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Perennially weak growth and a mountain of government debt mean that the Italian public finances are a potential time-bomb waiting to explode. Indeed, we think the size of the Governments debts will eventually prompt the markets to turn their sights on …
5th July 2010
On the face of it, there were some encouraging signs last week that the euro-zone banking system is becoming less reliant on the ECB for funding and is switching to borrowing from more conventional sources. But we think that these developments are not …
May’s euro-zone unemployment figures highlight the growing divergences between the core and peripheral euro-zone economies and add to evidence that the latter group’s economic woes are far from over. … Euro-zone Unemployment & Producer prices …
2nd July 2010
The widely predicted interest rate hike by the Swedish Riksbank from 0.25% to 0.5% made it thesecond western European central bank to tighten interest rates during the current cycle. But withother parts of Europe set for a much larger fiscal squeeze, we …
1st July 2010
With concerns about the euro-zone banking sector growing again, markets will be hoping for reassurance that the ECB will continue to provide ample liquidity. At the same time, the ECB is likely to stress that its asset purchases will continue to be fully …
The widely predicted interest rate hike by the Swedish Riksbank from 0.25% to 0.5% made it the second western European central bank to tighten interest rates during the current cycle. But with other parts of Europe set for a much larger fiscal squeeze, we …
Ireland exited recession with a bang in Q1, suggesting that the impact of fiscal tightening there and in the rest of the periphery may be less than generally feared. But the improving outlook largely reflects developments in the export sector, something …
30th June 2010
June’s euro-zone CPI data confirm that price pressures are very subdued. And while the continued fall in German unemployment brings hope of a modest consumer recovery there, it will not be strong enough to cause a marked pick-up in inflation. … Euro-zone …
June’s small increase in the EC measure of euro-zone economic sentiment is a relief after falls in other surveys lately. But it still points to only a modest recovery in the region as a whole, with the periphery performing very badly. … Euro-zone EC …
29th June 2010
May’s euro-zone money supply and bank lending figures suggest that banks remain in no mood to lend, highlighting the need for the ECB to maintain its unconventional policy support measures. … Euro-zone Monetary Indicators Monitor …
28th June 2010
Last week’s news on the euro-zone economy was fairly downbeat and suggested that divergences within the region have continued to widen. Germany, in particular, still seems to be benefitting from the weaker euro. But the outlook for the peripheral …
Recent data on the public finances suggest that the euro-zone peripheral governments are broadly on track to meet their ambitious fiscal targets for 2010. But these governments still face an enormous task to meet their medium-term goals. … Are the …
25th June 2010
The recent sharp rise in German consumers’ willingness to buy brings hope that announced fiscal austerity measures have not so far led households to abandon spending plans. But the weakness of fundamental determinants of household incomes suggests that a …
23rd June 2010
June’s fall in the euro-zone composite PMI index is another sign that the announced austerity measures may be starting to take their toll on the economy. But for the time being at least, the index still points to pretty strong growth. … Euro-zone Flash …
June’s improvement in the German Ifo business survey came as a relief amid evidence elsewhere that troubles in the periphery are starting to damage sentiment in core euro-zone countries. … German Ifo Survey …
22nd June 2010
On the face of it, the fact that the euro last week saw its strongest weekly gain in nine months might suggest that the worst is past for the single currency. The improvement could partly have reflected easing concerns about peripheral debt after a …
21st June 2010
The SNB’s hints that it will scale back its currency intervention suggest that the franc is set to appreciate more sharply and interbank interest rates should rise back towards the Bank’s target of 0.25%. But with growth set to slow before long, we doubt …
17th June 2010
Speculation that the Swiss National Bank’s (SNB’s) currency intervention has stemmed the decline in the trade-weighted euro seems overplayed. But the SNB’s struggle to prevent the franc surging against the euro is further proof of the strong fundamental …
16th June 2010
June’s drop in German ZEW investor confidence is a worrying sign that fears about peripheral debt are damaging sentiment towards core euro-zone economies too. … German ZEW (Jun.), E-Z Trade (Apr.) & Employment …
15th June 2010
The recovery in the euro-zone industrial sector continues apace. But it is far from clear that this will help the weakest economies in the region to cope with the coming fiscal squeeze. … Euro-zone Industrial Production …
14th June 2010
On the face of it, the latest news on the euro-zone economy has been reasonably encouraging, suggesting that the recovery has continued despite the fiscal crisis. National data point to another increase in industrial production in April, supporting …
The ECB maintained a supportive stance today, treating signs of an economic recovery with caution. While the Bank seems unlikely to resort to outright quantitative easing for now, sterilised bond purchases, generous bank lending and very low official …
10th June 2010
While the recent flurry of austerity measures in Germany and elsewhere goes some way towards meeting deficit reduction targets, there is considerably more to be done. And with the cuts already announced causing public uproar, some euro-zone countries will …
Q1’s GDP figures confirmed that, for now at least, Italy is expanding at a reasonably healthy pace. But with signs that the euro-zone fiscal crisis is damaging business and consumer confidence, growth looks set to slow over the remainder of the year. … …
