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Drop in core Norwegian inflation not the start of a trend We doubt that December’s decline in underlying inflation in Norway is the start of a trend. Given our view that the economy will regain momentum before long, the balance of risks is skewed towards …
10th January 2020
The French economy is likely to continue to perform reasonably well this year as solid consumer spending growth partly offsets fiscal tightening and a slowdown in investment. Moreover, the pensions reforms are likely to be passed, helping to keep …
9th January 2020
Hopes that the euro-zone economy will gather pace in the coming months are likely to be dashed. The latest business surveys point to growth stabilising but not recovering in the final quarter of last year. The slowdown over the past two years has been …
Industrial recession has not yet ended While the increase in industrial production in November comes as a bit of a relief, it merely reversed the decline in the previous month and still means that output is likely to have fallen again in Q4 as a whole. We …
ESI still pointing to feeble end to 2019 Although the euro-zone Economic Sentiment Indicator (ESI) edged up again in December, the index still suggests that economic growth in the region was very weak at the end of last year. The small rise in the ESI …
8th January 2020
ECB still more likely to loosen policy than tighten in 2020 December’s inflation data will provide some relief to policymakers at the ECB, but we are still sceptical that core inflation is about to start on a sustained upward trend. In our view, the …
7th January 2020
Small pick-up in Swiss inflation not a game changer Having seen inflation fall into negative territory in the previous two months, the increase in Swiss CPI back into positive territory in December will be welcomed by policymakers. Nonetheless, with core …
Sluggish end to the year, with Germany and Italy particularly weak The euro-zone’s Composite PMI for December was revised up slightly, but taken together with the other available evidence, this still suggests that the economy grew by only 0.2% q/q in Q4. …
6th January 2020
The latest data suggest that the euro-zone economy might have avoided a further slowdown in Q4 last year, adding to the evidence that growth is “bottoming out”. However, the economy seems to have remained sluggish and we don’t think that a recovery is on …
3rd January 2020
Swiss economy still not out of the woods The latest surveys from Switzerland support our view that the economy is likely to continue growing at a fairly sluggish pace over the first half of this year. Admittedly, data published in late December showed the …
Our big calls for 2020 are that economic growth and inflation will generally be weaker than the consensus expects, and that rates cuts are on the cards in Switzerland and Sweden. The first section of this Update looks at how some of our key forecasts for …
23rd December 2019
Better than 2009 The euro-zone economy is in better shape at the end of the current decade than it was ten years ago. In December 2009, we were writing Updates with titles such as “Greece heads deeper into the mire” and “Austrian banking troubles a sign …
20th December 2019
A decade in the spotlight Despite accounting for just 1.5% of global GDP between them (at PPP exchange rates), Switzerland and the Nordic economies have found themselves at the frontier of economic policymaking over the past decade – particularly when it …
The planned reforms to France’s retirement schemes that have provoked strikes and protests this month are important to put the country’s pensions and public finances on a more sustainable footing. But in the short term, they have few economic benefits and …
We think the euro-zone will continue to struggle in the first half of 2020 as Germany and Italy remain close to recession and inflation stays well below target, prompting the ECB to loosen policy further. Things should improve a bit in the second half of …
19th December 2019
While today’s decision by the Riksbank to raise the repo rate back to zero was never really in doubt, the fact that two of the Deputy Governors opposed the move lends support to our non-consensus view that policymakers will end up cutting rates back into …
Despite a rise in oil prices over the past couple of months, the Canadian dollar and the Norwegian krone have underperformed most other G10 currencies. Nonetheless, we expect both to fare better next year. Since the start of October, the price of Brent …
Germany to continue struggling in early 2020 December’s Ifo Business Climate Index was a bit better than expected, but it still suggests that the German economy is struggling to grow. We expect GDP growth to remain very weak at the start of next year. The …
18th December 2019
French President Emmanuel Macron’s emphasis on overhauling France’s ailing labour market is long overdue. But while there are signs that the changes are starting to take effect, the labour market improvement since 2015 is mostly thanks to a cyclical …
17th December 2019
What a difference a few months make; from being the worst performing G10 currency by some margin between the start of the year and late October, the Swedish krona has risen by about 3% against the euro since the Riksbank hinted that it would “most …
16th December 2019
Poor end to a disappointing year The flash PMIs for December will disappoint those looking forward to a happier New Year. Indeed, they point to euro-zone GDP being almost flat in Q4 and a continued industrial recession. Looking beyond the holiday season, …
Lagarde not just Draghi 2.0 In her opening press conference, Christine Lagarde seemed to be just as dovish as her predecessor. Her claim to be an owl, rather than a dove or a hawk, was more of a political gesture than view on policy. And her suggestion …
13th December 2019
Beware of the survey! The Norwegian krone barely moved after inflation data for November were released early on Tuesday morning. However, the currency plunged just two hours later after the latest quarterly Regional Network Survey indicated that economic …
While Ms Lagarde’s assessment of the outlook in today’s press conference was slightly less gloomy than Mr Draghi’s in October, this does not change our view that the ECB will loosen policy again during 2020. After all, policy would need to be eased even …
12th December 2019
Today’s decision by the Swiss National Bank to leave its policy stance unchanged came as a surprise to nobody. Five years on since the Bank first cut interest rates into negative territory, there is every chance that it will keep them below zero over the …
