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In an environment of global uncertainty, the Swiss National Bank will be wary of exacerbating any upward pressure on the safe haven franc when it meets on 15th March. Admittedly, its forecast for inflation to surpass 2% by 2020 suggests that it may soon …
8th March 2018
The ECB’s decision to remove the loosening bias from its monetary policy statement today was arguably the first step along a path of policy normalisation. But note that its balance sheet will continue to expand with new asset purchases until at least …
Little has changed since the Central Bank of Iceland’s (CBI) last policy meeting, so we expect it to keep policy unchanged next week. Later this year, we see the Bank raising interest rates. … Central Bank of Iceland on hold for time …
7th March 2018
After a tough start to 2018, we think that equities in the Nordic countries and Switzerland will continue to struggle over the next couple of years. But their performance will be far from uniform. … Will Nordic and Swiss equities continue to …
The first breakdown of euro-zone Q4 GDP showed that consumer spending growth slowed to just 0.2%, the weakest rate since Q1 2014. Encouragingly though, this appears to have been due to temporary factors. Indeed, unseasonably-warm weather throughout much …
The third estimate of euro-zone GDP in Q4 showed that the 0.6% expansion was driven mainly by net exports. Timelier evidence suggests that growth is no longer accelerating, but we still expect the economy to continue growing at a fairly strong pace this …
With clear signs that inflationary pressures are growing in Germany, core inflation looks set to rise. But as this will be gradual and price pressures elsewhere are subdued, it will be of little concern to the ECB. … German core inflation to rise only …
6th March 2018
The further decline in Swiss inflation in February to a five-month low will add to the Swiss National Bank’s caution ahead of its monetary policy meeting next week. Indeed, subdued inflation is likely to mean that the Bank maintains its accommodative …
The direct macroeconomic effects of President Trump’s proposed tariffs on EU exports would be very small. However, if this signals the beginning of a bigger shift towards US protectionism, followed by sustained EU retaliation, the economic implications …
5th March 2018
The recent softness of euro-zone retail sales is probably due to temporary factors and surveys bode well for the outlook. Meanwhile, the Greek economy finished last year on a weak note. … EZ Retail Sales (Jan.), PMIs (Feb.) & Greek GDP …
The lengthy political uncertainty that seems likely to follow Italy’s election is unlikely on its own to do much economic damage. But we suspect that the prospect of looser fiscal policy, higher debt, and the possibility that the Five Star Movement once …
The latest survey indicators all suggest that GDP growth in the euro-zone has peaked. That said, the economic recovery looks set to continue at a healthy pace over the next few years. … Has euro-zone growth …
2nd March 2018
The large imbalances in the euro-zone’s TARGET2 payments system indicate that all is still not quite right in the region. There are some good reasons to expect the imbalances to narrow again over the next few years. But there is also a risk that sentiment …
The first breakdown of Italy’s GDP in Q4 showed that the slowdown in growth was driven by household spending. This is perhaps unsurprising given that real wages are falling, and might also explain the loss of support for the Government ahead of Sunday’s …
With the economy still performing well and the euro off the boil, we expect the ECB to remove the loosening bias from its forward guidance when it meets on 8th March. But the persistent weakness of inflation will have convinced the Bank to take a cautious …
1st March 2018
While all of the Nordic currencies and the Swiss franc depreciated against the dollar in February, weak Swedish inflation data and dovish comments from the Riksbank meant that the drop in the krona was by far the largest. Meanwhile, many countries’ …
While the euro-zone unemployment rate held steady in January and the number of unemployed people only edged down, surveys suggest that the labour market recovery should regain momentum. But the improvement in labour market conditions seems likely to …
The first breakdown of Spanish GDP showed encouragingly broad-based growth in Q4 despite the effects of the political crisis in Catalonia. Meanwhile, the surveys paint a positive picture of the outlook. … Spain GDP (Q4, …
The Swiss economy ended 2017 on a fairly strong note and the surveys paint a positive picture for 2018. But with inflation set to remain subdued, we think that the SNB will wait until 2020 to raise rates. … Swiss GDP (Q4) & Retail Sales …
February’s Swiss, Swedish and Norwegian manufacturing PMIs point to continued strong growth. But this only seems to be causing underlying inflationary pressure to build in Sweden. … Manufacturing PMIs …
Italy’s general election on Sunday 4th March seems likely to result in a government that pushes for a small fiscal stimulus, largely centred on tax cuts. But we doubt that this would provide much of a boost to the economy. And the next government will …
28th February 2018
February’s decline in headline inflation does not change our view that the ECB will drop the easing bias from its forward guidance at its meeting on 8th March. But with core inflation still weak and likely to rise only slowly, we think that interest rate …
Sweden, Finland and Denmark all grew strongly in Q4 last year. While growth in Sweden and Finland is likely to outpace that in Demark in 2018, the big picture is that the outlook for each economy is bright. … Sweden, Finland & Denmark GDP …
February’s decline in German inflation reflected falls in the volatile food and energy components. But the still subdued rate of core inflation will encourage the ECB to take a cautious approach to communicating policy normalisation after its meeting next …
27th February 2018
February’s EC Business and Consumer Survey suggests that the euro-zone economy continued to grow strongly in early 2018, but that inflation expectations remain subdued. This supports our view that the ECB will tread cautiously in normalising monetary …
