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Euro-zone industrial production has slowed surprisingly sharply this year as producers have suffered from an investment-led global slowdown and an appreciation of the trade-weighted exchange rate. Since neither trend looks set to reverse, we have revised …
19th September 2018
The Swiss and Nordic economies generally performed well in Q2, but most of the timelier survey indicators point to slower growth to come. Switzerland’s economy expanded very strongly in the first half of the year, boosted by revenues from international …
18th September 2018
The latest comments from the ECB’s Benoît Coeuré suggest that future guidance about the pace of policy tightening might hinge on developments in wage growth. In our view, this would be a positive development, reducing the risk that the historically …
Political uncertainty following Sweden’s general election last weekend is unlikely to meaningfully alter the Riksbank’s plans to start tightening policy around the turn of the year. Meanwhile, in Norway, stronger August inflation data this week will have …
14th September 2018
Despite the recent softening of the economic data, on Thursday ECB President Mario Draghi maintained a positive tone on the outlook for GDP growth and inflation. And the Q2 labour cost data, published on Friday, will have given policymakers further cause …
The pick-up in euro-zone wage growth in Q2 adds to signs that inflationary pressures in the region are building. This will encourage the ECB that it is right to be normalising monetary policy. But with wage growth and core inflation set to rise only …
Although CPIF inflation was above target in August, the further decline in non-energy inflation will worry the Riksbank. If it remains soft, then the Bank will probably keep rates on hold until early 2019. … Swedish Consumer Prices …
The ECB today confirmed its intention to normalise policy gradually, expressing very little concern about signs of an economic slowdown. Given growing risks and economic uncertainty, the first interest rate hike is still at least a year away. But the …
13th September 2018
July’s euro-zone industrial production data marked a very weak start to Q3 and support the ECB’s cautious approach to policy normalisation. … Euro-zone Industrial Production …
12th September 2018
While Sweden looks set for a period of political uncertainty, the broad fiscal consensus among mainstream politicians suggests that, whoever takes power, the near-term economic outlook will not be radically different. But given rising support for the …
11th September 2018
The role of weakening exports in Germany’s recent slowdown makes it tempting to pin the whole thing on trade tensions. But the slowdown began before Trump’s tariff threats and seems more likely to reflect softer demand from Asia and Emerging Europe, as …
After providing a big boost to GDP growth last year, net exports were a drag on growth in the first half of 2018. This does not look like a temporary response to heightened trade tensions. Instead, it largely reflects three developments: a slowdown after …
Following August’s increase in core inflation to a 19-month high, the Norges Bank is almost certain to raise interest rates at next week’s meeting. But policymakers remain cautious about the impact of tighter monetary policy, so they will move very slowly …
10th September 2018
Markets Overview – We think that a combination of policy loosening by major central banks, an increase in investor risk aversion, and mounting trade tensions will lead to bond yields in Switzerland and the Nordics staying lower for longer and equities …
9th September 2018
The latest opinion polls suggests that Sunday’s general election in Sweden will be a close call. But the outcome of the vote is unlikely to significantly alter the outlook for the economy or monetary policy. Meanwhile, data published this week showed that …
7th September 2018
The latest official data on activity in the euro-zone have been fairly weak, but the timelier survey indicators paint a more positive picture. Meanwhile, Italian bond yields have fallen recently following comments from the Government that it would stick …
The third estimate of euro-zone Q2 GDP confirmed that net trade was a drag on growth for the second consecutive quarter. But with domestic demand strong and the timelier survey evidence encouraging, we remain fairly optimistic about the economic outlook. …
Despite mixed news from the economy and growing risks to the outlook, we expect the ECB to reiterate that asset purchases are set to end in December and that interest rates will probably rise gradually from next autumn. It will stress its ability to …
6th September 2018
Despite the more dovish tone of today’s policy announcement, the Riksbank looks likely to raise interest rates in December. We think that the Bank will then tighten more quickly in 2019 and 2020 than investors expect, causing the krona to strengthen. … …
This morning’s GDP data and the timelier surveys show that the Swiss economy is growing at a fairly strong pace. But inflationary pressures remain subdued. As a result, we still think that the SNB will wait until 2020 before raising raise interest rates, …
July’s euro-zone retail sales data imply that the sector had a slow start to Q3, but the timelier indicators are more encouraging. And the message from August’s PMI surveys was positive for the euro-zone economy as a whole. That said, in Italy, policy …
5th September 2018
Greater autonomy for Catalonia would probably have a detrimental impact on Spain’s public finances. But it would reduce calls for secession, and therefore limit the risk of a renewed and potentially damaging push for independence. So in the long run, it …
4th September 2018
Uncertainty about the outlook for the economy and monetary policy in the euro-zone is unusually low. While it is unlikely to return to the levels seen during the financial crisis or euro-zone debt crisis any time soon, we suspect that it will rise over …
In August, Swiss inflation was unchanged at its joint-highest level in over eight years. But underlying price pressures are subdued, and we think that falling oil prices and exchange rate effects will drag headline inflation down over the next year. So …
The Swiss franc has strengthened against the euro this week, but we doubt that this will last. Meanwhile, we think that Sweden’s forthcoming general election is unlikely to have much of a macroeconomic impact. … Swiss franc strength unlikely to …
