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Norway is a riddle, in a mystery, inside an enigma Norwegians will go the polls in parliamentary elections on Monday in what has been dubbed the “climate election”. The run-up to the vote has been dominated by a debate over the appropriate speed at which …
10th September 2021
The future of ECB QE On Thursday, the ECB announced a slight reduction in the pace of its PEPP purchases but delayed more important decisions to December. (See here .) So October’s meeting looks set to be dull, and Christine Lagarde might need to channel …
Weak core inflation will not prevent tightening cycle start The fact that the Norges Bank’s target measure of inflation fell for the fifth month in a row in August, and is likely to remain steady at about half the Bank’s target rate over the next six …
The ECB today confirmed that it will slow its asset purchases slightly but this is a long way from a “full taper”. We think inflation will drop even further than the ECB expects over the medium term and expect the Bank to continue with asset purchases of …
9th September 2021
The fact that the Swedish GDP indicator was nearly 2% above its pre-virus level in July puts a question mark over the wisdom of the Riksbank’s plan to exhaust its asset purchase envelope by end-2021. We think there is a rising chance that policymakers …
8th September 2021
The shortage of heavy goods vehicle (HGV) drivers in the euro-zone appears to be nowhere near as acute as in the UK. We therefore don’t expect to see a surge in drivers’ wages that would lead to widespread upward pressure on pay throughout the euro-zone …
7th September 2021
Economy and labour market recovering strongly With revised data showing that the euro-zone economy performed even better than previously thought in Q2, the ECB is sure to revise up its GDP forecasts on Thursday. That said, even if it reduces the pace of …
Auto sector still stuck in low gear The small increase in German industrial production in July merely reversed the fall in June, and left output well below normal. While the rest of the economy is now close to a full recovery, supply chain problems among …
Headline inflation came in higher than our above-consensus forecast in August and, at 3.0%, reached its highest level for a decade. It is likely to rise a bit further in the coming months: producer price inflation has risen recently and the price …
6th September 2021
The 3.0% inflation rate recorded in the euro-zone in August is the highest for a decade but it will not be the peak for this year. We expect the headline rate to reach over 3.5% in the coming months. And in Germany, the national CPI inflation rate could …
3rd September 2021
Mamma Mia! ABBA are back! Of course, it could just be a coincidence that ABBA announced that they are re-forming the day after we released a Focus with a shameless ABBA pun in the title, but we’d like to think otherwise. We will resist the temptation to …
Household spending patterns returning to normal The recovery in euro-zone retail sales ended in July as sales fell sharply compared to June. However this does not affect our view that consumption will grow strongly in Q3, not least because we think the …
ECB likely to signal that it will reduce its weekly PEPP purchases in the months ahead. But we think it will leave interest rates unchanged until beyond 2025. The Bank will also nudge up its inflation and growth forecasts for this year. The ECB is likely …
2nd September 2021
The recent fall in aggregate new daily Covid cases in the euro-zone, largely due to the success of the vaccination programme, means that governments in the region should be able to avoid re-imposing significant new restrictions in the coming months. After …
Post-pandemic recovery phase nearly over Data released this morning show that Swiss GDP is on track to re-gain its pre-pandemic level in Q3 and that inflation is creeping higher. Nonetheless, the near-term outlook is not as rosy as it was. Inflation is …
Further decline in measured joblessness The fall in euro-zone unemployment in July appears to be down to a decline in the overall labour force rather than an increase in employment, highlighting that the labour market recovery still has a long way to go. …
1st September 2021
Housing market valuations in Sweden are even more stretched than on past occasions when the Riksbank has “leant against the wind” – that is, set policy tighter than needed to contain consumer price inflation. While we think the Bank is unlikely to raise …
Data released today confirmed that the Italian economy grew strongly in Q2, supporting our above-consensus forecast for the year as a whole. Timelier data suggest that concerns about the Delta variant have not crimped the services recovery, but supply …
31st August 2021
Euro-zone wage data are published only quarterly, and with a long lag, and have been distorted by pandemic-related effects. So it will be another six months before we get a clearer idea of the underlying trend in earnings. For now, though, measures of …
Inflation will rise further before dropping back After rising to a near-10-year high of 3.0% in August, we suspect that euro-zone inflation will rise even further in the coming months. But this is due to temporary forces that should fade next year, …
Do you want the good news or the bad news? Business surveys took centre stage on Wednesday morning, with strong parallels between the August readings of the Swiss Investor Sentiment Index and the German Ifo . Encouragingly, businesses in both countries …
27th August 2021
This week saw the release of the first euro-zone business surveys for August, which provided reassurance that the region’s economy continued to grow strongly this month despite concerns about the Delta variant. Although the euro-zone Composite PMI and the …
Swedish GDP (officially!) above pre-virus level and growth to pick up in Q3 The release of GDP data from Sweden this morning confirmed that the economy surpassed its pre-virus peak in Q2, and we expect output to make further gains in Q3. The 0.9% q/q …
The account of the ECB’s July meeting confirms that a minority of Governing Council members objected to the dovish shift in the Bank’s interest rate guidance. Partly because of this, we now think the Bank is more likely to take until December to agree …
26th August 2021
Year-on-year money and lending growth has fallen sharply this year and we think it will decline further. With the subdued level of economic activity also weighing on consumer prices, we don’t think that money growth poses a significant upside risk to …
