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Despite the “yes” vote in yesterday’s independence referendum in Catalonia, there appears to be little chance that the region will secede from Spain in the coming months. We think the most likely outcome is that a compromise will be reached that grants …
2nd October 2017
September’s Swiss and Swedish manufacturing PMIs both rose to high levels. But while fairly strong growth is unlikely to push inflation up in Switzerland, price pressures are mounting in Sweden. … Manufacturing PMIs …
Bond yields across the Nordic and Swiss economies rose in September, largely in line with global trends as investors brought forward their expectations for monetary policy normalisation by the US Fed and the ECB. Meanwhile, the unexpected collapse of the …
29th September 2017
Among the wide range of proposals for the EU put forward by French President Emmanuel Macron this week was the introduction of a euro-zone finance minister and a euro-zone budget. In principle, we think that this would be a good idea. Indeed, we have long …
September’s weaker-than-expected euro-zone inflation data won’t stop the ECB from announcing in October its plan to taper its asset purchases next year. But the data suggest that the Bank will proceed cautiously when it comes to normalising monetary …
September’s rebound in the Swiss KOF Economic Barometer leaves it consistent with a pick-up in annual GDP growth to around 2%. But the KOF has overstated growth recently and, in any case, inflation looks set to remain not far above zero, so we doubt that …
Recent fiscal data suggest that most of the euro-zone’s peripheral countries are continuing to improve their budgetary positions. But Italy’s budget deficit has widened and its Government plans to ease up on its austerity, which is unlikely to be received …
28th September 2017
September’s flash inflation data for Germany and Spain suggest that euro-zone inflation was probably unchanged from August’s 1.5%. And the likely falls in core inflation in both Germany and Spain underscore the softness of underlying price pressures in …
The rise in the EC’s measure of euro-zone economic sentiment in September suggests that the eurozone’s economic recovery will continue at a decent pace. Along with the pick-up in consumer inflation expectations, this supports the case for the ECB to …
We no longer expect the Central Bank of Iceland (CBI) to cut interest rates again this year. The Government’s collapse and prospect of a left-wing coalition taking power have increased the chance of a expansion. And if sustained the króna’s recent …
27th September 2017
Euro-zone money and lending growth remained fairly strong in August, though the data suggest that economic growth is unlikely to gather much more pace. Meanwhile, recent developments in Italy’s and Portugal’s banking sectors provide some grounds for …
In September a sharp rise in manufacturing sentiment drove the Swedish Economic Tendency Indicator to its highest since 2011. With the growth outlook strong and inflation expectations rebounding, we still think that the Riksbank will raise its policy rate …
September’s fall in German Ifo business sentiment still leaves it pointing to very strong GDP growth. While Germany looks set for lengthy coalition negotiations following yesterdays’ federal election, we don’t expect political uncertainty to materially …
25th September 2017
The German election looks set to yield a coalition of Angela Merkel’s CDU/CSU, the FDP and the Green Party. This will mean slightly lower taxes than under the alternative of another grand coalition, which should boost growth over the next year or two. But …
In light of the disappointing performance of the Swiss economy in the first half of the year, we have revised down our 2017 GDP forecast substantially. We still expect the economic recovery to gain pace in 2018 and 2019, partly reflecting the depreciation …
22nd September 2017
The German election taking place on Sunday is not expected to have a significant impact on the economy. But the composition of the next coalition – which is likely to be either another grand coalition between the CDU and the SPD, or a tie-up between the …
September’s rise in the euro-zone Composite PMI suggests that the recovery has regained momentum after a brief summer lull. While this will embolden policymakers, as inflation is set to rise only gradually we still think that markets are overestimating …
The Norges Bank today raised its interest rate forecast, implying that it will begin tightening monetary policy mid-way through 2019. By contrast, we think that it will wait until 2020. … Interest rate hikes in Norway a very long way …
21st September 2017
