have picked up a bit of speed in the early months of 2014. The euro-zone now looks set to expand by 1% or more this year, a significant improvement on last year’s contraction, and even some of the peripheral …
The Swedish Riksbank pushed back the date at which it expects to start raising interest rates and signalled that the probability of a rate cut in the near term has grown. We continue to think that low inflation will force the Bank to cut its policy rate …
9th April 2014
Although President Draghi adopted a softer tone at last week’s interest rate press conference, the ECB decided to once again keep its powder dry. However, given the weak recovery and subdued inflation we still expect the ECB to cut interest rates later …
7th April 2014
Although the ECB left policy on hold again today, President Draghi turned his dovish rhetoric up a further notch. With the economic recovery set to remain too weak to diminish the threat of deflation, the pressure on the central bank to follow words with …
3rd April 2014
February’s retail sales data offered hope that the euro-zone’s recovery is slowly broadening to households, while the final PMIs suggest that the recovery may have strengthened in Q1. … Euro-zone Retail Sales (Feb.) & Final PMIs …
The key euro-zone surveys of activity and sentiment continued to pick up in Q1, particularly in the periphery, suggesting that GDP growth in the region as a whole may have been a bit stronger than in Q4. What’s more, January’s solid monthly rises in …
2nd April 2014
Recently published data show that Italy and Spain made little headway in strengthening their fiscal positions in 2013, but Portugal exceeded its targets. More encouragingly, most of the periphery reduced their budget shortfalls at the start of 2014. … …
1st April 2014
February’s euro-zone labour market figures underlined the fact that the economic recovery is still far too weak to make a significant dent in the high level of unemployment across the currency union. … Euro-zone Unemployment (Feb.) & Final Manu. PMI …
Although the Cypriot economy has proven surprisingly resilient over the past year, its future still looks bleak. In common with a number of euro-zone economies, Cyprus is at risk of a prolonged period of weak growth and deflation which, on current plans, …
France is beginning to tackle its long-standing economic problems. Although a weak labour market and additional fiscal austerity will weigh on the economy this year, growth should pick up in 2015, putting the country’s fiscal dynamics on a more …
31st March 2014
March’s fall in euro-zone consumer price inflation probably partly reflected temporary factors relating to the timing of Easter. But the weakness of inflation suggests that the ECB may need to take further policy action. … Euro-zone Flash CPI …
Survey data for March provided an insight into how the euro-zone fared over Q1. While they suggested that the recovery probably gained a little momentum in the first quarter, they remain consistent with disappointingly sluggish growth and growing …
The rise in the European Commission’s Economic Sentiment Indicator (ESI) in March provides another indication that the euro-zone economic recovery has built up a little momentum in the early months of the year. … Euro-zone EC Survey …
28th March 2014
Developments over the last month have not clearly met either of the ECB’s two “contingencies” for further policy action. Nonetheless, the ongoing danger of deflation and dovish signals from several Governing Council members – not least Bundesbank …
27th March 2014
February’s weak euro-zone monetary data will add to pressure on the ECB to ease monetary policy further in the coming months. … Euro-zone Monetary Indicators Monitor …
Although the Norges Bank left its monetary policy stance unchanged today, the Bank may yet need to push back its first projected interest rate hike from mid-2015 to 2016. … Norwegian interest rates may be on hold until …
March’s German Ifo survey echoed the message from other recent surveys that sentiment towards the economy might be starting to soften a little bit. But the current conditions index still points to solid growth. … German Ifo Survey …
25th March 2014
The fall in the Danish krone to its weakest level against the euro since early 2006 has increased speculation that Denmark’s central bank will have to respond to maintain the krone’s peg. We agree that action is necessary but suspect that the Nationalbank …
24th March 2014
Recent data show that the euro-zone labour market is finally starting to strengthen and that labour costs are falling in the periphery relative to the core. But, while some economies are adjusting better than others, this grinding rebalancing will …
