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The further slowdown in the money supply growth in May is due to big changes during the first lockdown dropping out of the annual comparison. Money supply data will be affected by the pandemic for a while, making them difficult to interpret, but the …
25th June 2021
Lingering restrictions on international travel to control the spread of the Delta variant mean that Spanish foreign tourist revenues this year will probably be only half what they were in 2019. That will hold back the pace of the overall recovery, even as …
24th June 2021
After last week’s hawkish shift by the Fed, and the erasure of any doubt about the start of hikes by the Norges Bank , the Riksbank may also pencil a rate hike into its projections next Thursday (1 st July). However, policy action will be centred on the …
Surge in services activity The German football team only narrowly scraped through the group stage of the Euros yesterday, but the news about the economy continues to be much more emphatic. The increase in the Ifo Business Climate Index (BCI) from 99.2 in …
Last week’s surprise change in the Fed’s guidance about how soon it is likely to raise its key policy rate raises the question of whether the ECB will follow suit. In our view, although the euro-zone faces similar inflationary pressures in the coming …
23rd June 2021
Output and prices both rising quickly The further strengthening of the euro-zone Composite PMI to a 15-year high in June underlines that the economy is rebounding quickly. Alongside this recovery, price pressures are continuing to build. But we still …
The passing of this morning’s “no confidence” vote in Swedish Prime Minister Stefan Löfven has plunged Sweden back into a period of political purgatory. While the political outlook is unclear, the near-term macroeconomic implications are likely to be …
21st June 2021
Football enthusiasts will not need to be told that life is still not back to normal in Europe. Only 13,000 fans watched Germany lose to France in the 75,000-capacity Allianz Arena, for example. Health restrictions also limit the number of people allowed …
18th June 2021
Norges Bank trumped by the US Fed The Norges Bank laid its cards on the table this Thursday, all but confirming that it will start to raise its key interest rate from September. (See here .) In the event, it was overshadowed by the less anticipated news …
Marine Le Pen’s RN party is likely to do well in French regional elections this month, a key test ahead of next year’s presidential election. A Le Pen presidency would no longer entail a “Frexit” but would hinder European fiscal integration. And it would …
17th June 2021
Reopening set to push inflation up further The final euro-zone inflation data for May do not provide much evidence that price pressures are rising as the economy re-opens. We suspect that these will materialise in the coming months and will push core …
While the Norges Bank left its policy rate on hold at a record low of zero once again this morning, it all but confirmed that it will raise rates in September – which would be well ahead of the RBNZ and the Fed, for example. We expect the NOK to gain …
While the Norges Bank will start hiking in Q3, and we now expect the Fed to raise rates twice in 2023, developments in Frankfurt will continue to set the tone at the Swiss National Bank. Having left the policy rate on hold at -0.75% again this morning, …
There is less spare capacity in Germany’s labour market than elsewhere in the euro-zone, and economic activity is set to regain its pre-crisis level before long. However, we think wage inflation (which has fallen sharply in the past year) will increase …
16th June 2021
The Delta variant does not appear to have taken hold in mainland Europe as yet, but the experience of the Alpha variety suggests that it could be dominant by the end of July. While this would be far from helpful, it should not prevent the euro-zone …
Wage growth to remain weak Average hourly labour cost growth slowed in Q1, and we expect wage growth to remain subdued over the coming years. This will keep underlying inflationary pressures down. Data released this morning showed that growth in average …
The ECB made significant upward revisions to its GDP forecasts last week, presumably encouraged by the recent experience of other economies. The Bank also seems to have come round to our view that the pandemic will not leave deep, lasting scars on the …
15th June 2021
A rate hike by the Norges Bank in September would make it the first G10 central bank to start to raise interest rates after the pandemic, by a comfortable margin. As a result, the NOK is likely to gain ground on the euro and the SEK by the end of the …
Almost back to pre-covid levels The further rise in euro-zone industrial production in April suggests that the sector is continuing to recover. Supply disruptions look set to drag on for a while yet, constraining the sector’s recovery, but the business …
14th June 2021
Data published by Eurostat this week revealed that the euro-zone economy had a less bad start to the year than previously thought. The third estimate of Q1 GDP showed that the contraction in the first quarter was half as big as previously reported, with …
11th June 2021
Falling vegetable prices In a week when we learnt that core inflation in the US reached a 28-year high of 3.8% in May it is difficult to know what to make of the detailed discussion of vegetable prices in Statistics Sweden’s CPI press release . The good …
We expect both the Swiss National Bank and Norges Bank to leave interest rates on hold next Thursday. But while rate hikes by the SNB are many years away, a tightening cycle in Norway is edging closer. Given that the SNB last changed interest rates in …
Having left the pace of its PEPP purchases unchanged and made big upgrades to its GDP forecasts, we think the ECB will start to taper the PEPP later this year. But we think it will eventually make an offsetting increase to other asset purchases and will …
10th June 2021
Underlying inflation subdued Inflation in Norway and Sweden was lower than expected in May, with core inflation falling in both economies. This will reassure Sweden’s Riksbank that it can keep its policy rate on hold, but we still think that the Norges …
Rising global price pressures have pushed inflation up in Switzerland and Sweden this year, but their central banks look set to leave policy on hold. In contrast, inflation in Norway has been falling recently (see Chart 1) and yet its central bank is …
