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While business surveys have weakened throughout the euro-zone, they imply quite different things for growth in each economy. The Spanish surveys still bode well. But the German and French indicators are consistent with very slow growth while the Italian …
18th December 2018
December’s fall in the Ifo Business Climate Indicator (BCI) to a twenty-seven month low adds to evidence that the slowdown in Germany is more than just a soft patch. … German Ifo Survey …
Following this week’s ECB meeting, and the latest data on economic growth in the currency union, the chance that the Bank raises interest rates next year has fallen. … ECB dovish as PMI confirms growth …
14th December 2018
Central bank meetings in Norway and Iceland this week suggested that interest rate hikes are on the horizon in both economies. By contrast, the Swiss National Bank again signalled that it won’t raise rates anytime soon. Next week we expect the Riksbank to …
December’s fall in the euro-zone Composite PMI was almost entirely driven by a sharp drop in France, perhaps suggesting that the ‘gilets jaunes’ protests have had a serious economic effect. But even if France’s PMI bounces back as the effects of the …
While the ECB has ended its net asset purchases, it plans to reinvest funds from maturing securities for a long time to come and has stressed that any future rate hikes will depend on a build-up of inflationary pressure. We are still pencilling in a first …
13th December 2018
Italy’s government has agreed to reduce its budget deficit forecast for next year, which reduces the risk of a crisis in the near term. But this does not spell the end of its fiscal troubles. With the country’s economic prospects bleak, government debt …
In today’s statement, the Norges Bank clearly signalled that an interest rate hike in March is a near certainty. But beyond that, we think that lower oil prices will prompt the Bank to end its tightening cycle sooner than investors expect, causing the …
The Swiss National Bank reiterated its commitment to its ultra-accommodative policy stance today and revised down its forecasts for inflation and GDP. As we think inflation will be even lower than they forecast, we continue to expect the SNB to keep its …
The euro-zone economy’s recent performance has been worse than we or the consensus expected. But for now at least, it seems to be a garden variety slowdown rather than something more worrying. The exception is Italy, where the risk of stagnation or even a …
12th December 2018
October’s small rise in euro-zone industrial production provides some grounds for optimism that GDP growth will pick up a bit in Q4. But the big picture is that the euro-zone economy has lost momentum, increasing the chance that the ECB waits longer …
The Central Bank of Iceland left interest rates unchanged today, but hinted strongly that hikes are on the horizon. We think that it will raise interest rates twice next year, leaving the deposit rate at 5.00%. … Central Bank of Iceland tightening cycle …
The slight drop in core inflation in November further decreases the chances of the Riksbank raising rates next week. Nonetheless, we still expect the first hike in February as underlying inflation is set to rebound. … Swedish Consumer Prices …
Protests in France are likely to put a serious dent in GDP growth in Q4. And while the giveaways announced yesterday will boost disposable incomes next year, any positive effect on the economy is likely to be offset by deteriorating confidence and tax …
11th December 2018
November’s unexpectedly-sharp rise in inflation in Norway is unlikely to change the Norges Bank’s mind about leaving policy unchanged at Thursday’s meeting. The Bank is likely to raise interest rates again in Q1, but the recent decline in oil prices …
10th December 2018
The latest data on economic activity in the euro-zone have been weak, but policymakers at the ECB will have been encouraged by the continued acceleration in wage growth. At its meeting on Thursday, the Bank looks set to confirm that it will end its net …
7th December 2018
Switzerland’s Federal Council has been debating this week on whether to align itself more closely with the EU, a decision with serious implications for the country’s status as an international financial centre. Meanwhile, although Q3’s stagnation in the …
The breakdown of euro-zone Q3 GDP suggests that the slowdown was down to more than just disruption to car production. Nevertheless, for now we still think that quarterly growth will probably pick up a touch early next year as lower oil prices boost …
At next week’s monetary policy meeting, the Swiss National Bank is set to reiterate its ultra-dovish stance. Meanwhile, recent developments in Sweden and Norway suggest that policymakers in both countries will give more dovish messages than at previous …
October’s industrial production data for Germany and France add to the evidence that the euro-zone economy is unlikely to bounce back strongly after Q3’s slowdown in GDP growth. … German & French Industrial Production …
While the ECB will confirm the end of its net asset purchases at its December meeting, it will keep its options open about the future path of policy. The weakness of recent data may well lead it to concede that the risks to growth have shifted to the …
6th December 2018
After contracting in Q3, activity surveys suggest that Italy’s economy is on the brink of recession. Indeed, the Composite PMI was unchanged at 49.3 in November, which on past form points to GDP falling by as much as 0.3%. Whether or not the economy tips …
November’s final euro-zone PMIs suggested that the weakness of GDP growth in Q3 was more than just a blip. But October’s rise in retail sales provides some comfort and we expect consumer spending growth to accelerate next year. … Euro-zone Retail Sales …
5th December 2018
Sweden’s private sector production data for October suggest that the economy bounced back after Q3’s contraction. This reduces the risk of the Riksbank delaying its first rate hike beyond February. … Swedish Private Production …
November’s falls in headline and core inflation highlight the lack of price pressures in Switzerland. And with GDP growth also weak, the SNB looks set to keep policy looser for longer than investors expect. … Swiss CPI …
4th December 2018
