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Deteriorating global growth prospects and increased risk aversion have prompted a further fall in German 10-year government bond yields to a post-reunification low of around 2.1%. While fears have grown that bubbles may be forming in government bond …
30th August 2010
August’s fall in German HICP inflation confirmed the absence of price pressures in the euro-zone’s largest economy. Indeed, we still see the headline rate there falling to near zero next year. … German CPI (1st Est. …
27th August 2010
The ECB is likely to maintain a very dovish stance at the forthcoming meeting. Admittedly, recent positive data might have led the Bank to revise up its growth forecast for 2010. But the slowdown in global demand is a very worrying sign for the future. As …
26th August 2010
The latest money figures add to evidence that annual credit growth is picking up. But with credit conditions still tight and many peripheral banks still looking vulnerable, the ECB will need to maintain its unconventional policy support for a good while …
The latest Spanish GDP figures confirmed that the economy continued its modest revival in Q2. But with the full effects of the fiscal squeeze yet to be felt and global demand set to slow, the recovery will splutter to a halt in the second half of 2010. … …
Markets may have become more confident that Spain can get its public finances under control. But if Spain is to restore external balance within the euro-zone, it may have to accept a decade of deflation, stagnation and sky-high unemployment. … Can Spain …
25th August 2010
August’s rise in the German Ifo is good news after falls in some of the other surveys lately. But the slight decline in expectations highlights concerns for the future. … German Ifo Survey …
The euro-zone’s relative resilience has prompted some optimism lately, but note that the region’s business cycle typically lags behind that of the US. Euro-zone growth will almost certainly follow that in the US down very soon and the region looks set to …
24th August 2010
The breakdown of Q2’s German GDP data looks very encouraging, with the 2.2% quarterly surge in activity driven by both exports and domestic spending. But we doubt that the strength of either is sustainable. … German GDP …
August’s fall in the euro-zone composite PMI suggests that the recovery is now beginning to slow alongside those of other major economies. But the index points to pretty strong GDP growth for the time being. … Euro-zone Flash PMIs …
23rd August 2010
Recent encouraging news on the euro-zone has prompted us to revise up our 2010 GDP growth forecast from 1.0% to 1.5%. But the recovery is still heavily reliant on German exporters and the outlook for the periphery remains grim. And further evidence that …
Q2’s GDP figures add to evidence that Norway is on track for a modest recovery, suggesting that the Norges Bank will continue to tread cautiously. … Norwegian GDP …
19th August 2010
Q2’s GDP figures highlighted huge divergences within the euro-zone. We have revised up our growth forecast for this year, but this is entirely down to a better performance by Germany. And with consumer spending in the region as a whole still very weak, …
17th August 2010
August’s drop in the German ZEW index will dent any hopes that the strength of the recovery in Q2 could continue. Although the economy should post a strong annual gain of 3% or more this year as a whole, growth is probably slowing already. … German ZEW …
The news that euro-zone GDP rose by 1.0% in Q2 confirmed that the economy is performing very well, both by its own and international standards. But this might not last. The recovery is still heavily reliant on German exports, which will probably slow with …
16th August 2010
Q2’s GDP figures confirm that the euro-zone performed surprisingly well, both by its own and international standards. But the recovery remains dependent on exports from the core economies, which look set to slow before long. … Euro-zone GDP …
13th August 2010
Recent news has confirmed that the Greek central government is meeting its ambitious deficit reduction goals, adding to evidence that it will receive its second tranche of euro-zone and IMF funds in September without a hitch. But Q2’s GDP figures showed …
12th August 2010
Despite a small drop in production in June, the industrial sector remains the eurozone’s main engine of growth. But there remain stark divergences in industrial performance within the region. … Euro-zone Industrial Production …
A sharp drop in the euro exchange rate might seem like the answer to all of the currency unions problems. But while it might boost the core economies exports, it would do little to help the troubled periphery and could even increase the risk that the …
11th August 2010
The recent surge in German imports has brought hope that the recovery there is starting to benefit the rest of the world. But Germany is still running a very large trade surplus and the persistent weakness of domestic spending suggests that the strength …
10th August 2010
On the whole, the news on the euro-zone was fairly good again last week. Industrial figures from Germany confirmed that Q2 was a very good quarter and the final release of July’s euro-zone PMI surveys suggested that the recovery might since have gained …
9th August 2010
Since Italy has already put in place measures to reduce its budget deficit over the next couple of years, the current political uncertainties do not pose a major risk to the near-term outlook for the public finances. But its huge public debt certainly …
German industrial production data and GDP estimates from Italy and Spain confirm that the euro-zone recovery gained pace in Q2, with Germany far in the lead despite June’s small fall in production. … German Industrial Production (Jun.) & Italian GDP …
6th August 2010
The ECB maintained a cautious stance towards the economic outlook at August’s press conference, despite recent surprisingly positive news. With the pick-up in growth likely to prove temporary, policy will remain extremely loose for much longer than …
5th August 2010
July’s improvement in the euro-zone composite PMI was an encouraging sign that the economic recovery has continued and marked a stark contrast with falls in similar indicators in the US and UK. With the worst fears concerning peripheral debt easing a …
4th August 2010
