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Swiss Q1 GDP data released this morning offer some comfort that the Swiss economy has put the weak patch in H2 2018 behind it. But indicators suggest that growth is likely to slow over the rest of this year. … Switzerland GDP (Q1) and Swedish ETI …
28th May 2019
Projections of the results of the European elections confirm that pro-European parties will continue to have a clear majority in the European Parliament (EP) itself, so little will change at EU level. But there will be some fallout for national politics, …
27th May 2019
This week saw the release of another set of underwhelming business surveys, suggesting that the pick-up in GDP growth in Q1 will not be sustained, and some further evidence that price pressures remain very weak. The stage is therefore set for a dovish …
24th May 2019
The Swiss franc has strengthened in recent weeks, and we think that this trend will continue over the rest of the year. By contrast, despite the Swedish central bank’s concerns about the krona’s weakness, we expect it to fall further. … Swiss franc set to …
The account of the ECB’s latest monetary policy meeting confirms that policymakers were concerned about downside risks to economic activity and, particularly, inflation. This reinforces our view that the Bank is likely to seek ways to provide more policy …
23rd May 2019
The flash PMIs for the euro-zone continued to disappoint in May and suggest that the economic growth dropped back again in the second quarter. And with the Ifo Business Climate Index having fallen to a 54-month low in May, business surveys point to a …
The recent fall in financial market measures of inflation expectations may be a bit misleading, and is not matched by a comparable fall in households’ inflation expectations. But it is nonetheless another reason for the ECB to keep policy ultra-loose, or …
22nd May 2019
The Central Bank of Iceland’s decision to cut interest rates by 50bp to 4.00% came as a surprise. While it was prompted by a deterioration in the economic outlook, inflation expectations remain high and wage growth is strong. Given that the economic …
While the sharp downturns in the German motor vehicle and chemical sectors have attracted a lot of attention, the weakness of other sectors accounts for more of the slowdown in production since 2017. Accordingly, a sustained pick-up in growth is only …
21st May 2019
The recent sell-off in the Swedish krona to decade lows against the euro has been driven by a combination of a flare-up in global trade tensions and a dovish shift in the Riksbank’s policy stance. We think that things are likely to get worse before they …
20th May 2019
Developments this week suggest that Italy’s government is on another collision course with the European Commission. Meanwhile, the risk of US car tariffs has eased, but it has not disappeared. Finally, German Bund yields have continued to decline, partly …
17th May 2019
We suspect that the weather-related weak patch in Norwegian activity in Q1 will prove temporary. Meanwhile, following the recent flare-up in trade tensions and the Swedish Riksbank’s dovish shift, we have revised down our forecast for the krona. And as …
Recent comments by Italy’s deputy prime minister have increased the risk that Italy is placed in an EU disciplinary procedure later this year. There are a few ways that talks about Italy’s fiscal plans could play out, but all of them would lead to higher …
16th May 2019
Following the recent flare-up in global trade tensions and dovish shift in the Riksbank’s stance, we have revised down our already below-consensus end-2019 forecast for the krona against the euro from SEK 10.6 to 11.0. But we still expect it to recover …
Given that the improvement in Q1 was at least partly due to temporary factors, and that business surveys have remained uniformly downbeat, we suspect that the German economy will lose momentum again in the second quarter of this year. As a result, growth …
15th May 2019
The euro-zone industrial production data for March show that while output in the sector expanded in Q1, this was not enough to offset Q4’s contraction. And with global economic growth set to remain weak this year and next, euro-zone industrial production …
14th May 2019
The small pick-up in Swedish inflation in April was caused by the later timing of Easter this year. Amid signs that economic growth has slowed sharply in the first half of 2019, we expect headline inflation to fall back again over the coming months and …
The US is stepping up the pressure on China to agree a trade deal, and a deadline to decide whether to raise tariffs on all auto imports is looming. On their own, those tariffs would do little damage to the euro-zone, but if the US raised tariffs more …
13th May 2019
The slowdown in mainland Norway GDP growth in Q1, from an upwardly-revised 1.1% q/q in Q4 to 0.3% in Q1, was sharper than we had expected. However, the result was driven in part by a weather-related fall in electricity production, so we suspect that the …
This week saw further signs that the German economy regained some momentum at the end of Q1, as industrial production rose and exports picked up in March. But with the business surveys for March and April still looking grim, we doubt that the improvement …
10th May 2019
The Norges Bank held interest rates on hold at 1.00% at its meeting on Thursday but signalled that it will “most likely” resume its tightening cycle at the next meeting, in June. Meanwhile, the minutes from the Riksbank’s April policy meeting further …
Norwegian inflation data for April, released this morning, remained well above the Norges Bank’s 2.0% target and will reinforce policymakers’ current hawkish stance. … Norwegian & Danish Consumer Prices …
On current plans, national governments in the euro-zone will deliver a modest fiscal stimulus worth around 0.5% of GDP during 2019 and 2020 combined. Hopes that it might be scaled up significantly look misplaced given political preferences in Germany and …
9th May 2019
Euro-zone GDP growth was stronger than expected in Q1, at 0.4% q/q, but we suspect that it will slow again in the coming quarters. Activity was flattered by the comparison with a weak end to 2018 and construction was boosted by unusually good weather. …
Today’s decision by the Norges Bank to leave its policy rate on hold at 1.00% is just a brief pause in its tightening cycle, with another hike now almost certain in June. With core inflation set to remain above target this year, we have a further rate …
