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While the latest data suggest that the European economies made a weak start to the year, we do not see this as the start of a serious slowdown. The euro-zone in particular has more spare capacity than official estimates suggest and we think that stronger …
18th April 2018
April’s further decline in the ZEW measure of investor sentiment in Germany suggests that investors are worried that escalating trade tensions and broader geopolitical concerns will take their toll on the export-reliant economy. … German ZEW Survey …
17th April 2018
The euro has been buffeted recently by concerns about protectionism, which have caused it to strengthen, and softer economic data, which have caused it to weaken. While the risks of an all-out trade war have risen, we still think that negotiations will …
13th April 2018
Both the Swiss franc and the Swedish krona have depreciated by almost 1.5% against the euro over the past month. This has left the franc trading at its weakest level since the Swiss National Bank abandoned its cap on the exchange rate just over three …
After widening in February, the euro-zone’s nominal goods trade surplus is on track to be little changed in Q1. Looking ahead, the surveys suggest that the contribution from net trade to economic growth has peaked but will remain positive. … Euro-zone …
February’s fall in euro-zone industrial production confirms that the sector made a soft start to 2018. But as this partly reflected temporary factors in Germany and the industrial surveys remain strong, we do not expect it to mark the start of a sharp …
12th April 2018
Although headline inflation increased to the Riksbank’s target in March, inflation excluding energy remained somewhat weaker. At its April meeting, we expect the Bank to signal that it will raise interest rates later than it previously anticipated, but …
Despite Spain’s recent strong run of form and the prospect of higher wage growth, we suspect that core inflation will remain subdued at close to 1% this year and next. With inflation set to remain in check even as wage growth picks up, the prospects for …
10th April 2018
National data suggest that the euro-zone’s industrial sector fared poorly in February, despite whopping rises in energy production as a result of the unseasonably cold weather across much of the region. The weakness in manufacturing was disappointing and …
March’s weak inflation data in Norway strengthen the case for the Norges Bank to move only very slowly towards tightening monetary policy. We suspect that it will wait until 2019 to raise interest rates, later than the Bank and investors currently …
The most recent official euro-zone data have been weak and the latest business surveys are consistent in their message that the economic expansion has lost momentum. A sanguine view of this is that firms are simply facing short-term capacity constraints …
6th April 2018
February’s sharp fall in industrial production confirms that the German economy made a soft start to the year. But the business surveys suggest that this should prove to be temporary. … German Industrial Production & French Trade …
Euro-zone money and lending growth slowed in February, adding to the evidence from the official data and business surveys that economic growth has peaked. Growth in “narrow” money – which is the sum of currency in circulation and overnight deposits – fell …
5th April 2018
February’s euro-zone retail sales data suggest that consumer spending made a slow start to 2018. And March’s Composite PMI implies that overall GDP growth has peaked. But we remain fairly optimistic about the economic outlook. … Euro-zone Retail Sales …
Despite February’s rise, Swedish private sector production growth appears to have slowed in Q1. But economic growth should remain healthy this year and inflationary pressures are building, so we still expect the Riksbank to raise interest rates in the …
The renewed rise in Swiss inflation in March will be welcomed by the Swiss National Bank. But with pipeline price pressures still very subdued, we doubt that the SNB will alter its ultra-accommodative policy stance any time soon. … Swiss Consumer Prices …
February’s fall in euro-zone unemployment to its lowest level since late 2008 is good news for the ECB. But with core inflation remained weak in March, so the Bank will continue to stress its patient and persistent approach to monetary policy …
4th April 2018
The activity surveys across the Nordics and in Switzerland generally weakened in Q1. But they were still fairly strong, so on the whole these economies seem to have performed reasonably well in the first three months of 2018. … How did the Nordic & Swiss …
3rd April 2018
The new German Government plans a fiscal boost equivalent to around 0.4% of GDP per year during its term. Increased spending on child benefits, pensions and refugee integration will support consumer spending growth in particular and we see GDP rising by …
Positive fiscal data have been something of a rarity in France in recent years, so President Emmanuel Macron will have welcomed the news earlier this week that the French budget deficit for 2017 was smaller than the Government had forecast. This largely …
29th March 2018
March’s increase in German consumer price inflation reflected a rebound in the volatile food and energy components. The headline rate remains low, at 1.5%, and there is still limited evidence of a rise in underlying price pressures. This will add to the …
In March, equity prices and bond yields in the Nordics and Switzerland were pushed down by concerns about US trade policy, while exchange rate movements were more mixed. Looking ahead, we expect yields to rise while equities continue to struggle. … Trump …
Despite falling in March, the Swiss KOF Economic Barometer is consistent with annual GDP growth remaining fairly healthy. But with inflation subdued, we expect the SNB to keep interest rates on hold until 2020. … Swiss KOF …
The further fall in the EC’s measure of economic sentiment in March echoes the message from the other surveys that euro-zone GDP growth may be at its peak. And with consumers’ inflation expectations declining again, the ECB will tread very carefully in …
27th March 2018
February’s euro-zone money and lending data add to the evidence from the activity surveys that economic growth has topped out. But with interest rates likely to rise only slowly as the ECB normalises policy, bank lending looks set to continue supporting …
