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March’s small fall in the euro-zone composite PMI does little to alter the view that the economy made a strong start to 2011 and that the ECB will push ahead with its planned interest rate hike in April. … Euro-zone Flash PMIs …
24th March 2011
Portugal seems very likely to become the third peripheral euro-zone country to need a bail-out. But it also faces much greater challenges if it is to overcome the deep-seated structural problems which have held back the economy for the last ten years and …
22nd March 2011
Details on the methodology and assumptions behind this year’s European bank stress tests provide little hope that the results will significantly ease concerns about the region’s banks. This supports the view that the euro-zone fiscal crisis is still far …
21st March 2011
Recent events in Japan and the sharp fall in euro-zone equity prices mean that an interest rate hike by the ECB in April is now less certain. For now at least, we continue to think that the Bank will raise interest rates next month. But even if it does …
Despite growing domestic price pressures, the Swiss National Bank left its interest rate target at 0.25% at today’s meeting. While the Bank’s tone was a bit more upbeat than expected, the inflation forecast remains subdued, supporting our view that …
17th March 2011
February’s final euro-zone CPI inflation figures revealed that the rise in the headline rate was once again down to energy and food. With core inflation still very subdued and global concerns building, we still think that the ECB will raise interest rates …
16th March 2011
Contrary to prior expectations, Portugal was not pushed into accepting a bail-out at this weekend’s euro-zone summit. Instead, the “Euro Pact” and Portugal’s announcement of new fiscal measures eased the pressure on it to do so. Still, these developments …
15th March 2011
March’s small fall in the headline German ZEW index suggests that investor sentiment might be starting to ease in response to the ECB’s increasingly hawkish stance and global concerns. But this does nothing to alter our view that the near-term prospects …
Measures announced by European leaders late last Friday to try to resolve the region’s fiscal problems have provided the markets with a boost. But the measures are not as far-reaching as had been hoped for a couple of months ago and are unlikely to mark …
14th March 2011
January’s euro-zone industrial production data suggest that the sector has made a reasonably solid start to the year. Nonetheless, they add to evidence that the wider economy has grown at a slower pace in Q1 than the business surveys have suggested. … …
Expectations for the EU summit to discuss the latest policy proposals to tackle the euro-zone debt crisis have fallen so far that the scope for disappointment in the near term may be limited. Nonetheless, growing political resistance in a number of …
The Italian and Portuguese Q4 GDP expenditure breakdowns add to evidence that the divergence in economic growth between the northern and southern euro-zone economies is unlikely to narrow significantly any time soon. … Italian & Portuguese GDP (Breakdown, …
11th March 2011
Recent financial market developments suggest that Greece is as far away as ever from convincing investors that it can get its public finances on a stable footing without defaulting. What’s more, there appears to be a growing risk that Greece could …
9th March 2011
January’s sharp rise in German industrial production adds to evidence that the recovery in the sector and the wider economy still has plenty of momentum and that Germany will remain the euro-zone’s main engine of growth in 2011. … German Industrial …
Q4’s renewed contraction in Icelandic GDP is a reminder that the economy will struggle to sustain a decent recovery. While the end of the Icesave saga provides some signs of hope, we doubt it will significantly alter the grim outlook for the economy. … …
8th March 2011
This week’s EU summit to discuss the so-called “Grand Bargain” of policy proposals to tackle the euro-zone debt crisis already had a lot riding on it. But last week’s strong indication from the ECB that it is about to withdraw some of its own policy …
7th March 2011
The ECB gave a crystal clear signal today that it has already made the decision to raise interest rates in the near future. We have pencilled in quarter-point hikes in rates in both April and July. … ECB signals April rate …
3rd March 2011
The second estimate of euro-zone Q4 GDP provides some welcome signs that the economic recovery in the region is becoming a little more broad-based. But there are still good reasons to think that the recovery could falter later this year. … Euro-zone GDP …
February’s sharp rises in the surveys of euro-zone business sentiment are an encouraging sign that the region’s fiscal squeeze is not yet having a severe impact on business confidence. This, coupled with growing evidence that the external sector recovery …
2nd March 2011
The apparent impasse between the ECB and Germany over the purchase of peripheral government bonds not only makes it very likely that Portugal will have to accept a bail-out but also questions the policymakers’ ability to prevent the debt crisis from …
Most of the peripheral euro-zone governments made some progress towards getting their public finances under control in 2010. But those economies are set for another painful squeeze this year and markets remain sceptical as to whether the likes of Greece …
Well over a year into the euro-zone debt crisis, policymakers still face enormous challenges if they are to prevent the region’s problems from continuing to escalate. On current evidence, it is far from clear that they have the conviction and means to …
1st March 2011
The latest data on the euro-zone economy brought mixed news in the form of falling unemployment and rising inflation. … Euro-zone Flash CPI & Unemployment …
Q4’s Swiss and Swedish GDP releases confirmed that some of the European economies outside the euro-zone are expanding at a healthy pace. But strong currencies will ensure that the external sectors there may struggle this year, prompting overall GDP growth …