9th June 2021
We estimate that the spare capacity in the euro-zone’s labour market has increased by around four million people, or 2.5% of the labour force, since the start of the pandemic. This is likely to disappear over the next couple of years as the economy …
Upward revision to Q1 and activity is now recovering Euro-zone GDP fell in Q1 and official data for April have been weak, but timelier data suggest that the recovery is now underway. We have pencilled in a 1% q/q rise in GDP in Q2, with risks to the …
8th June 2021
Disappointing start to Q2 The decline in German industrial production in April underlines that the German economy was performing well below normal at the start of the second quarter. But things should have improved since then, so we still expect GDP to …
Rising inflation won’t faze the SNB Inflation in Switzerland is likely to keep climbing over the coming months, but we still expect it to fall back next year. So the SNB looks set to keep interest rates on hold for a very long time. The rise in headline …
7th June 2021
The economic outlook has brightened as the virus has subsided and governments have permitted people to return to the shops and restaurants as well as to travel a bit more freely. However, manufacturers are struggling to keep up with booming demand due to …
4th June 2021
Inflation likely to surprise on the upside this year May’s inflation data were a little stronger than we or the consensus had expected (see here ), and inflation looks set to keep rising in the second half of the year. There is a laundry list of factors …
New Riksbank Act proving to be Ingves’ kryptonite If somebody was to devise a superhero franchise featuring Riksbank Governor Stefan Ingves, they could do a lot worse than casting the proposed new Riksbank Act as his arch-enemy. Like a legislative version …
Sales back below pre-pandemic levels, but only temporarily Euro-zone retail sales fell back again in April to below their pre-pandemic levels. But the re-opening of non-essential retail throughout much of the euro-zone in May means they will have improved …
There are some signs of labour shortages developing in parts of the euro-zone, notably in hospitality. But they are likely to be short-lived and will not put sustained upward pressure on wages. And compared to the US, the slower recovery and greater use …
3rd June 2021
The ECB is likely to set the stage next week for a very gradual taper. It will probably end net PEPP purchases next March, but scale up the APP. No big forecast changes likely, but Bank will acknowledge the outlook is brighter. We think the ECB will tweak …
Recovery accompanied by growing price pressures The PMIs are consistent with the euro-zone’s economic recovery gathering pace in May. Price pressures in the manufacturing sector are intensifying, but we still think that higher inflation will be temporary. …
Inflation heading higher but will fall back next year The jump in euro-zone inflation to 2.0% in May will not be the end of the upward trend, but we expect inflation to drop back sharply next year as temporary factors are reversed. May’s increase in HICP …
1st June 2021
Swiss economy already putting weak start to 2021 behind it Data released this morning confirmed that the Swiss economy started 2021 on the back foot following a tightening in virus-related restrictions. However, activity will have gathered pace in Q2. The …
After rising steadily since the end of March, sovereign bond yields have dropped back quite sharply over the past week or so. For example, the Italian 10-year yield fell from 1.16% on 19 th May to 0.93% at the time of writing, and the Italy-Germany spread …
28th May 2021
Swiss government calls time on EU talks It has been an eventful week in the news in Switzerland, with a placing in the Eurovision Song Contest for the first time in 33 years, a fighter jet crash (pilot uninjured, plane less so), and the announcement that, …
Economy recovering As Covid restrictions continue to be lifted, it is no surprise that economic sentiment in the euro-zone improved in May. The EC survey also showed that input shortages are causing price pressures to intensify, but we still think that …
While the breakdown in Treaty talks between Switzerland and the EU makes the outlook for Swiss exporters more uncertain, we doubt that the lasting economic impact will be very big. Yesterday’s news that the Swiss government has walked away from talks with …
27th May 2021
The Norges Bank has a history of beginning to tighten policy earlier than the ECB and we think it will follow that pattern again this year. Meanwhile, although it’s not the most likely scenario, we think that financial markets are under-estimating the …
Italy’s Recovery and Resilience Plan could provide a significant boost to aggregate demand in the coming years. And arguably even more important are the accompanying structural reforms, which could raise GDP in the long run. Having said that, there are a …
26th May 2021
Recovery underway The Ifo Business Climate Index (BCI) for May suggests that an economic recovery is now underway in Germany, as the lifting of restrictions outweighs any adverse effects from supply bottlenecks in the manufacturing and construction …
25th May 2021
The covid numbers have continued to move in the right direction in the euro-zone, while the vaccine rollout has continued to gain pace, with around a third of the population receiving at least one dose. That has reassured governments that they can push …
21st May 2021
Please entertain me, Statistics Denmark Statistics Denmark’s website is always a good place to start if you’re looking for some off-the-wall statistics to liven up an otherwise data-light week, and this week was no exception: we learned that the average …
Supply shortages continuing to drive up input prices May’s rise in the euro-zone Composite PMI reflects the further lifting of restrictions in many parts of the region and suggests the economic recovery is now fully underway. Supply chain difficulties …
Price pressures are building in the US and we think they will be longer-lasting than the Fed expects, but it is a very different story in the euro-zone. A weaker economic recovery and a flat Phillips curve suggest that after a brief period of above-target …
20th May 2021
Euro-zone inflation is likely to keep increasing as the economy re-opens, but we doubt it will rise as high as in the US. That’s because base effects will be smaller and the rebound in consumer spending slower. We think that headline euro-zone inflation …
19th May 2021
