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Norwegian core inflation holds steady While we expect the Norges Bank to leave its key policy interest rate on hold at 1.50% into 2022, the persistence of above-target core inflation in Norway will ensure that it maintains a comparatively hawkish bias …
11th November 2019
The prospect of further political stalemate in Spain, following yesterday’s inconclusive election result, does not alter the short-term economic outlook. But it does mean that there is little chance of a fiscal stimulus, or of making progress in reforming …
Musical chairs at the Riksbank The announcement this morning by the Riksbank that Anna Breman will fill the vacant seat on the Executive Board ends the period of uncertainty since the news of Kerstin af Jochnick’s departure was made public in July. It was …
8th November 2019
Spanish poll unlikely to break deadlock All the signs are that Spain’s fourth election in as many years, which takes place this Sunday, will result in another hung parliament, and that Prime Minister Pedro Sánchez will continue to struggle to cobble …
Manufacturing recession to continue The decline in industrial production in September confirms that German manufacturers are still firmly in a recession. We expect this to continue well into next year, causing the economy as a whole to contract. The 0.6% …
7th November 2019
Although the euro-zone economy grew by more than expected in Q3, helped by solid growth in France and Spain, the overall picture remains fairly gloomy. Euro-zone GDP expanded by only 0.2% q/q, and survey data, such as the Composite PMI, suggest that it …
6th November 2019
Heading towards a weak end to the year September’s euro-zone retail sales data suggest household consumption made a positive contribution to GDP growth in Q3. Meanwhile, the upward revision to October’s euro-zone Composite PMI still leaves it pointing to …
Economic growth in Finland outpaced the euro-zone average before the global financial crisis but has been broadly in line with it in recent years. We think that this trend will continue and that Finnish GDP growth will slow to around 1% in 2020-2021 – a …
5th November 2019
Spain’s fourth general election in as many years looks likely to result in further political stasis, but we doubt that this will have a detrimental effect on the economy. Nevertheless, weaker consumer spending and investment are likely to cause GDP growth …
Deflation rears its head again in Switzerland… Perhaps fittingly in the week of Halloween, data released this morning showed that deflation came back to haunt the SNB in October. (See here .) With the KOF Economic Barometer confirming that the economy …
1st November 2019
It seems fitting that “Count Draghila” ended his term at the ECB on Halloween. And as Christine Lagarde takes over, the euro-zone’s immediate prospects are not nearly as frightening as they were when Mr Draghi took the helm in 2011. In fact, some of the …
Return of deflation to ring alarm bells at the SNB The confirmation this morning that Swiss inflation fell back into negative territory in October for the first time since November 2016 will reignite deflationary fears at the SNB and strengthen its …
The Riksbank appears determined to raise interest rates into an economic slowdown. While higher policy rates may provide some support for the Swedish krona, we still think that it will continue to depreciate. To the surprise of most analysts, ourselves …
Italian stagnation to continue Italy’s economy eked out only a small expansion in Q3, and it looks set to continue performing very poorly over the coming years. We think that it will fail to grow at all in 2020. The 0.1% q/q increase in Italy’s GDP in Q3 …
31st October 2019
Economy to continue slowing The slightly better-than-expected euro-zone Q3 GDP figure does not alter the fact that the region is expanding at only a very modest pace. What’s more, forward-looking indicators, along with the deteriorating global backdrop, …
ESI consistent with anaemic GDP growth The decline in the euro-zone Economic Sentiment Indicator (ESI) in October adds to the evidence that the economy started Q4 on weak footing. The fall in the ESI, from 101.7 in September to a 57-month low of 100.8 in …
30th October 2019
Rebound in sentiment still consistent with weak GDP growth October’s rise in the Swiss KOF Economic Barometer was not enough to offset the previous month’s drop and the series still suggests that activity will remain subdued into 2020. Given the …
As part of its forthcoming review under Christine Lagarde, the ECB is likely to change its inflation target and make its voting system more transparent. Further ahead, it will have bigger issues to resolve, including deciding which tools it could use in a …
29th October 2019
Weak October data bode ill for Q4 This week saw the release of a raft of data which suggested that the euro-zone economy remained very weak at the start of Q4 after a probable stagnation in Q3. Although the Composite PMI edged up in October, this came as …
25th October 2019
Riksbank gunning for zero at all costs As expected, the Norges Bank and the Riksbank both left their policy interest rates on hold on Thursday, at 1.50% and -0.25% respectively. (See here .) Nonetheless, the strong hint by the Riksbank that it will “most …
Ifo adds to evidence that German services sector has lost steam The Ifo Business Climate Index (BCI) held steady at a very low level in October and, in line with the message from other surveys, showed that the German economy remained weak at the start of …
Outgoing President Mario Draghi defended the ECB’s decision last month to introduce a raft of measures and downplayed the Governing Council’s divisions. As euro-zone growth is set to remain weak and any fiscal stimulus is likely to be small, we think that …
24th October 2019
Having left its repo rate on hold at -0.25% this morning, we do not doubt the Riksbank’s clear intent to raise it to zero in December. However, with economic growth set to slow in 2020, and underlying price pressures to stay subdued, we think that …
PMIs suggest that the euro-zone economy is stagnating October’s marginal rise in the euro-zone Composite PMI is fairly disappointing after September’s large fall and reinforces our view that economic growth in the currency union is at a virtual …
While we think that there is still a bit more scope for the Norwegian krone to fall against the euro, we expect the currency to bounce back over the next couple of years, as the country’s terms of trade improve. For all the talk about krone weakness, its …
