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Italy’s new prime minister, Giuseppe Conte, gave his maiden speech to parliament this week, and his comments riled the markets. After all, he reiterated the Government’s intentions to cut taxes significantly and introduce a minimum citizen’s income, both …
8th June 2018
The Icelandic economy had a weak start to the year, as net trade and investment weighed on growth and offset the continued strength of private consumption. But the surveys suggest that the outlook remains fairly bright. … Icelandic GDP …
April’s data for industrial production in Germany and France add to the evidence that the euro-zone economy is unlikely to rebound strongly after Q1’s slowdown. … German & French Industrial Production …
Although Italy is likely to stay in the euro-zone for the foreseeable future, recent political developments have resurrected the possibility of it leaving at some point and raised the issue of how Italy would settle its big TARGET2 liabilities. The upshot …
7th June 2018
Despite worries about Italy’s new Government, we suspect that the ECB will announce after its meeting on 14th June that it will end its asset purchases this year. It might also strengthen its guidance on interest rates to prevent speculation that it will …
Politics have captured the limelight over the past month. Bond yields in Italy have risen sharply over the past few weeks as concerns about debt sustainability and the new government’s commitment to the euro have mounted. Italian 10-year bond yields are …
The third estimate of euro-zone Q1 GDP confirmed that the slowdown in growth was caused by net trade. While the latest evidence suggests that growth is unlikely to pick up much in Q2, it should still be stronger than the euro-zone’s long-run potential. … …
The Central Bank of Iceland is likely to leave policy unchanged next week. But with imported inflation rising and domestic price pressures set to grow, we see the Bank raising interest rates later this year. … Inflationary pressures in Iceland set to …
6th June 2018
Although headline inflation rose in May to its highest level in over seven years, the core rate fell to a nine-month low. This will be a concern to the SNB, especially given the appreciation of the franc over the past week or so. We expect the Bank to …
Political turmoil in Italy has rocked Swiss and Nordic financial markets over the past few weeks, but the economic fallout is likely to remain limited. That said, if the situation in Italy worsens, the Swiss economy looks more vulnerable than the Nordics. …
5th June 2018
April’s euro-zone retail sales data imply that the consumer sector fared a little better in Q2 than it did in Q1. Nevertheless, May’s Composite PMI is consistent with the pace of GDP growth remaining at around Q1’s pace, suggesting that growth has shifted …
April’s rise in private sector production suggests that Sweden’s economy got off to a decent start to Q2. While the construction sector is likely to remain weak, overall we expect the economy to continue performing well, causing price pressures to build …
In any other week, the imposition of tariffs on the EU by the US would have taken centre stage. But amid the political and market turmoil in Italy and the downfall of Spain’s government, this was no normal week even for the euro-zone. The risks of a …
1st June 2018
May’s manufacturing PMIs suggest that the Swiss and Norwegian economies continued to perform well in Q2 after decent starts to the year. Sweden’s PMI was yet again quite weak, but other survey indicators have not softened as much and the weakness of the …
The recent political turmoil in Italy gave the Swiss franc and Nordic & Swiss government bonds a boost at the end of May as investors sought safe havens. Stronger exchange rates weighed on equities in Switzerland and Sweden, but Norway’s stock market …
31st May 2018
After reaching an eight-month high in May, core inflation looks set to rise further. Moreover, recent increases in oil prices will push headline inflation above 2% next month. While the recent drama in Italy creates a headache for the ECB, we doubt that …
The Swiss economy’s decent start to 2018 was partly down to a boost from international sports events but there are also signs of strengthening domestic demand. Nonetheless, with inflation still very weak, we doubt that the SNB will raise interest rates …
The fallout from the latest political turmoil in Italy has so far been contained, with limited impact on other euro-zone countries’ financial markets. There are good reasons to expect this to remain the case in the near term. But the size of Italy’s debt …
30th May 2018
After falling only slightly in May, the EC’s measure of economic sentiment provides some reassurance that the softness in activity in Q1 does not mark the start of a sharp slowdown. … EC Business & Consumer Survey …
The Swedish economy made a strong start to 2018 and the outlook is positive. Healthy growth is set to drive wage growth gradually higher, prompting the Riksbank to raise interest rates at the end of this year. … Swedish GDP (Q1) & Swiss …
If sentiment towards Italy deteriorates as a result of the current political situation, we could see renewed capital flight and a further worsening of Italy’s already-high TARGET2 liabilities. But other euro-zone countries may refuse to tolerate any …
29th May 2018
After the President refused to appoint a eurosceptic finance minister, Italy is heading for a fresh election. Provided that Five Star Movement and the League do not call for a referendum on euro membership, a full-blown crisis is not an immediate threat. …
April’s euro-zone money and lending data provide further evidence that economic growth has peaked. While households’ and firms’ demand for loans is still fairly strong, the deteriorating situation in Italy is a key risk to the outlook. … Euro-zone …
Spain’s Government is teetering and a snap election is on the cards. Given the rise of populists in Italy, an increase in political uncertainty in Spain seems concerning. But while the situation is likely to keep investors on edge, we think that an …
25th May 2018
The “account” of the ECB’s April meeting, released this week, revealed that policymakers had taken a pretty sanguine view of the weakness of survey indicators and hard data in the first few months of the year. Indeed, Council members believed that …