Euro-zone lending growth made a strong start to the year. And with interest rates likely to rise only slowly as the ECB normalises policy, bank lending looks set to continue supporting economic growth. … Euro-zone Monetary Indicators Monitor …
The recent softening of the Economic Tendency Survey suggests that the Swedish economy lost some momentum at the start of 2018. But the survey still implies that growth will remain strong. … Sweden Econ. Tendency Survey (Feb.) & Trade …
The Dutch housing market is set to perform well this year and next. And as there is a strong link between house prices and consumer spending, this should give the already strong-economy a further boost. … Rising Dutch house prices to support economic …
26th February 2018
The minutes of the ECB’s January meeting indicated just how cautiously the Bank wants to communicate and carry out its monetary policy normalisation. The ECB looks set to revisit its forward guidance at the next meeting in March, but it only seems likely …
23rd February 2018
In light of weak inflation data earlier this week and the dovishness of today’s Riksbank minutes, we expect the Bank to signal at April’s meeting that it will raise interest rates later than its current guidance implies. However, we still think that …
The peripheral euro-zone countries have improved their competitiveness and eliminated their big current account deficits. But we think that they will struggle to maintain this improvement. And at the same time, Germany’s large surplus is as much of a …
22nd February 2018
February’s fall in Ifo business sentiment matches the message from other surveys that German GDP growth is nearing its peak. Nevertheless, the outlook remains bright. … German Ifo Survey …
Icelandic growth is set to hold up well with tourism booming despite the strength of the króna and with the financial imbalances that caused the previous crisis largely resolved. But inflation is a threat. If unions secure large wage gains in negotiations …
21st February 2018
Luis de Guindos, who is set to replace Vítor Constâncio as the ECB’s Vice President this June, may well be less dovish than his predecessor. What’s more, his appointment makes it more likely that arch-hawk Jens Weidmann will succeed Mario Draghi as …
Despite falling in February, the euro-zone Composite PMI remained at a high level and consistent with continued healthy GDP growth in early 2018. This might encourage the ECB to signal before long that it will end its asset purchase programme this year. … …
February’s small fall in German investor sentiment was unsurprising against a backdrop of falling equity prices and a strong euro. The fact that the majority of investors expect economic conditions to improve regardless is testament to the positive …
20th February 2018
January’s drop in Swedish inflation was entirely due to changes in the weights used to calculate the price index. While inflation looks set to be lower in 2018 than we previously anticipated, the Riksbank still needs to raise interest rates this year to …
Data released this week confirmed that the euro-zone economy finished 2017 on a strong footing. But the composition of growth shifted markedly in the second half of last year, with net trade making a large positive contribution to GDP while domestic …
16th February 2018
Greece has made further encouraging progress towards exiting its bailout recently. But the latest rise in bond yields highlights its vulnerability to changes in financial market sentiment and suggests that the country will be forced to rely on some form …
15th February 2018
Although the franc has strengthened in recent weeks, the big picture is that the currency is over 5% weaker than this time a year ago. Currency valuation measures paint a mixed picture but our view is that the franc is still a little stronger than fair …
While the euro-zone’s nominal goods trade surplus was little changed in Q4, overall net trade seems to have boosted GDP growth. We expect trade to contribute positively to growth again this year. … Euro-zone Trade …
An acceleration in industrial production growth was not enough to prevent a slight slowdown in euro-zone GDP growth in Q4. Nevertheless, the economic outlook is bright. … Euro-zone Flash GDP (Q4) & Industrial Prod. …
14th February 2018
Given that the Riksbank called time on its net asset purchases just one meeting ago, it was always unlikely that the Bank would make any major policy changes today. In order to test the water ahead of repo rate rises later this year, in April we expect …
Q4 GDP data showed that Italy’s economy performed fairly well last year but that it is still lagging behindthe rest of the euro-zone. Despite the recent strength of the surveys, we doubt that this will change anytime soon. Meanwhile, both the Dutch and …
Q4’s 0.6% rise in German GDP marked a decent finish to 2017 and growth looks set to accelerate again this year. But with inflation and wage growth still subdued in the euro-zone’s largest and arguably strongest economy, ECB interest rate hikes still seem …
The official data suggest that the Nordic & Swiss economies recorded fairly mixed performances at the end of last year. So far, only Norway has published national accounts data for Q4. This release revealed a healthy quarterly growth rate for the mainland …
13th February 2018
Ireland’s national accounts are notoriously unreliable as indicators of domestic economic activity, but alternative indicators suggest that the economy is performing well. Looking ahead, while growth prospects over the next few years are bright, there are …
The outlook for Austria is bright. Policies announced by the new Government should help to support consumer spending and investment. And while we expect export growth to weaken next year, Austria should remain one of the star performers of the region. … …
12th February 2018
Following January’s decline, there is little chance that Swiss inflation will rise much in the next few months. And later in the year, inflation is likely to drop back as exchange rate effects unwind. … Swiss and Danish Consumer Prices …
With three weeks to go before Italy’s election, the latest surveys suggest that the economy is performing very well. But the official data paint a less rosy picture. On balance, we think that GDP will rise by 1.5% this year and next, which would be a …
9th February 2018
