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The manufacturing PMIs for March provide further evidence that the Swiss and Swedish economies made a weak start to 2019. This underlines our view that policymakers there will be in no rush to tighten policy. … Manufacturing PMIs …
1st April 2019
Speeches by policymakers this week suggest that the ECB is likely to provide more policy accommodation within the next six months or so. All the more so as the latest survey data continue to point to an economy which is losing momentum. … Draghi dovish, …
29th March 2019
The scandal at Swedbank raise questions about transparency, corruption, and the relationship between banks and regulators in Sweden, while the collapse of WOW Air means that the chances of further rate hikes this year are diminishing. Meanwhile, the …
If it is introduced (which is far from certain) a tiered deposit rate would reduce the cost of negative interest rates for banks, but it would do so by only a trivial amount. Its main purpose would be to help to build support for, or buy off opposition …
The sharp pick-up in the Swiss KOF Economic Barometer in March does not change our view that GDP growth in Switzerland will slow this year. However, it supports our forecast that the economy will hold up reasonably well in the face of weak growth in the …
Weaker Chinese demand can explain only a fraction of the slowdown in German GDP growth over the past year: softer demand in other export markets and in the euro-zone are more important factors. Accordingly, we do not expect a stimulus in China to cause a …
28th March 2019
March’s decline in the euro-zone’s Economic Sentiment Indicator (ESI) adds to the evidence from other surveys that the economy has continued to lose momentum. And there is no sign that either the German or Italian economies are on the mend. … EC Business …
Over the next ten years, we think that Italy’s economy will fail to grow because productivity growth will remain weak and total employment will fall. As a consequence, the public debt ratio will probably continue rising and eventually prove unsustainable. …
27th March 2019
The decline in the Swedish Economic Tendency Indicator (ETI) in March was not as bad as we had feared given the sharp fall in the euro-zone manufacturing PMI last week. But it is still consistent with a sluggish start to the year for the Swedish economy …
If the past is anything to go by, a fresh round of ECB QE would lead to upward pressure on the Danish krone. We think Denmark’s Nationalbank would react with a combination of FX intervention and rate cuts, which would see it reduce its key policy rate to …
26th March 2019
The Spanish economy looks set to slow slightly as the effect of last year’s fiscal stimulus fades and weak growth elsewhere in the euro-zone takes a toll. That said, it will still probably be one of the region’s best performers this year. April’s general …
The Ifo Business Climate Index for March was a little better than expected, but it does not suggest that the German economy is out of the woods. … German Ifo Survey …
25th March 2019
This week delivered more data which suggest that the euro-zone economy grew at a meagre pace in Q1. And the Composite PMI is now at a level where the ECB has often loosened monetary policy in the past. … Euro-zone likely to have grown slowly again in …
22nd March 2019
In a week when the Fed called time on its tightening cycle, and further signs of weakness in euro-zone activity lent extra support to our view that the ECB will ultimately have to do more to ease policy, the Norges Bank stands out as a rare example of a …
We are now more hawkish than the consensus about the outlook for monetary policy in Norway this year. But we don’t expect the krone to keep strengthening, as we forecast that oil prices will fall. … Monetary policy likely to prevent weaker …
The drop back in the euro-zone Composite PMI for March comes as a disappointment to those hoping that the economy was beginning to turn a corner. And far from easing, as many had anticipated, the German manufacturing recession appears to be getting worse. …
Higher government bond yields in Italy have not fed through to increased interest rates on bank loans, and this seems unlikely to happen to any significant degree this year. Nevertheless, Italian banks have tightened their lending standards and loan …
21st March 2019
Today’s decision by the Norges Bank, to raise its policy rate from 0.75% to 1.00%, came as no surprise, but policymakers struck a more hawkish tone than expected. While the Bank is now likely to continue its tightening cycle in the second half of this …
As we expected, weak economic data and a recent pick-up in the króna contributed to the Central Bank of Iceland leaving interest rates on hold today. While it maintained a hawkish bias in its statement accompanying the decision, we now just expect one …
20th March 2019
Price pressures generally remained subdued in Switzerland and the Nordic economics in February. Core inflation is still stubbornly low in Switzerland and while it is higher in Sweden, it has now been stable in a narrow band since the start of last year. …
19th March 2019
A slow start to the year, combined with a deterioration in prospects for both export growth and household consumption, has prompted us to cut our forecast for economic growth in Germany to only 0.5% for this year. What’s more, we expect only a modest …
Euro-zone labour cost growth edged down in Q4 and, in contrast to the ECB, we don’t expect it to start rising again this year. This suggests that upward pressure on core inflation will remain muted. … Wage growth likely to stop rising this …
Supply-chain links between Germany and the manufacturing sectors of other large euro-zone countries are smaller than people tend to think. As long as the slowdown in Germany is contained primarily to the manufacturing sector, its direct impact on the rest …
15th March 2019
We have cut our forecast for Swiss GDP growth this year to a below-consensus 1.0%. This leaves us broadly in line with the government’s recently-revised forecast for 2019, but we think its forecast for GDP growth in 2020 is too optimistic. Meanwhile, the …
We don’t think the increase in euro-zone industrial production in January marks a turning point for the economy, given that the business surveys for February were weak and global demand is still sluggish. Indeed, with growth and inflation likely to remain …