Riots over living costs in France have not altered our view that the economy will outperform most of its neighbours in the next two years. But they highlight how difficult it will be for President Macron to implement more controversial growth-boosting …
3rd December 2018
The increase in manufacturing PMIs for Switzerland, Sweden and Norway in November offers hope that the weakness of economic activity in Q3 was not the start of a deeper downturn. But since the surveys also point to easing price pressures, the three …
We think that this week’s decline in Italian bond yields will be reversed before long, weighing on the economy. Meanwhile, data released this week showed that core inflation in the euro-zone edged down to just 1.0% in November. But there are still …
30th November 2018
Data released this week which showed that Swiss GDP contracted in Q3 support our view that the SNB will keep interest rates on hold longer than investors currently expect. Meanwhile, other data showed that Sweden’s economy also shrank, which is likely to …
The second estimate of Italy’s GDP in Q3 showed that the economy performed even worse than previously thought. And while we know that temporary disruption in the car industry weighed on the economy in the third quarter, more recently the underlying pace …
We doubt that November’s decline in euro-zone inflation will cause the ECB to alter its plans for a gradual normalisation of monetary policy, with asset purchases set to end next month. … Euro-zone Flash CPI (Nov.) & Unemployment …
November’s fall in the KOF Economic Barometer adds to the evidence that Swiss growth has shifted down a gear. And with inflation weak, we expect the SNB to keep policy ultra-loose until at least 2020. … Swiss KOF (Nov.), Finnish & Danish GDP …
The recent fall in euro-zone consumer confidence has reflected a decline in optimism about the general economic outlook, which may well continue. But this need not imply that a slowdown in spending growth is to come. Households’ perceptions of their own …
29th November 2018
November’s modest decline in the EC’s euro-zone Economic Sentiment Indicator (ESI) left it consistent with solid GDP growth which will encourage the ECB to end its asset purchases next month as planned. … Euro-zone EC Business & Consumer Survey …
The very weak Swiss Q3 GDP data make us more confident that the SNB will keep monetary policy ultra-loose longer than investors expect. Meanwhile, the contraction in the Swedish economy in Q3 suggests that the Riksbank will push back the first interest …
We doubt that the recent rally in Italian government bonds will last. And higher yields are already feeding through to higher borrowing costs in the private sector. We think that this will offset any positive impact on GDP from looser fiscal policy in …
28th November 2018
The housing boom that has been one of the prime drivers of Dutch economic growth in recent years is likely to be close to its peak. As a result, growth is likely to slow in the coming years. But we do not expect another house price crash, mostly due to …
Provided that it is reasonably orderly, a “no deal Brexit” would probably reduce economic activity in the euro-zone by 0.1-0.2% points next year, though the impact would be much larger for Ireland. The blow would be concentrated in Q2 and Q3, after which …
November’s fall in the Ifo Business Climate Indicator (BCI) adds to evidence that the German economy is slowing, but suggests that the particular weakness of Q3 will not be repeated at the end of the year. We still expect growth to regain pace in 2019 as …
26th November 2018
The Riksbank’s Financial Stability Report highlighted the risks that higher interest rates would pose to the housing market and to households. But we continue to expect a first rate hike in December and the Riksbank to raise rates more quickly than …
23rd November 2018
The sharp drop in oil prices this month supports our long-held view that lower inflation will give consumer spending a boost. And we doubt that the sell-off in the equity market will do much damage to the wider economy. … Fall in oil prices to boost …
Sunday’s referendum on whether to place Swiss law above international law threatens to undermine treaty negotiations currently taking place between Switzerland and the EU. Failure to strike a deal on the treaty would hurt financial services and harm …
November’s fall in the Composite PMI raises doubts about whether the economy will rebound after a weak Q3. This won’t be enough to stop the ECB from ending its asset purchases next month, but it increases the chance that the Bank will wait longer to raise …
The ECB has a range of tools at its disposal to respond to the situation in Italy and its effects on the wider euro-zone. But for it to use them, there would have to be a serious escalation of the crisis. And even then, the ECB would force Italy to agree …
20th November 2018
October’s weaker-than expected inflation data, published this week, are unlikely to deter the Riksbank from raising interest rates in the coming months, with a December hike most likely in our view. Meanwhile, although temporary factors weighed on …
16th November 2018
The EU looks set to launch disciplinary proceedings against Italy, perhaps as soon as next week. But unless the situation in Italy escalates dramatically, the ECB is unlikely to respond. Instead, the Bank is more focused on the risks to the wider outlook …
Economic growth in Switzerland, Sweden and Norway looks set to slow next year. In fact, survey evidence in Switzerland suggests that the economy has already shifted down a gear, with the KOF Economic Barometer pointing to a decline in annual GDP growth …
15th November 2018
The small changes that Italy’s Government has made to its Budget are unlikely to placate the European Commission. So Italy looks set for greater budget oversight, which could eventually lead to sanctions. But we doubt that even this would make the …
14th November 2018
Q3’s slowdown in euro-zone GDP growth partly reflected temporary factors, so we remain optimistic that the economy will perform better in the coming quarters. This would allow the ECB to push ahead with its plans to start tightening monetary policy next …
The slight fall in Swedish inflation in October will not significantly influence the Riksbank’s decision on the timing of its first rate hike, which we still expect in December. Underlying inflation will be strong enough next year to allow for a steeper …