Business surveys suggest that global supply problems are becoming a drag on euro-zone investment, but these problems should fade going into 2022. As long as the Delta variant doesn’t halt the economic recovery in its tracks, investment should make a …
25th August 2021
Losing some momentum The second successive decline in the Ifo Business Climate Index in August provides further evidence that Germany’s recovery is losing some momentum, partly due to supply chain difficulties in the manufacturing sector and the Delta …
Data published today show that the weakness in German GDP in Q2 was due to the low level of household spending. Consumption should increase sharply in Q3. But with manufacturers struggling, the economy will probably not regain its pre-pandemic size until …
24th August 2021
After a sharp rise in support for the SDP the election result looks set to be very close. Whatever the outcome, economic policy will not change very much, but fiscal policy may be slightly less conservative, and Germany may be more open to European …
Economy still growing strongly, price pressures high but no longer intensifying August’s PMIs suggest that growth slowed only slightly despite persistent supply problems and activity approaching more normal levels. They also imply that price pressures are …
23rd August 2021
Norges Bank gets its nose in front The Norges Bank’s “interim” August policy announcement on Thursday did not upset the form book, and the Bank left interest rates on hold at a record low of zero once again. (See here .) The Bank said that economic …
20th August 2021
Activity continuing to increase The latest national accounts data confirmed this week that GDP grew by 2% q/q in the second quarter (see here ), but that’s old news now. Timelier data suggest that the economy has continued to grow, with only limited …
Norwegian economy re-gained pre-virus peak in June The release of Q2 GDP data from Norway this morning confirmed that the mainland economy came within a whisker of re-gaining its pre-virus level in June. Growth is set to accelerate in Q3. The 1.4% q/q …
Market-based measures of inflation expectations have risen during the past few months, but they are still consistent with our view that inflation will remain well below target over the medium term. And while firms expect to raise prices in the near …
19th August 2021
This morning’s decision by the Norges Bank to leave its policy rate on hold at a record low of zero was no surprise. Following the delay to the tightening cycle in New Zealand, the Norges Bank is back in pole position to be the first G10 central bank to …
Core inflation to jump in August The final euro-zone inflation data for July show that global supply problems have not pushed up goods prices dramatically, and “re-opening inflation” has been limited so far. We think that base effects will cause core …
18th August 2021
Recovery will continue at healthy pace over the summer The strong growth in the euro-zone GDP in Q2 is likely to be repeated in Q3 despite the spread of the Delta variant, and should bring the economy back towards its pre-virus size in the coming months. …
17th August 2021
The SNB and the Riksbank will leave interest rates on hold throughout 2022 and 2023 and probably beyond, but the start of rate hikes by the Norges Bank is edging ever closer. (See here .) Once the tightening cycle in Norway begins, attention will …
16th August 2021
With six weeks left until Germany’s federal elections, on 26 th September, opinion polls suggest that things have got more complicated. In brief, and with apologies for the alphabet soup, they show that support for the CDU/CSU has declined compared to …
13th August 2021
All eyes on the north Atlantic The world tends to only take notice of Iceland after spectacular events, be it the implosion of its banking sector or the explosion of a volcano . The country has been thrust into the spotlight once again recently following …
Small rise in inflation will leave the Riksbank unfazed The slight pick-up in Swedish headline inflation in July was primarily driven by a rise in energy inflation. However, the fall in core inflation to its lowest level since 2014, means that the …
The Norges Bank is set to leave interest rates on hold at zero next Thursday (19 th August), but it will almost certainly start to raise them, and tighten macroprudential policy further, in September. Recall that the Norges Bank left the policy interest …
12th August 2021
Manufacturing unlikely to boost GDP in coming quarters The second successive monthly fall in euro-zone industrial production in June was largely due to ongoing supply-chain difficulties in Germany. As these will ease only slowly, we don’t expect industry …
Below-target core inflation will not prevent September rate hike The small increase in headline CPI inflation in Norway, and the bigger decrease in the Norges Bank’s target measure, will have no bearing on the near-term outlook for monetary policy given …
10th August 2021
The latest data show pipeline price pressures continuing to mount in the euro-zone, pointing on the face of it to much higher consumer price inflation. But while there is arguably scope for a small rise in core goods inflation, subdued wage growth will …
9th August 2021
It was a week of more generally good news for the euro-zone economy. The risk that the Delta variant would halt the recovery in its tracks is receding rapidly. Daily infection numbers are now falling consistently in Spain and the Netherlands, which were …
6th August 2021
A macroeconomist’s take on the Olympics Rather than just enjoying the spectacle of Norway’s Karsten Warholm storming to victory in the 400m hurdles this week, we found ourselves frustrated by the emphasis that sports reporters put on nominal rather than …
Manufacturing hobbling the wider recovery The further decline in German industrial output in June, to 6.8% below its pre-pandemic level, underlines that the problems in the auto sector will hold back an otherwise strong economic recovery. It is now …
The surge in spending as coronavirus restrictions have been lifted will bring the euro-zone economy close to its pre-pandemic level in the coming months. After expanding by 2% q/q in Q2, we expect a similar increase in Q3. Both business and consumer …
4th August 2021
Rebound still in full swing The final PMIs show that the euro-zone’s recovery continued apace at the start of Q3. Price pressures are continuing to mount and point to an increase in inflation in the coming months, but we expect this to be temporary. …
