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February’s euro-zone Economic Sentiment Indicator (ESI) confirmed the message from other surveys that despite weakness in the industrial sector, the overall economy is still growing. That said, the risks are skewed to the downside, with slower global …
27th February 2019
The slowdown in euro-zone GDP growth in the second half of last year resulted from weaker exports and domestic demand, about half of which was due to problems in the car industry. But more recently, the economy has been hit by an abrupt downturn in global …
26th February 2019
We have removed the single 25bp interest rate hike that we had pencilled in for Sweden this year, and forecast rates to remain unchanged at their current level into 2021. In fact, with risks to activity skewed to the downside, it is even plausible that …
We have just returned from a day of meetings with clients and local contacts in Rome. In this Update , we summarise the key takeaways from the visit. While the banks are heading in the right direction, the consensus view on economic growth is too bullish. …
25th February 2019
The small rise in the composite PMI for the euro-zone, from 51.0 in January to 51.4 in February, came as a bit of a relief – especially as this was the first increase in six months. However, it leaves the index consistent with quarterly GDP growth of …
22nd February 2019
The improvement in annual Swiss industrial production growth in Q4 suggests that the wider economy returned to positive quarterly growth at the end of last year. Nonetheless, while the data appear solid enough, they only add to the evidence that activity …
February’s fall in the Ifo Business Climate Index confirms that Germany’s manufacturing recession has continued this year. But GDP data released earlier today and the Markit services PMI published yesterday, suggest that stronger domestic demand should …
The latest data paint a mixed picture of the performance of the Swiss and Nordic economies at the end of 2018, with signs of weakness in Switzerland and Sweden offset in part by robust quarterly GDP growth in Norway and Denmark. However, we think that GDP …
21st February 2019
February’s Composite PMI provides some reassurance that the euro-zone economy as a whole is still growing. But industrial output is falling, and with the global economy slowing and trade tensions unlikely to disappear, the chance of a strong rebound in …
The weaker-than-expected outturn for Swedish inflation in January underlines our view that the Riksbank will be in no rush to raise interest rates again. Indeed, with core inflation remaining stubbornly subdued, and increasing downside risks to economic …
19th February 2019
The Riksbank delivered a slightly more hawkish message than anticipated at its meeting this week, but we still think that the chance of an interest rate hike this year is falling. Meanwhile, despite Denmark and Finland both performing very well in Q4, we …
15th February 2019
With Germany having narrowly avoided recession and Italy’s downturn dragging on, policymakers at the ECB will soon have to provide more clarity about which tools they are willing to use if the economic data don’t improve. … China and Germany, another …
Recent movements in most of the indicators which signalled the only two recessions in the euro-zone’s history suggest that the economic outlook has deteriorated sharply. They do not yet point unequivocally to a recession, but they do suggest that the risk …
14th February 2019
With Germany avoiding recession only by the skin of its teeth, and Italy actually in recession, the euro-zone eked out GDP growth of only 0.2% in Q4. For now we still expect growth to recover a bit, but the speed with which activity has slowed has …
December’s 0.9% fall in industrial production confirms that there was a broad-based slowdown in the euro-zone at the end of last year, which was not due to problems in just one or two sectors or countries. The downturn will serve to keep worries about a …
13th February 2019
The Riksbank seems to be in denial about the weakening of Sweden’s economy. While it reiterated today that it expects to raise interest rates in the second half of this year, with the economy performing poorly and core inflation showing little sign of …
The next euro-zone recession is likely to begin before the ECB has raised interest rates from the “zero lower bound”. When it happens, we think the Bank will resume its asset purchase programme – but it will probably do so half-heartedly, which could …
11th February 2019
We think that inflation in Switzerland will fall below zero by the middle of the year, so the SNB is likely to stick to its very dovish policy stance. By contrast, we think that inflation in Norway will rise and the Norges Bank will raise interest rates …
The publication of macroeconomic forecasts by the European Commission is not normally a market-moving event. But the extent of the downward revisions to its GDP forecasts seemed to take the financial markets by surprise when they were published on …
8th February 2019
At its meeting next week, the Riksbank is likely to deliver a dovish message, perhaps hinting that even the single rate hike that it has pencilled in for this year is now in doubt. … Riksbank to strike a dovish note next …
While the Swiss franc has not benefitted much from recent upheaval in markets, including yesterday’s sell-off in US equities, it has been very stable. We expect this to remain the case in 2019, as slowing global growth and concerns about Italy support the …
Norway’s economy ended 2018 on a high note, but we doubt that this will last. We suspect that lower oil prices and weaker activity elsewhere in Europe will weigh on growth, prompting the Norges Bank to tighten monetary policy more slowly than it currently …
With the euro-zone economy slowing and the ECB short of ammunition, there will be growing calls for a big fiscal stimulus from Germany. However, we suspect that the German government will fall short of the fairly modest stimulus in its 2019 budget, and …
7th February 2019
The Danish krone is now close to the centre of the central bank’s exchange rate band – a level at which it has in the past unilaterally raised interest rates. However, we think it is likely to leave rates on hold throughout this year and 2020, not least …