Industrial production hasn’t bottomed out yet October’s sharp fall in euro-zone industrial production adds to the evidence that the sector’s troubles are far from over. We expect the sector to remain in recession at the start of next year. The 0.5% m/m …
Pick-up in inflation makes Riksbank hike next week a done deal The pick-up in Swedish inflation in November means that a rate hike by the Riksbank next week is all but guaranteed. But with surveys continuing to show that the economy is struggling, and …
11th December 2019
After cutting rates by 150bps since April, the Central Bank of Iceland kept its deposit rate at its current record low of 3.00% today. We suspect that in the absence of a sharp and sustained fall in inflation expectations, the Bank will keep rates …
Hopes that the euro-zone is turning a corner look premature. The latest activity data have been disappointing, with retail sales falling in October and national data pointing to another decline in industrial output. Business surveys paint a bleak picture …
10th December 2019
Risks skewed towards tighter policy in Norway While we expect the Norges Bank to leave its key policy interest rate on hold at 1.50% for the foreseeable future, the persistence of core price pressures means that the balance of risks is skewed towards …
There is little evidence that negative interest rates have succeeded in boosting economic growth or inflation expectations. But equally, they do not seem to have done much harm either – many of the criticisms levelled at them have been wide of the mark. …
9th December 2019
France’s public sector strikes will probably dampen economic activity this quarter, but experience from previous, similar walkouts suggests that the hit to GDP will be small. Moreover, while protests have occasionally caused governments to abandon planned …
6th December 2019
No sign of green shoots in Swedish industry Another week, and yet more data from Sweden that call into question the wisdom of the Riksbank’s probable rate hike later this month. As in Germany, conditions in the industrial sector are going from bad to …
Still no light at the end of the tunnel If Christine Lagarde had been hoping that the economy would perk up this year, taking the heat out of the disputes between hawks and doves on the Governing Council, this week’s data will have been a disappointment. …
Manufacturing recession takes a turn for the worse The sharp drop in production in October was driven by a slump in auto production and suggests that, far from bottoming out, Germany’s industrial contraction may even be getting worse. The economy narrowly …
Three months after the September policy package, no change is likely next week. The spotlight on Thursday will be on Ms Lagarde herself, and her policy review. Further ahead, we still expect more ECB easing, prompted by low inflation. With little chance …
5th December 2019
House price inflation in Spain is now slowing but we do not envisage a slump in property prices that would derail GDP growth. After all, economic and financial conditions are supportive and there is little evidence that valuations are particularly …
Growth likely to remain subdued The third estimate of euro-zone GDP in Q3 confirmed that the economy remained sluggish, with net trade continuing to weigh on growth. And we doubt that things will get any better in the coming quarters. As expected, …
France and Spain still outperforming November’s final euro-zone PMI is consistent with very anaemic GDP growth in Q4 and the national indices point to continued weakness in both Germany and Italy, while France and Spain remain relative bright spots. The …
4th December 2019
While the resignation of the Finnish Prime Minister today is unlikely to lead to a collapse in government, elections may well take place before 2023, when they are due. If so, the nationalist Finns Party could end up in power which could lead to fiscal …
3rd December 2019
Our economic forecasts for Italy are based on the assumption that the coalition government holds together, at least for the next two years. But in our view, the economic impact would be small if it fell apart. Bond yields would probably rise, but not as …
Stuck in a rut The falls in the Swiss and Swedish manufacturing PMIs in November dash any hopes that the manufacturing sectors have gathered momentum in Q4. With the manufacturing recession in Germany set to rumble on, industrial output in Switzerland and …
2nd December 2019
Below, but close to, 2 degrees centigrade Reports that Christine Lagarde wants climate change to feature in the ECB’s forthcoming review of its monetary policy strategy suggest that the Bank will be even more political under her leadership than it was …
29th November 2019
Setting the stage for a December repo rate hike The pick-up in GDP growth in Sweden in Q3 (see here ) was much stronger than the small contraction that we had pencilled in, and was at odds with the raft of weak survey data that we had put emphasis on. It …
Core inflation unlikely to keep rising November’s jump in inflation is unlikely to be the beginning of a sustained upward trend in price pressures. With employment growth slowing and slack in the labour market increasing, wage growth seems likely to level …
Stronger growth in Sweden not likely to last The pick-up in Swedish GDP growth in Q3 means that a rate hike by the Riksbank at its next meeting is now pretty much a done deal. But if, as we expect, the economy slows next year, we think the Bank will have …
Sentiment still pointing to weak GDP growth Despite November’s small increase in the euro-zone Economic Sentiment Indicator (ESI), the index suggests that the economy is unlikely to have gained pace in Q4. The slight rise in the ESI, from 100.8 in October …
28th November 2019
Positive surprise but economy is not out of the woods, yet The stronger-than-expected rise in quarterly Swiss GDP growth in Q3 was a bit of a relief and poses upside risks to our near-term forecast. But the outcome was skewed by weather-related effects …
In its first five months in office Greece’s new government has implemented a range of tax cuts that should support the economy and has made a start with some structural reforms. But we are sceptical that it will execute the deeper reforms needed to raise …
26th November 2019
Germany is not out of the woods yet November’s Ifo Business Climate Index suggests that Q3’s small increase in German GDP was not the beginning of a recovery. We think that the economy will contract in the coming quarters. On the face of it, the increase …
25th November 2019
