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Euro-zone governments have been understandably keen to avoid repeating the blanket lockdowns of earlier this year in response to the resurgence in coronavirus cases over the past month or so. Low hospitalisation rates have allowed policymakers to focus on …
28th August 2020
Nordics top of the league in H1… The Nordic economies emerged at the top of the economic league in Europe in H1, with comparatively small declines in output. (See here .) The second reading of Swedish Q2 GDP, released this morning, shows that the …
Rebound may have run its course The increase in the EC’s Economic Sentiment Indicator (ESI) for August was smaller than in the previous two months and left it well below its February level, while the index for Spain actually fell. The euro-zone’s economic …
Broad money growth accelerated to a 12-year high in July, but we think that this will prove to be temporary and is not likely to push up inflation. Meanwhile, growth in bank lending to firms has returned to more normal levels, while consumer credit …
27th August 2020
Recovery losing pace The rise in Sweden’s Economic Tendency Indicator (ETI) in August was smaller than in the previous two months and suggests that although the recovery there continued in Q3, it may already be slowing. Meanwhile, the sharp rise in retail …
Swiss economy on track for a comparatively modest drop in GDP this year Data released this morning show that the Swiss economy weathered the crisis comparatively well in the first half of the year. While its fortunes are closely tied to those in the …
While Sweden’s economy got off relatively lightly in H1 thanks to the light-touch lockdown, Norway and Finland saw even smaller falls in activity at a lower human cost. Nonetheless, the success of the Nordics does not offer any obvious lessons for those …
26th August 2020
Strong rebound in Q3 is already slowing The second estimate of Q2 German GDP confirms that all elements of domestic demand except government spending fell sharply. A big rebound in Q3 is already baked in the cake, but survey evidence, including from the …
25th August 2020
Norway outperformed light-touch Sweden in H1, despite locking down While Sweden’s light-touch response to Covid has hogged the headlines, data released this morning show that the Norwegian economy outperformed its Nordic cousin in the first half of the …
France’s virus-related slump in the first half of 2020 rivalled the big falls in GDP in Italy and Spain. But its recovery should be stronger because working from home is more common, the economy is less dependent on international tourism, and the …
24th August 2020
Rebound already fading With the number of confirmed virus cases rising and employment support schemes being run down, it comes as no surprise that the EC’s measure of consumer confidence levelled off in August. That is consistent with other evidence that …
21st August 2020
Are virus ripples turning into waves? The upward trend in daily virus infections in the euro-zone is partly due to increased testing, but the proportion of tests coming back positive is also on the rise. It seems likely that there will be further …
“Two-speed” Swiss industry finds reverse gear The belated release of Q2 industrial production data from Switzerland on Thursday laid bare the stark divergence in fortunes within the sector. Total manufacturing output dropped by 8.3% q/q in Q2, which was …
Recovery petering out The fall back in the euro-zone Composite PMI in August suggests that the initial V-shaped rebound following the lifting of the lockdowns is already fizzling out. We suspect that activity will remain below pre-crisis levels for at …
The account of the ECB’s last monetary policy meeting suggests that there was a strong consensus in favour of the current policy settings. Absent a big surprise in the economic data or fresh financial market turmoil, the Bank is likely to leave policy …
20th August 2020
We think that economic activity in Italy is still nearly 10% below its pre-crisis level. Even without a second wave, the economy will remain weak and the budget deficit wide for several years. Nevertheless, the near-term outlook is not as bad in Italy as …
This morning’s decision by the Norges Bank to leave its key interest rates on hold at zero was never really in doubt. We still think it more likely than not that the Bank will leave rates on hold throughout our forecast horizon. Today’s announcement was …
Jump in core inflation a one-off July’s jump in euro-zone core inflation was entirely due to delayed summer sales, so it should reverse in August now that those sales have begun. Meanwhile, social distancing rules appear to have had a limited effect on …
19th August 2020
Virus numbers have risen sharply in the past month, but the second wave has different characteristics from the first. It is concentrated in younger people, so hospitals are not being put under such pressure. One consequence is that the restrictions being …
Denmark’s lockdown pays off … According to the GDP indicator released on Friday, the Danish economy contracted by 7.4% q/q in Q2, broadly in line with our forecast. While this was its biggest decline since data began in the 1990s, it was a far cry from …
14th August 2020
Two-speed recovery This week saw more evidence of the extent of the rebound as euro-zone industrial output rose by 9.1% in June. However, this left it 11.4% below its pre-coronavirus level in February – a situation which was similar in all the major …
Recovery underway but at different speeds The preliminary estimate of euro-zone GDP was unchanged in today’s release, but new data showed that the variation between countries was, if anything, larger than previously thought, while there was a record drop …
Compared to many of the larger euro-zone countries, the coronavirus remains relatively well under control in the Nordic countries and Switzerland. With the exception of Denmark, there are at this stage no signs of a second wave. This in turn is helping to …
13th August 2020
Short-time working has been widely used during the pandemic to stop unemployment soaring. But even with financial help from Brussels, the mounting costs will force the more fiscally constrained countries, primarily Italy and Spain, to wind back their …
The Norges Bank will almost certainly leave its key interest rate on hold at zero next Thursday (20 th August), and we expect it to reiterate that it is in no rush to tighten policy. Having cut its key policy interest rate to a record low of zero at its …