December’s decline in German industrial production adds to the evidence that the economy was struggling in Q4. At face value it suggests that GDP may have declined in the fourth quarter after all. … German Industrial Production …
Economic activity finished last year on a weak note and most business surveys suggest that things did not improve in January. Italy went back into recession in the second half of 2018 and the evidence suggests that economic activity there has continued to …
6th February 2019
The Central Bank of Iceland had hinted only a few weeks ago that interest rate hikes were likely at the start of this year, but the recent economic data have been weak enough for it to hold fire today. It maintained a hawkish bias in its statement, but …
Italy’s economy would need to grow more quickly than it has over the past twenty years to prevent the public debt ratio from rising. Given the country’s demographics and poor productivity performance, that seems highly unlikely. So Italy will remain …
5th February 2019
Retail sales figures for December were no worse than expected, and upward revisions to the data for October and November show that sales actually rose by 0.6% in Q4 as a whole. However, the final PMIs for January show that economic activity remained very …
The weakness of German consumption growth last year resulted partly from problems in the auto industry and partly from slowing real household income growth. Spending growth will probably accelerate a bit in the coming months, but not enough to prevent …
4th February 2019
In our view, the Netherlands’ huge current account surplus, at around 10% of GDP last year, is unlikely to fall much anytime soon. Household saving will stay high, the government budget will remain in surplus and there is little scope for a reduction in …
1st February 2019
At the end of last year, Italy fell back into recession but Spain’s economic growth rate accelerated. We think that this divergence will continue. Next week is a quieter one for data releases; we think data for December will show a small rebound in German …
Manufacturing PMIs for Switzerland, Sweden and Denmark, released on Friday, dropped sharply in January, suggesting that the recent weakness in the euro-zone is spilling over to its neighbours. Next week, we expect rising inflation and inflation …
The increase in underlying inflation in the euro-zone in January is a rare piece of good news for the ECB. However, core inflation remains a long way below the ECB’s near-2% target and, given the mounting evidence that economic activity has slowed, we …
The recession in Italy last year appears to have been due to a combination of (temporary) disruption in the car sector and a (perhaps less temporary) decline in confidence among consumers and firms. The risks to our below-consensus forecast that Italy’s …
31st January 2019
Norway’s housing market struggled last year but looks set to do better in 2019. By contrast, construction in Sweden is likely to contract this year, causing the economy to slow sharply. … Norway housing market stabilising, Sweden …
Q4’s GDP growth rate of 0.2% will do nothing to reassure policymakers about the outlook for this year. We think growth will be only around 1.0% in 2019, and even this would require a slight pick-up from Q4. So the ECB will have no choice but to cut its …
The latest twists in the Brexit saga suggest to us that the UK is most likely to stay in the EU beyond 29th March and leave later in the year with some kind of deal. If so, we think Ireland’s GDP would rise by about 3% this year and 2% in 2020. But there …
30th January 2019
The further drop in the EC’s Economic Sentiment Indicator (ESI) in January adds to the evidence that the euro-zone economy got off to a slow start to 2019. … EC Business and Consumer Survey …
January’s surveys suggest that growth has slowed sharply in both Switzerland and Sweden. The SNB will see this as supporting its ultra-accommodative policy. But for the Riksbank it creates downside risks to its forecast for a rate hike in the second half …
Problems in the auto industry explain most of the slowdown in euro-zone GDP growth in Q3 last year. But in Q4, although car production remained weak, it did not fall further, and it will not have subtracted from GDP growth. Other factors lie behind the …
29th January 2019
The turn towards a slightly more dovish tone by the ECB at its meeting on Thursday will have made policymakers at the SNB and the Riksbank even more hesitant to hike rates anytime soon. Next week, we expect economic sentiment indicators for Switzerland, …
25th January 2019
The latest batch of business surveys suggest that the euro-zone economy may be stalling rather than just slowing. We think the ECB will tweak its forward guidance in March, and will at least consider more radical options soon. Meanwhile, we’re braced for …
January’s further fall in the Ifo Business Climate Index supports other evidence that economic growth in Germany has stalled. … German Ifo Survey …
Following today’s ECB press conference, we think that the Bank will soon change its forward guidance to make it clear that it won’t raise interest rates until 2020 at the earliest. We also suspect that it will unveil a new round of TLTROs before long. … …
24th January 2019
The further fall in the Composite PMI for the euro-zone in January will not prompt the ECB to change its statement this afternoon. But it will heighten concerns about the severity of the slowdown and makes it even more likely that policymakers will leave …
Following today’s monetary policy announcement, the Norges Bank is almost certain to raise interest rates in March. But we think that it is still too optimistic about prospects for the economy this year and, as a result, its tightening cycle will be much …
The slowdown in the euro-zone economy last year was driven partly by a decline in export growth and partly by weakening household consumption growth. This year, we suspect that consumption growth will edge up but exports and investment will lose pace, …
23rd January 2019
Whoever becomes the next ECB President is likely to be more “hawkish”, and perhaps less effective, than Mario Draghi. That may not matter if the economy recovers from its recent soft patch, allowing the ECB to normalise monetary policy; but it could be a …
22nd January 2019
The latest ECB Bank Lending Survey shows that consumers’ and firms’ demand for credit is softening, adding to the evidence that the euro-zone economy has lost momentum. … ECB Bank Lending Survey (Q4 …