31st August 2018
Euro-zone data published this week showed a picture of fairly strong growth but continued subdued inflationary pressure. In the coming years, we expect GDP growth to slow, but underlying inflation to creep up. Meanwhile, we doubt that the US-Mexico trade …
August’s small decline in euro-zone inflation won’t deter the ECB from ending its net asset purchases this year. But core inflation is still not on a sustained upward trend, so the Bank will be in no hurry to raise interest rates. We think that the first …
Denmark had a weak first half of the year, but timelier evidence points to slightly faster growth in Q3. Meanwhile, Finland’s economy continues to perform well. … Finland & Denmark GDP …
Strong economic growth is fuelling inflationary pressures in both Norway and Sweden. So we expect the Norges Bank to follow through on its guidance and raise rates by 25bp next month. We doubt that Sweden’s Riksbank will be far behind and think that it …
30th August 2018
Although the EC’s measure of euro-zone economic sentiment fell again in August, it remains at a high level and consistent with fairly strong growth. But underlying price pressures are building very slowly, supporting the ECB’s cautious stance. … EC …
August’s surveys suggest that while economic growth is slowing in Switzerland, it remains very strong in Sweden. This is primarily due to differing conditions in the manufacturing sector, which might reflect the fact that the Swiss franc is historically …
Although the Central Bank of Iceland left policy unchanged today, it expressed concern about rising inflation expectations ahead of wage negotiations later this year. So domestic inflationary pressures are set to build further and we continue to expect …
29th August 2018
Germany’s current account surplus is likely to narrow over the coming years, but we suspect that it will remain very large. So there is little chance that economic rebalancing in Germany will help to ease trade tensions within the EU or across the …
28th August 2018
The upward pressure on the Swiss franc eased this week and our forecasts for monetary policy in Switzerland suggest that the currency will continue to depreciate against the euro over the next couple of years. Meanwhile, the latest opinion polls suggest …
24th August 2018
Greece’s exit from its bailout on Monday was widely hailed by European policymakers as a sign of success, but its problems are far from over. Meanwhile, comments from President Trump emphasised that, despite the supposed tariff ceasefire between the US …
Even after its recent rise, we still think that the Swiss franc will weaken against the euro over the coming years as the Swiss National Bank lags the ECB in tightening monetary policy. But sustained demand for safe-haven assets suggests that the …
23rd August 2018
August’s small increase in the euro-zone PMI suggests that the region’s economy is continuing to perform well in Q3, which will reassure the ECB that it is right to be normalising monetary policy very gradually. … Euro-zone Flash PMIs …
The slowdown in Norway’s housing market is weighing on the economy. But other sectors are performing much better, so this won’t be enough to stop the Norges Bank from raising interest rates next month. … Norway GDP & Switzerland IP …
Following September’s general election, Sweden looks set for a period of political uncertainty that might dent economic activity. But this is likely to prove temporary and we doubt that it would prevent the Riksbank from tightening monetary policy or the …
21st August 2018
We suspect that, due to technical reasons, the ECB will increase its purchases of Italian government bonds in October. This might help to prevent yields from shooting up if Italy’s Government submits a very expansionary Budget to the European Commission …
The sell-off in Italian bonds continued this week, and although we think that Italian yields have further to rise, we suspect that contagion will remain limited. Meanwhile, data released this week for the euro-zone showed that the economy did better in …
17th August 2018
The further appreciation of the franc this week strengthens our view that the SNB will be very cautious about policy tightening, keeping rates on hold until 2020. Meanwhile, with inflationary pressures building in Norway, we think the Norges Bank was …
Developments over the past few weeks have made it more likely that Italy’s Government will implement some form of fiscal stimulus in next year’s Budget. This is likely to cause bond yields to rise further. However, contrary to some Italian politicians’ …
The latest inflation data in Switzerland and the Nordic economies show that underlying inflation is fairly low. But we doubt that this will stop the Norges Bank or Riksbank from raising interest rates this year. … Soft inflation won’t stop rate rises in …
16th August 2018
After leaving policy unchanged today, the Norges Bank looks almost certain to begin raising interest rates at its next meeting in September. But even as the central bank tightens monetary policy over the next few years, we think that falling oil prices …
Portugal’s banks have strengthened their balance sheets significantly and look set to support economic growth over the coming years. However, the already-high level of private sector debt is a concern. … Portugal’s banks to support investment-led …
15th August 2018
The upward revision to euro-zone GDP growth in Q2 will make policymakers at the ECB more confident that they are right to be winding down their asset purchases. … Euro-zone GDP (Q2), IP (Jun.) & German ZEW …
14th August 2018
The stronger-than-expected expansions in Germany and the Netherlands in Q2 provide some hope that the euro-zone economy may have grown more strongly in Q2 than initially estimated. This should encourage the ECB that it is right to wind down its asset …
The renewed appreciation of the Swiss franc this week as investors sought out safe haven assets will not have been welcomed by the SNB. But the franc is still weaker than it has been over the past few years so we do not expect the SNB to alter its stance. …
10th August 2018
While worries about the exposure of euro-zone lenders to Turkey weighed on the euro and European banking stocks on Friday, the economic spillovers to the region should be fairly modest. Meanwhile, comments from Italy’s Deputy Prime Minister Luigi di Maio …