Sweden’s contrary policy response to the pandemic reduced the depth of its economic slump at the expense of worse public health outcomes. But the data so far suggest that its experience stands out less than one might have expected, both in terms of …
12th August 2020
Recovering but a long way to go The second successive chunky increase in industrial output in June left it a long way below normal. Output will have risen more slowly in July, and we expect it to stay subdued during the next two years. Euro-zone …
Inflation to remain anchored at low levels Swedish headline inflation would have fallen further in July had it not been for temporary effects related to car rental prices. And while core inflation edged up from June, against a backdrop of falling resource …
Krone-driven boost to inflation to fade in early-2021 The lagged impact of exchange rate movements will ensure that inflation remains above the Norges Bank’s target throughout the second half of this year. However, this effect will fade in early-2021 and …
10th August 2020
Services activity takes a hit, despite no lockdown Given the wider interest in how Sweden’s economy performed under its light-touch lockdown, its preliminary estimate of Q2 GDP growth, released on Wednesday, was perhaps watched more closely-than usual. …
7th August 2020
Taking stock of the latest coronavirus numbers With worries about a major second coronavirus wave in Europe intensifying this week, it is worth taking a step back and putting the current cases numbers in a bit of context. Three trends stand out. First, …
Still a long way from normal Despite another substantial increase in June, driven by the auto sector, industrial output in Germany remained well below its pre-crisis level. The recovery should continue in the coming months, but will probably lose momentum …
The economy is set to rebound strongly in the current quarter after its 12% slump in Q2, even if there is no further increase in GDP in August and September. Indeed, some of the high frequency data suggest that economic activity is almost back to its …
6th August 2020
Rising virus cases pose growing threat to the outlook Euro-zone retail sales reached their pre-crisis level in June and July’s final PMIs confirmed that the broader recovery continued at the start of Q3. But other parts of the economy won’t have rebounded …
5th August 2020
Swedish economy not immune, but still well placed The sharp contraction in the Swedish economy in Q2 confirms that it has not been immune to Covid, despite the government’s well-documented light-touch lockdown. Nonetheless, the economic crunch over the …
The re-imposition of some restrictions in late-June is weighing heavily on Portugal’s tourism sector. Along with its unfavourable labour market structure and fragile banking system, this will hold back the recovery of consumption and investment. …
3rd August 2020
Swiss inflation likely to edge higher from here Inflation in Switzerland now appears to have troughed, but it is set to remain frustratingly weak over the coming years and a headache for the SNB. Meanwhile, the manufacturing PMIs from July suggest that …
Huge variations in scale of Q2 contraction The Q2 GDP data published this week highlight that euro-zone member states have had very different experiences of the coronavirus crisis so far, reflecting the variation in the number of virus cases and …
31st July 2020
Mixed messages from the retail data Retail sales data from Switzerland for June, released this morning, show that consumer spending lost a bit of steam at the end of Q2 following the initial sugar-rush as restrictions were eased. Having surged by almost …
Slump just as bad as anticipated; recovery will be painfully slow There are few silver linings in the data published today, which confirmed the massive slump in Q2. Parts of the economy have sprung back to life since April, but the damage already done …
Hit the hardest and slowest to recover The record plunge in Spain’s GDP of 18.5% q/q is likely to have been one of the biggest falls of any euro-zone country in Q2, illustrating the severity of the country’s lockdown and its slow and partial recovery …
Q2 as disastrous as expected, a long recovery awaits While the catastrophic collapse in French Q2 GDP was hardly a shock given the country’s stringent lockdown, it still highlights the sheer extent of the economic damage wrought by the pandemic. High …
Crisis wiped out nearly 30 years of growth The huge drop in Italian GDP in Q2 took the economy back to its size in the early 1990s. (See Chart 1.) While timelier data show that after plummeting in April the economy grew pretty quickly in May and June, we …
A combination of official travel restrictions and caution from holidaymakers is likely to hit Spain, Greece and Portugal particularly hard. Germany should get off lightly thanks to its comparatively small tourism sector, relatively small number of foreign …
30th July 2020
Further recovery but outlook very uncertain The further increase in the EC’s Economic Sentiment Indicator for July echoes the message from other surveys that the recovery continued at the start of Q3. But it tells us little about how far activity remains …
Huge fall, but activity has already rebounded The double-digit fall in quarterly GDP confirms that the coronavirus crisis delivered a huge blow to the Germany economy. Monthly and high frequency data show that activity bounced back since April, so Q3 …
Barometer suggests recovery continued at start of Q3 While the flare-up in cases in Europe is a key downside risk, the sharp increase in the KOF Economic Barometer in July suggests that the Swiss economy continued to bounce back at the start of Q3. The …
Spain’s economic recovery was already set to be one of the weakest in the euro-zone but the resurgence in virus cases over the past week and subsequent re-imposition of restrictions deals a fresh blow to the outlook. A return to normality looks even …
29th July 2020
Recovery continues apace The rise in Sweden’s Economic Tendency Indicator (ETI) in July suggests the recovery there continued to gather pace at the start of Q3. That said, the rise in consumption appears to be slowing, and the external sector would suffer …
Further encouraging signs from German business The message from the Ifo Business Climate Index chimes with that from the PMIs published last week and suggests that the rebound in the German economy continued at a steady pace in July. The increase in the …
27th July 2020