Markets’ continued concern about the euro-zone fiscal outlook has prompted the euro to depreciate further and peripheral government bond yields to remain high over the past month. Worryingly, there are tentative signs that markets’ gloom may be starting …
9th June 2010
April’s rise in German industrial production provides hope that the recovery in the wider economy is gaining momentum. But with fiscal policy in Germany and elsewhere set to be tightened dramatically, the revival certainly remains fragile. … German …
8th June 2010
The past week’s data have added to concerns that strains in the region’s periphery are spreading to broader economic activity. While business sentiment remains consistent with a continued recovery for now, recent falls are worrying and the decline in …
7th June 2010
The second euro-zone GDP release for Q1 confirms that domestic spending remains weak and with fiscal tightening set to intensify, there is little prospect of an improvement any time soon. … Euro-zone GDP …
4th June 2010
The latest ratings downgrade of Spanish Government debt has triggered a new wave of concern in the markets. While Spain’s problems are far less acute than those of Greece, the Government still faces a tough task to convince the markets that it can return …
3rd June 2010
April’s drop in euro-zone retail sales brought more worrying evidence of the weakness of the consumer sector even before fiscal tightening really kicks in. … Euro-zone Retail Sales (Apr.) & Final PMI …
After making radical changes to unconventional policy just a few weeks ago, further alterations seem unlikely this month. The ECB will give little away about the size and type of future bond purchases. For now, it will stress that its actions are being …
Fears that Belgium might be the ‘Greece of the North’ have not yet been picked up by the markets. (See Chart 1.) But with persisting weaknesses in the banking sector and a renewed bout of political instability, risks to the economic and fiscal outlook are …
2nd June 2010
April’s sharp rise in euro-zone producer price inflation may prompt concerns that inflationary pressures are building. But we continue to think that deflation, rather than a surge in inflation is the greater threat for the region. … Euro-zone PPI …
The Swiss economy is recovering a little more slowly than had been hoped, but it continues to easily outperform the euro-zone. The key risk now is that close trade links to the region and a strong franc soon prompt the export-led revival to stall. … Swiss …
1st June 2010
April’s further rise in euro-zone unemployment adds to evidence that domestic demand in the region looks set to remain weak. … Euro-zone & German Unemployment …
Recent market developments, coupled with the prospect of a prolonged bout of fiscal consolidation, appear to be starting to have a damaging impact on confidence in the wider euro-zone economy. In the short term, this may not prevent the economic recovery …
31st May 2010
The sharp increase in Swedish activity in Q1, coupled with large upward revisions to growth in the preceding quarters, suggests that the Riksbank may bring forward its plans to raise interest rates in the summer or early autumn. … Swedish GDP …
28th May 2010
A bank levy along the lines of that recently proposed by the European Commission seems unlikely to alter banks’ behaviour or the state of European public finances dramatically. But the difficulty in agreeing to a uniform EU policy is another sign that a …
27th May 2010
German headline and core inflation remain very low and look set to fall further. With disinflationary pressures even stronger in many of the smaller euro-zone economies, deflation remains a real threat for the region as a whole. … German CPI (1st Est. …
The joint EU/IMF support packages may have provided Greece with some breathing space but it will not prevent years of economic hardship. Whatever its actions, the Government has no choice but to return its huge budget deficit to balance. … Greece: From …
The recent rescue package along with rulings made by the European Commission might be steps towards euro-zone fiscal integration that could feasibly benefit the region’s economies in the long run. But the near-term implication is greater pressure for a …
26th May 2010
On the face of it, there are signs that Ireland may be about to exit recession. But any recovery will be down to its exceptionally strong trade links with non-euro-zone economies, rather than any benefit from its early fiscal tightening. Accordingly, a …
24th May 2010
On the face of it, the recent weakening of the euro should provide the euro-zone’s external sector with a boost over the coming months. But given that exporters have tended previously to respond to a weaker currency by raising their prices in euros, the …
May’s falls in the euro-zone PMI and German Ifo business surveys are slightly worrying signs, but both still point to pretty strong growth for the time being. … Euro-zone Flash PMIs & German Ifo …
21st May 2010
Q1’s unexpected fall in GDP casts further doubt on the strength of the Norwegian recovery and supports our view that the Norges Bank will not increase interest rates as rapidly as its forecasts suggest. … Norwegian GDP …
20th May 2010
Switzerland’s low levels of public and private sector debt suggest that it will continue to out-grow the euro-zone over the next couple of years. But it will suffer from strong trade links with the region, particularly if the Swiss National Bank fails to …
19th May 2010
The latest Spanish GDP figures confirm that the economy just about exited recession at the start of the year. But with the Government recently announcing new austerity measures and the private sector still sitting on mountains of debt, the pick-up may …
May’s renewed decline in the ZEW index suggests that investors are still very worried about the effect of the periphery’s problems on the German economy. … German ZEW Survey (May), EZ CPI (Apr.) & Trade …
18th May 2010