The Norges Bank is all but certain to increase interest rates to 1.0% at its policy meeting next week. In contrast, we expect policymakers in Switzerland and Iceland to leave rates unchanged at their March meetings (also scheduled for next week). The next …
14th March 2019
Ireland’s Q4 GDP data, released today, show that the economy slowed towards the end of last year. But timelier indicators suggest that, despite rising uncertainty about Brexit and the wider euro-zone slowdown, Ireland’s economy is still performing pretty …
The ECB’s new “TLTRO-III” programme should help to prevent credit conditions from tightening next year. But any boost to lending growth is likely to be small. … TLTRO-III to support bank funding, but not …
13th March 2019
The Greek economy looks set to expand at a modest pace this year. But next year, it will probably slow as investment continues to contract and the slowdown in the rest of the euro-zone weighs on exports. … Greek recovery likely to lose …
The 1.4% increase in industrial production in January was a bit of a relief after the 0.9% fall in December, but it does not put an end to concerns about the euro-zone’s slowdown. The increase did not reverse the declines in the previous two months, and …
We now think that a combination of sluggish economic growth, low inflation, and monetary policy loosening in the US is likely to prompt the ECB to re-launch its net asset purchases next year. … ECB likely to be forced into more QE in …
12th March 2019
The fall in Swedish inflation in February lends further support to our view that the Riksbank will keep interest rates on hold at least into 2021. In fact, with core price pressures subdued, and a rising chance of additional stimulus from the ECB, the …
Economic activity in the euro-zone seems to have remained sluggish in the first quarter of this year: we think GDP growth will be only 0.2% for a third successive quarter. This is largely due to weakness in the industrial sector, driven by softening …
11th March 2019
The stronger-than-expected rise in core Norwegian inflation in February makes it all but certain that the Norges Bank will increase interest rates at its policy meeting later this month. However, given our forecast for oil prices to fall this year, we …
January’s decline in industrial production adds to the evidence that the economy made a weak start to 2019. And timelier indicators suggest that output is unlikely to increase strongly in the coming months. … German Industrial Production …
The ECB’s decision to launch more TLTROs and strengthen its interest rate guidance means that it is, at least for now, ahead of the curve. But we think the Bank is still too optimistic about economic prospects for the euro-zone next year. Policymakers may …
8th March 2019
The more dovish stance adopted by the ECB at its monetary policy meeting this week suggests that the upside risks to Nordic and Swiss currencies – particularly the franc – will intensify. Indeed, if Thursday’s announcement turns out to mark the start of …
The more dovish than expected stance adopted by the ECB at today’s monetary policy meeting supports our view that the SNB will also keep rates lower for longer. And if the euro-zone economy disappoints as we expect, the SNB may find itself having to get …
7th March 2019
The ECB did more than expected today, announcing another round of TLTROs and pledging to leave policy rates on hold at least until next year. But with economic growth and inflation likely to remain lower than even its new forecasts there is a growing …
The third estimate of euro-zone GDP in Q4 last year confirmed that the economy grew at only a moderate pace, and with the latest data fairly weak the ECB is certain to announce lower forecasts later today. But we think that they will remain too optimistic …
Italy’s economy is unlikely to come out of recession in the first half of this year. Several temporary factors might lead to a small expansion in the second half of the year, but even if this happens we still think that the economy is likely to contract …
5th March 2019
The upward revision to February’s final PMIs does not change our view that GDP growth in the euro-zone was probably just 0.2% again in the first quarter of this year. Meanwhile, the increase in retail sales in January was simply a reversal of a …
The continued lack of price pressures in Switzerland will reaffirm the SNB’s dovish stance. Meanwhile, private sector activity data from Sweden for January suggest that the economy made a weak start to 2019. … Swiss CPI (Feb.19) & Sweden Priv. Sec. Prod. …
Philip Lane, who is due to take over as the ECB’s Chief Economist in May, acknowledged last week that Q1 2019 will probably be the third successive quarter of below-potential GDP growth. We agree with that, but we are not convinced by his claim that …
4th March 2019
Q4 GDP data from Switzerland and the Nordics released this week mostly showed impressive rates of growth – particularly in Sweden. However, upon closer inspection, the data masked signs of domestic weakness. … Impressive GDP figures mask domestic …
1st March 2019
The survey evidence continues to suggest that the euro-zone economy is growing, but that it is doing so only slowly, with the services sector doing all of the heavy lifting. The industrial sector appears to be in recession, with little prospect of a …
The increase in the euro-zone’s headline inflation rate, to 1.5% in February, will be of little comfort to the ECB given that it masks a small reduction in the core rate to just 1.0%. Moreover, the latest business surveys confirm that the industrial …
The slight pick-up in the Swiss and Swedish manufacturing PMIs in February provides some comfort that the recent downward pressure on their industrial sectors has not intensified. However, weakness in euro-zone industry is likely to continue to cast a …
The ECB is likely to reduce its forecasts for economic growth at its meeting next week and to again stress that it has the necessary tools to respond if the recent slowdown worsens. But we think it will stop short of making any changes to its forward …
28th February 2019
Q4 GDP data released this morning show that large parts of the region ended 2018 on a high note. However, more timely indicators suggest that activity has lost momentum into 2019. Against a backdrop of a slowing European economy, we also expect Nordic and …