If the ECB re-starts QE next year, as we think is likely, the resulting upward pressure on the Swiss franc would stoke deflationary fears at the Swiss National Bank (SNB) and prompt a policy response. We expect the SNB to step up its currency …
8th May 2019
The increase in industrial production in March is not as a good as it looks at first sight, not least because it was largely due to another increase in construction activity. Moreover, the business surveys such as the manufacturing PMI and Ifo Business …
We expect policymakers in Norway, Switzerland, Iceland, and Sweden to all leave interest rates unchanged at their next policy meetings over the coming weeks and months. In the case of the Norges Bank, we suspect that this will just be a pause in its …
As we expected, the KOF Economic Barometer from Switzerland edged down in April and remained consistent with Swiss GDP growth staying subdued in quarterly terms this year. The sub-50 reading for the manufacturing PMI in April points to a deepening …
3rd May 2019
The rebound in euro-zone GDP growth to a respectable 0.4% q/q in the first quarter of this year has been greeted by many as proof that the economy is back on track. But we suspect that the expansion will slow again in the coming months, given that Q1 was …
The jump in the euro-zone’s core inflation rate in April was largely due to Easter timing effects, and is likely to be reversed in May. We expect the headline rate to fall below 1% towards the end of the year, and core inflation to remain weak. As a …
This morning’s release of inflation data from Switzerland for April yielded no surprises and showed that price pressures remain almost completely absent. We expect the headline rate to fall close to zero over the coming months and that core inflation will …
Negative interest rates in Denmark, Switzerland, and Sweden impose costs on their respective banking sectors, but the overall burdens are very small – well below 0.1% of bank assets in all cases. Accordingly, concerns about these costs will not prevent …
2nd May 2019
A surge in support for populist parties in European parliamentary elections later this month should have little bearing on economic policy in the near term. After all, moderate parties are still likely to control a majority of seats, and parliament’s …
Data due to be released tomorrow are set to show a jump in inflation in April. But given that this rise will largely be the result of Easter timing effects, it is unlikely to be sustained. And while we have raised our end-2019 oil price forecast, and as a …
The manufacturing PMIs from Switzerland and the Nordics for April make for grim reading and suggest that economic conditions have stayed weak at the start of the second quarter. This supports our generally dovish view on policy rates, particularly for …
The official euro-zone activity data for Q1 were much stronger than the message from the business and consumer surveys. But we still think that the consistent weakness of the survey evidence bodes ill for Q2. … Are the euro-zone activity surveys too …
1st May 2019
The first estimate of euro-zone GDP in Q1 and the labour market data for March were encouraging. But the timelier survey indicators have continued to weaken, and we expect the global economy to remain sluggish. So we think that euro-zone growth will slow …
30th April 2019
The decrease in the Swiss KOF Economic Barometer in April leaves it consistent with subdued quarterly GDP growth this year, in line with our forecast. And we expect the franc to appreciate this year, leaving the stage set for further relaxation in policy …
April’s decline in the euro-zone’s Economic Sentiment Indicator adds to the evidence from other surveys that the economy got off to a slow start to Q2. So even if GDP data for Q1, published tomorrow, show a pick-up in growth as we expect, this seems …
29th April 2019
Following this weekend’s election, we suspect that Spain’s next government will tighten fiscal policy slightly, contributing to slower GDP growth over the coming years. But the country still looks set to grow more quickly than the euro-zone as a whole. … …
The dovish shift in the Riksbank’s policy stance this week was a step in the right direction, but we still think that policymakers and investors are overestimating the potential for interest rate hikes in Sweden in the future. Meanwhile, the Riksbank’s …
26th April 2019
Spain’s economy is performing well in the run-up to Sunday’s general election, but we expect growth there to slow. Meanwhile, although we have revised up our oil price forecasts, energy inflation still looks set to drag the headline rate down below 1% …
For now, the Riksbank is in the peculiar position of trying to ease and tighten policy at the same time. But with economic growth and core inflation set to remain subdued, we expect policy tightening to ultimately be kicked down the road. If anything, the …
Spain’s period of very strong growth has come to an end. Nevertheless, the latest data suggest that in the run-up to this weekend’s election, it is growing at a decent pace. And there still appears to be plenty of spare capacity in the economy, which …
The dovish shift in the Riksbank’s policy stance is a step in the right direction. But with economic growth and core inflation set to remain subdued over the coming years, we still think that policymakers and investors are overestimating the potential for …
25th April 2019
We expect that higher oil prices will result in the Norges Bank raising interest rates twice this year and that the krone will outperform its Nordic peers. However, if we are proved correct in our view that the price of oil will fall between now and …
24th April 2019
Whatever government is formed after Spain’s general election, we expect it to implement a moderate fiscal tightening, causing economic growth to slow slightly. But Spain should remain one of the euro-zone’s top performers. The bigger concern is that the …
The fall in the Ifo Business Climate Index for April, which was largely due to a decline in the reading for the manufacturing sector to its lowest level since 2012, is further evidence that Germany’s industrial recession has dragged on into the second …
The Riksbank is all but certain to keep its repo rate unchanged at -0.25% at its policy meeting next week. Meanwhile, coalition negotiations following last week’s election in Finland are likely to drag on into May, but we think that the Social Democrats …
18th April 2019