23rd October 2019
Riksbank and Norges Bank set to leave policy on hold this week. SNB to push the boundaries of policy easing in early 2020. Central bank of Iceland to continue its easing cycle over the coming months. We expect the Riksbank and the Norges Bank to leave …
22nd October 2019
Survey consistent with continued sluggish GDP growth The latest ECB Bank Lending Survey shows that firms’ demand for credit is softening, adding to evidence that the euro-zone economy will remain sluggish and in need of further policy support. In Q3, …
The success of environmentalist parties in yesterday’s Federal Elections in Switzerland echoes similar gains elsewhere in Europe in recent months. But given Switzerland’s consensus-based political system, the result is unlikely to cause any major change …
21st October 2019
Our best guess is that vehicle production in the euro-zone will stabilise at around its current level over the next year. If so, the sector would subtract 0.2% from GDP this year, but neither add to nor subtract from GDP in 2020. Regardless, the euro-zone …
Statistics Sweden sound a health warning The news that the Swedish unemployment (UP) rate was unchanged at its highest level since June 2015 in September (7.4%) initially caused the krona to fall against the euro on Thursday morning. However, the currency …
18th October 2019
Draft budgets not quite what they appear At first glance the budget proposals submitted to the European Commission (EC) this week might raise hopes for a big fiscal stimulus next year. But we think they should be taken with a pinch of salt. Admittedly, …
Clashes on Governing Council will cast a shadow over Draghi’s farewell party. No chance of policy action next week, but we think policy will be loosened next year. Forthcoming review to change inflation target and possibly communication strategy. Mario …
17th October 2019
While the Swiss and Swedish economies appear to have contracted in Q3, mainland GDP growth in Norway is chugging along nicely. And even though activity is set to slow in 2020, Norway will remain a bright spot over the coming years. This comparatively …
In keeping with our bearish view on the euro-zone, our forecasts for GDP growth in Switzerland and the Nordic economies over the coming years are generally well below consensus. Switzerland is most exposed to the industrial woes in Germany, and we expect …
16th October 2019
Overview – Economic growth has slowed to a crawl and is likely to remain anaemic until well into next year, even in the absence of a fresh external shock. Germany is probably in a recession already and we think it will not recover for a long while yet; …
15th October 2019
The decades-long downward trend in the Swedish krona means that a Nobel prize in US dollar terms is worth less than half what it was in the early 1990s. With the krona set to fall further by year-end, and unlikely to rise much over the medium term, …
14th October 2019
Increase in production not the start of a trend August’s small rise in euro-zone industrial production is nowhere near enough to offset the previous two months’ declines, and so output in Q3 as a whole is likely to have fallen sharply. This supports our …
Swedish activity data flatter to deceive On the face of it, the stronger than expected activity data from Sweden for August released this week lend support to the Riksbank’s forecast that it will hike rates over the next six months or so. Production in …
11th October 2019
Still scope for agreement on more ECB stimulus The account of September’s ECB meeting supports our view that when the Bank is eventually forced to loosen policy again, it will opt to cut interest rates and increase its corporate bond buying. The divisions …
Given how much has been said (and leaked) about the ECB’s 12 th September meeting, there was little scope for fresh revelations in today’s account. But the report is consistent with our view that more rate cuts and corporate bond purchases will be easier …
10th October 2019
Underlying inflation to stay subdued in Sweden The persistent weakness of underlying inflation in Sweden serves as further proof, if needed, that the Riksbank will have to shift to a more dovish stance over the next six months or so. As a result, the …
Calls for any fiscal stimulus to support the Swedish economy are likely to fall on deaf ears, so the burden will continue to be entirely on the Riksbank. A combination of a dovish shift by the Bank and a further escalation in global trade tensions will …
9th October 2019
There have been one or two positive signs in the past week or so, such as the increase in German industrial production in August. But the overall picture remains gloomy. Indeed, at face value the Composite PMI, which is one of the most reliable timely …
8th October 2019
Increase in August not a turning point The 0.3% increase in German industrial production comes as a relief, and a bit of a surprise, compared to the consensus forecast of 0.0% and our own expectation of a 1.0% fall, and given the poor factory orders data …
What’s Swedish for ‘disastrous’? The plunge in Sweden’s manufacturing PMI in September, from 51.8 to just 46.3, was bad enough on its own. (See here .) But taken together with the sharp fall in the services PMI (data released yesterday), the overall …
4th October 2019
The trade war takes to the skies The WTO’s decision this week to grant the US permission to raise tariffs on the EU over Airbus subsidies increases the risk that the bloc is drawn into Mr Trump’s trade war. Tariffs of 10% on large civil aircraft, and 25% …
Germany behind euro-zone Q3 slowdown The downward revision to September’s euro-zone PMI leaves it consistent with zero growth at the end of Q3, as the contraction in Germany’s economy appears to have accelerated and spread to the services sector. …
3rd October 2019
Having cut its key interest rate by 25bps this morning, we now expect the Central Bank of Iceland (CBI) to stay in easing mode over the coming months and to reduce rates to 2.75% by year-end. The reduction in the seven-day deposit interest rate in Iceland …
2nd October 2019
We think that the ECB will increase its monthly bond-buying next year by purchasing more corporate debt. This would lead to a marked pick-up in bond issuance, but only a small increase in investment. The divisions on the ECB’s Governing Council become …
Another step towards deflation The further decline in Swiss inflation, to just 0.1% in September, will stoke deflationary fears at the SNB and will only strengthen its resolve to resist upward pressure on the franc. The headline Swiss inflation rate fell …