News that Fine Gael and Labour are likely to form a coalition Government with a healthy majority will reduce political uncertainty in Ireland. But the new Government faces a major battle to improve the terms and conditions of its bail-out and a further …
28th February 2011
Healthy rises in the euro-zone business surveys in February add to evidence that the region as a whole and Germany in particular have made a strong start to the year. But while a bout of robust German growth would appear to be good news for the periphery, …
The further rise in German CPI inflation in February will do nothing to ease the ECB’s worries about building inflationary pressures. But we continue to think that the pickin German inflation is predominantly down to temporary factors and that inflation …
25th February 2011
The latest euro-zone money and credit data continue to suggest that underlying inflationary pressures remain subdued. But needless to say, the recent surge in the oil price, coupled with the fact that headline CPI inflation remains above 2%, suggests that …
The recent increase in Portuguese bond yields will increase the pressure on the Government to accept a bail-out. Nonetheless, the Government may resist requesting outside support for a little while yet. … Is a Portuguese bail-out just around the …
24th February 2011
The recent batch of reasonably upbeat economic data, coupled with further signs that price pressures may be building, will ensure that President Trichet continues to strike a hawkish tone at next week’s council meeting. But he is unlikely to go as far as …
February’s EC business and consumer survey adds to evidence that the euro-zone recovery has regained momentum in Q1 and that the ECB’s hawkish stance may harden at next week’s Governing Council meeting. … Euro-zone EC Survey …
There have recently been signs that Spain may be starting to persuade the markets that it is not in as dire a position as some of the other peripheral economies. While this provides some hope that the markets might not turn their sights on Spain if …
22nd February 2011
February’s euro-zone PMI and German Ifo surveys suggest that the euro-zone and German economies have started 2011 with a bang. Nonetheless, divergences between the core and peripheral euro-zone economies look set to remain. … Euro-zone Flash PMIs & German …
21st February 2011
On the face of it, the news that the euro-zone economy expanded by just 0.3% in Q4 was pretty disappointing. But note that bad weather in Germany might have reduced euro-zone quarterly GDP growth by 0.1 percentage points. This, coupled with the fact that …
The recent news that the Greek economy remains deep in recession will add to fears that the Government may struggle to meet its budget deficit goals and will do nothing to ease concerns about Greece’s economic and fiscal outlook. … Worsening economic …
17th February 2011
Q4’s GDP figures show that the Norwegian economy continued to expand at a steady pace. This, together with the fact that inflation is still a little below the Norges Bank’s target and the strong krone, suggests that the Bank will continue to tread …
16th February 2011
Today’s Q4 GDP figure suggests that the Belgian economy continued to expand at a modest pace. But growth is likely to slow in coming quarters and given the country’s ongoing political crisis and large public debt, concerns about Belgium’s economic and …
Spain’s final Q4 GDP release confirmed that the economy outperformed its southern European counterparts at the end of last year. But we still think that Spain is set for a pretty tough 2011. Indeed, the economy may fall back into recession later this …
As expected, the Swedish Riksbank responded to the economy’s ongoing robust revival by raising interest rates and revising up its interest rate forecast. Nonetheless, we still think that weaker than anticipated growth this year and the strong currency …
15th February 2011
The modest rise in euro-zone GDP growth in Q4 is likely to have been partly down to one-off weather-related factors, suggesting that the recovery may regain momentum at the start of this year. Nonetheless, the disappointing growth figures for the …
The renewed contraction in Portuguese GDP in Q4 last year underlines the fragility of the outlook for the economy. With political tensions rising and government bond yields uncomfortably high, Portugal still seems to be the next in line to be forced to …
14th February 2011
December’s small fall in euro-zone industrial production was probably down to the unusually severe winter weather and does little to alter the view that the sector remains the key driver behind the economic recovery in the region. … Euro-zone Industrial …
On the face of it, recent data suggest that the euro-zone is on track to expand at a pretty healthy pace in Q4. But we suspect that the disruption caused by the bad weather will mean that Q4’s growth figures may be rather disappointing. While there is …
After a month of respite, the surge in Portuguese ten year government bond yields to new euro-era highs has reignited fears that Portugal may still need outside support. Even if Portugal isn’t forced to accept a bail-out as part of the euro-zone’s crisis …
10th February 2011
Speculation is growing that the next Irish Government will attempt to restructure some of the nationalised banks’ senior debt. But such a move, while no doubt popular with taxpayers, would do little to improve the public finances. … Bank debt plans won’t …
9th February 2011
On the face of it, the recent fall in Greek sovereign CDS premia and press reports suggesting that Greece will receive the fourth tranche of loans from its bail-out package in March are encouraging signs that the Government may be getting its fiscal …
December’s sharp fall in German industrial production is not as worrying as it seems. Although GDP growth in Q4 will not be as strong as we had previously anticipated, owing to bad weather, it still looks set to broadly match Q3’s healthy rise. … German …
8th February 2011
Peripheral euro-zone bond yields fell further last week in apparent anticipation of the so-called “Grand Bargain” of policy measures. But the markets’ optimism raises the danger that the package falls short of hopes of a “bazooka” to aim at the debt …
7th February 2011