The Swedish economy has lost some momentum of late, but growth still looks set to be healthy. And with inflationary pressures gradually rising, we expect the Riksbank to raise interest rates this year. … Sweden Econ. Tend. Survey (Mar.), Trade & PPI …
The fundamental differences between Italy’s Five Star Movement and League suggest that even if the parties agreed to form a government, they would not agree to implement either party’s more extreme and costly policy proposals. But we would still expect to …
26th March 2018
A key hurdle in securing a relatively smooth UK exit from the EU has been passed. The Brexit transition deal preserves the current economic relationship between the UK and the EU for 21 months after the UK technically leaves the bloc in March 2019. …
23rd March 2018
The Swiss National Bank is likely to reduce its currency interventions further over the next couple of years as other central banks start to normalise policy and the Swiss economy is better able to withstand a franc appreciation. But an outright reduction …
22nd March 2018
March’s PMI and Ifo surveys point to a softening of euro-zone growth, which we had expected after such a strong run and which has not caused us to change our upbeat GDP forecasts. But it certainly supports the ECB’s cautious approach to policy …
The weakness of euro-zone productivity growth since the global financial crisis can in part be attributed to cyclical factors. As these factors reverse, there is scope for economic growth to remain strong without a corresponding sharp rise in inflation. …
21st March 2018
While the Central Bank of Iceland’s forecasts imply that it intends to scale back its controls on foreign investment later this year, we think that it will end up leaving them unchanged until 2020. … When will Iceland drop its remaining capital …
The Nordic central banks are all moving towards tightening monetary policy, albeit at different speeds. We think that higher interest rates will come first in Sweden, pushing up government bond yields there fairly quickly. By contrast, the Swiss National …
20th March 2018
March’s sharp decline in the ZEW measure of German investor sentiment highlights the risks to the economy. While Germany would be hit harder than most by a trade war, for now the outlook is positive. … German ZEW Survey …
The euro-zone’s nominal goods trade surplus narrowed in January, and since then survey indicators of export orders have weakened slightly. Nevertheless, we think that the euro-zone’s trade surplus will remain fairly wide, suggesting that tension between …
19th March 2018
The latest inflation data in the Nordic countries and Switzerland have generally been quite weak. Indeed, inflation in Switzerland slowed to a five-month low of 0.6% in February. The core rate was unchanged from the previous month at 0.5%, while the rate …
16th March 2018
This week has featured a raft of speeches from the ECB’s Governing Council on the outlook for monetary policy, displaying a range of views among its members. Several would clearly prefer to end asset purchases in September, while others favour a much more …
Today’s euro-zone labour costs data support our view that the ECB will act very patiently in normalising its monetary policy stance. Indeed, higher interest rates remain a long way off. … Euro-zone Labour Costs …
Ireland’s GDP had another very strong year in 2017. While that tells us little about actual economic activity taking place in the country, other more reliable indicators suggest that the economy performed well last year and got off to a good start in …
15th March 2018
Following the recent reduction in its inflation target, the Norges Bank now clearly expects to begin raising interest rates this year. However, we think that it will tighten monetary policy more slowly than investors anticipate. Along with our forecast …
Despite sounding a slightly more positive tone on the economy, the Swiss National Bank today reiterated that the Swiss franc remained “highly valued” and that it still needed to keep interest rates at rock-bottom levels and intervene in the currency …
Introducing a parallel currency could help to stimulate Italy’s economy by providing a fiscal boost and leading to an improvement in competitiveness. That said, despite some of the eurosceptic parties’ claims, it would be akin to leaving the euro-zone. It …
14th March 2018
Labour shortages are a growing problem in parts of the euro-zone and are likely to persist due to mismatches of skills and barriers to relocation. But given the degree of labour market slack in the likes of Italy and Spain, and the decline in workers’ …
January’s fall in euro-zone industrial production marked a weak start to 2018, but much of the decline was due to temporary weather effects. The business surveys suggest that once this volatility washes out, the sector will continue to perform well. … …
While the Central Bank of Iceland left policy unchanged today, it also acknowledged that inflation expectations are rising. We expect higher actual and expected inflation to prompt the Bank to raise interest rates in the next two years, contrary to the …
With Swedish inflation unchanged at a joint 10-month low in February, we see the Riksbank changing its forward guidance next month to signal that it will raise interest rates later than it previously forecast. But we still think that the Bank will tighten …
In addition to reducing the monthly pace of its asset purchases from €60bn to €30bn, in January the ECB also changed the composition of its purchases. Corporate sector debt now accounts for a larger share of the total, as we expected. This should help to …
9th March 2018
The Norges Bank’s new inflation target strengthens the case for tighter monetary policy. But we think that the Bank will move very cautiously. … How big a deal is the new lower inflation …
Inflation in Norway rose quite sharply in February, but we do not think that it is about to surge. Meanwhile, Icelandic GDP growth would have been negative in Q4 was it not for a one-off intellectual property payment which boosted exports. Nevertheless, …
Large declines in energy output as a result unseasonably-warm temperatures explain much of the weakness in industrial production across the euro-zone in January. Meanwhile, the business surveys remain strong. So euro-zone industry is likely to fare better …