The continued strength of euro-zone producer price inflation, coupled with the recent increase in CPI inflation, may prompt concerns that inflationary pressures are building. But we still expect CPI inflation to fall back sharply over the months ahead. … …
3rd August 2010
On the face of it at least, last week brought good news as economic sentiment rose further in July and there were tentative signs that strains in the banking sector could be easing. But with credit conditions tightening and sentiment in the periphery …
2nd August 2010
July’s increase in euro-zone inflation probably reflected developments in energy and food prices, while core inflation remained low. The still high rate of unemployment in the region points to further downward pressure on underlying inflation to come. … …
30th July 2010
The ECB’s decision to tighten future lending criteria and the fact that its bond purchases have ground to a near halt suggest that the Bank is again phasing out its unconventional policy support. The recent pick-up in indicators of economic activity and …
29th July 2010
July’s improvement in the EC consumer and business surveys adds to the evidence that the euro-zone is performing surprisingly well. But divergences between the region’s economies are widening. … Euro-zone EC Survey …
The recent news on the European economy has defied the ongoing concerns over the fiscal crisis in the peripheral countries of the euro-zone. But the recovery in the export and industrial sectors could soon start to lose steam in response to slower growth …
28th July 2010
July’s increase in German HICP inflation, from 0.8% to 1.2%, was probably driven by a temporary rise in the energy and food components. With core inflation still very subdued and likely to remain so, we see the headline rate ending the year near zero. … …
The EU bank stress tests have provided some encouraging signs that parts of the euro-zone banking system may be in better health than feared. But as yet there is little sign that banks are becoming more willing to lend to the wider economy. … Euro-zone …
27th July 2010
Attention last week centred again on the bank stress tests, which were due for publication on Friday. While the results were unavailable at the time of writing, it already seemed clear that they would be no panacea for the sector. The scenarios considered …
26th July 2010
The EU bank stress tests may have helped to reduce uncertainties around the health of Europe’s largest banks’ balance sheets. But concerns remain over the way the tests were constructed and we are little the wiser about how well equipped the smaller banks …
July’s rise in the German Ifo index suggests that the economy is performing very well despite signs of a slowdown in the US and elsewhere. But June’s fall in French consumer spending confirmed that activity there is lagging further behind. … German Ifo …
23rd July 2010
Germany’s export-led recovery appears to be going from strength to strength. But while this is clearly good news, a domestic revival would be required to ensure a strong and sustained pick-up in the euro-zone as a whole and to really help the beleaguered …
22nd July 2010
July’s rise in the euro-zone composite PMI suggests that, for now at least, the region is (perhaps surprisingly) evading the threat of a double-dip recession apparently facing the US and UK. … Euro-zone Flash PMIs …
Last week’s euro-zone industrial data provided further evidence that the recovery in the sector remains on track. But it also added to worries that divergences within the region are building and that the Club Med economies are far from out of the woods. … …
19th July 2010
Euro-zone exports continued to recover in May. But as the global economic revival loses momentum, weaker export growth will exacerbate the negative effects of the fiscal squeeze on the wider economy. … Euro-zone Trade Balance …
16th July 2010
May’s euro-zone industrial production data confirm that the recovery remains on track for now. But as global demand slows and domestic demand is hit by the fiscal squeeze, the revival in the wider economy may falter before too long. … Euro-zone Industrial …
14th July 2010
On the face of it, today’s Greek treasury bill auction, the first since April’s bailout package was activated, provides some reassurance that markets’ confidence may be gradually returning. But Greece is still a long way from being able to rely on the …
13th July 2010
July’s fall in German investor sentiment highlights concerns that peripheral debt worries and banking sector problems might stem the recovery in the euro-zone’s largest economy before long. … German ZEW …
Last week’s confirmation that stress tests of EU banks will be published on 23rd July did little to ease fears about the sector, probably because the scenarios considered will not be adverse enough. At least the ECB’s latest comments suggest that it will …
12th July 2010
After leaving interest rates unchanged today, the ECB confirmed that it would continue to support the banking sector with unlimited liquidity provision. And its cautious tone regarding the economic outlook suggested that official interest rate hikes are …
8th July 2010
May’s sharp rises in German industrial production and exports add to evidence that any negative effects on the sectors from the euro-zone fiscal crisis are being more than offset by the global economic upturn and weaker euro for now. … German Industrial …
The announcement that fairly detailed stress tests of EU banks will be published later this month brings only limited comfort. The adverse scenario that will be considered is nowhere near adverse enough and, crucially, there is still no clear promise of …
Further falls in euro-zone business confidence in June add to evidence that the economic recovery will fade in the second half of the year. But just as importantly, there are growing signs that divergences between the core and the periphery are …
7th July 2010
The threatened break-up of the euro-zone, which many see as a potential disaster, would actually open the door to renewed economic growth, not just for the weaker members of the zone, but for Europe as a whole. … Why the euro-zone needs to break …
We have come to the conclusion that the balance of probabilities has swung against the euro-zone surviving in its present form. We have been brought to this point by our analysis of the problems of indebtedness, competitiveness and structural economic …
6th July 2010