The stabilisation of the German Ifo in May is encouraging and provides some hope that a rebound in growth is on the cards in Q2. We doubt that the economy will regain all of its lost momentum, but it should still put in a good performance over 2018 as a …
Norway’s labour market recovery looks set to gather pace in the coming months, but wage growth is likely to remain subdued. So we still think that the Norges Bank will wait longer than most expect before beginning to tighten monetary policy. … Norwegian …
The policies of the two parties likely to form Italy’s next government have understandably caused concern. In the near term , we actually think that they would provide a modest boost to the economy. But they are likely to worsen the economy’s long-run …
24th May 2018
Q1’s 0.3% rise in German GDP marked a weak start to the year. But temporary factors were partly to blame and the strength of investment in particular is an encouraging sign that the upturn still has legs. … German GDP (Q1, …
We expect wage growth in Sweden to pick up to around 3% by the end of the year. This should be enough for the Riksbank to start raising interest rates in December. … Will Swedish wage growth ever pick …
23rd May 2018
May’s fall in the euro-zone PMI yet again partly reflected temporary factors, but the continued softness of the surveys in Q2 is certainly a concern. … Euro-zone Flash PMIs …
A “yes” vote in Switzerland’s sovereign money referendum next month would completely overturn the current monetary system. It would constrain the Swiss National Bank’s approach to monetary policy, risks politicising the central bank, and would impair bank …
22nd May 2018
Data released this week added to the evidence that soft global demand and the previous appreciation of the euro have taken a toll on euro-zone exports. We doubt that exports will regain all of their lost momentum, but growth should pick up in the coming …
18th May 2018
A leaked draft policy document shows that there is still anti-euro sentiment bubbling under the surface in the two parties most likely to form the next Italian government. What’s more, the parties have discussed policies that would cause significant …
16th May 2018
While the Central Bank of Iceland left policy unchanged today, its new forecasts show that it expects inflation to remain above target for the next three years. Moreover, we think that the Bank is underestimating the scope for inflation expectations and …
We think that the slowdown in euro-zone GDP growth in Q1 largely reflected temporary effects. So we remain optimistic that the economy will perform better over the rest of the year. … Euro-zone GDP (Q1), IP (Mar.) & German ZEW …
15th May 2018
The sharper-than-expected slowdowns in both German and Dutch GDP in Q1 suggest that there is a risk that euro-zone GDP will be revised down from the first estimate of 0.4% q/q. But with Q1’s weakness largely down to temporary factors, we continue to …
Norway’s economy did not perform as well in Q1 as the headline growth numbers imply. But we remain optimistic about growth over the rest of the year. Meanwhile, Finland’s economy put in a strong performance in Q1, and the latest activity surveys bode …
With attention in Italy focused on politics, some significant improvements in the banking sector have gone under the radar. That said, the banks are still a long way from a full recovery. … Italy's banks are on the mend, albeit …
14th May 2018
Ahead of Q1 GDP releases over the coming weeks, the official monthly data suggest that growth slowed in Switzerland and the Nordics. Indeed, retail sales in Switzerland increased by 0.6% in Q4 last year, but flat-lined in the first three months of this …
11th May 2018
One year into President Emmanuel Macron’s term, the French economy is performing well. Annual GDP growth is healthy and the labour market is recovering steadily. But this owes little to Macron’s efforts so far, reflecting instead the impact of previous …
The Central Bank of Iceland is likely to leave policy unchanged next week. But with inflation set to rise, we expect it to raise interest rates later this year. … Central Bank of Iceland on hold for …
10th May 2018
The fundamental differences between Italy’s Five Star Movement and League suggest that even if they agree to form a government together, they will not implement either party’s more extreme and costly policy proposals. We would still expect to see a fiscal …
Euro-zone GDP data for Q1 were pretty weak. Indeed, quarterly growth in the euro-zone economy slowed from 0.7% in Q4 to just 0.4%, its weakest rate since Q3 2016. And national data showed that growth declined in France and remained subdued in Italy, while …
9th May 2018
Easter timing effects distorted April’s inflation data. Looking ahead, inflationary pressure is building in Sweden and, to a lesser extent, in Norway. Inflation is much more subdued in Switzerland. … Sweden, Norway, Switzerland CPI …
The minutes to the Riksbank’s April meeting were slightly hawkish and suggest that the Bank is on track to raise interest rates this year. We think that markets have gone too far in pushing the krona to a nine-year low against the euro and see the …
8th May 2018
March’s improvements in German industrial production and the trade balance support our view that while Q1 was a pretty poor quarter, this will not mark the start of a sustained economic slowdown. … German Industrial Production & Trade …
We think that temporary factors – including industrial action, cold weather and an outbreak of the flu – explain about 0.2 percentage points of the slowdown in quarterly euro-zone GDP growth from 0.7% in Q4 to 0.4% in Q1. So without those effects, growth …
4th May 2018
March’s euro-zone retail sales data suggest that consumer spending had a weak first quarter. And April’s Composite PMI implies that the pace of GDP growth is unlikely to fully rebound after a slow Q1. But we remain fairly optimistic that the economy will …
Swedish private sector production was unchanged in March meaning that growth slowed over Q1 as a whole. Nevertheless, this still implies that GDP expanded at a respectable rate. … Swedish Private Production …