Today’s Riksbank minutes suggest that at least two of the six Board members would support an extension of the Riksbank’s QE programme beyond the current December end date. But given our forecast for inflation to remain above the Riksbank’s target between …
Despite little prospect of a pick-up in public investment in Germany following Sunday’s federal election, conditions are ripe for sharp rises in both general business investment and construction investment. … German investment set for strong …
20th September 2017
September’s larger-than-expected rise in German investor sentiment may partly reflect reduced fears about the strength of the euro and suggests that the economy will continue to perform well. Indeed, we forecast German GDP to grow by a healthy 2.3% this …
19th September 2017
Portugal’s economic recovery is strengthening, while it has also made progress with recapitalising its banks and strengthening its fiscal position. This is reflected in the decline in government bond yields this year. While the ECB’s taper in 2018 is a …
We think that corporate bond yields will rise only gradually as the ECB tapers its asset purchases next year. After all, the economy looks set to continue performing well. And the Bank is likely to keep enough flexibility in the programme to increase …
18th September 2017
European Commission President Jean-Claude Juncker this week gave his support to the creation of a European Monetary Fund and a euro-zone “budget line”. Eventually, these would result in slightly quicker and more coherent decision-making in providing …
15th September 2017
After falling in Q1, Ireland’s GDP only partially rebounded in Q2. That said, the data are notoriously unreliable as a measure of domestic activity. Other more reliable indicators suggest that the economy is performing well. … Ireland GDP …
Today’s euro-zone labour costs data reinforce our view that the ECB will set out in October its plans to taper its asset purchases to zero in the first nine months of 2018. Meanwhile, July’s fall in the euro-zone trade surplus adds to the evidence that …
The Norges Bank is likely to leave the key policy rate at 0.50% next week, and we think that it will also leave its interest rate forecast unchanged, showing no change in rates until 2019. Although the economy is performing well, interest rate hikes look …
14th September 2017
The Swiss National Bank today acknowledged the depreciation of the franc over recent months but stressed that it was still necessary to keep interest rates at rock-bottom levels and maintain the option of currency intervention to reduce any upward …
The Q2 GDP data for the Nordic and Swiss economies were a mixed bag, but more timely indicators point to a strong second half of the year. … Q2 GDP data a mixed bag, but timelier data look …
13th September 2017
Given upward pressure on the single currency, we now see the ECB tapering its asset purchases over nine months instead of six next year. We still expect it to announce the full programme in advance, which is arguably more hawkish than the step-by-step …
Despite July’s small rise in euro-zone industrial production, growth in the sector will probably slow in Q3. But with more timely survey indicators still strong, any slowdown should be modest. … Euro-zone Industrial Production (Jul.) & Employment …
A unilateral declaration of independence after October’s referendum could severely destabilise the economies of Catalonia and Spain. But given this, and the political and legal barriers to secession, it is most likely that a compromise will be reached …
Inflation was above both the Riksbank’s forecast and its target in August. With the strengthening economy suggesting that inflationary pressure is building, we think that the Riksbank will soon start forecasting interest rate rises in the first half of …
12th September 2017
In August, inflation in Norway fell further below the Norges Bank’s target. While inflation should stop falling by the end of the year, it will rebound only slowly. So interest rate hikes are a very long way off. … Norwegian Consumer Prices …
11th September 2017
The ECB’s new forecasts show that it expects inflation of just 1.2% next year and 1.5% in 2018. As the economy is performing well and core inflation has picked up recently, the Bank should still feel confident enough to taper its asset purchases to zero …
8th September 2017
Iceland’s second consecutive quarterly fall in GDP was down to the volatility of trade. While the trade balance appears to be declining a bit faster than we expected as a result of the strong króna, the outlook for Icelandic GDP growth is still positive. …
July’s data on German trade, as well as French and Spanish industrial production, provide some early hints that euro-zone GDP growth might slow a touch in Q3. But the continued strength of activity surveys suggest that any slowdown will be small. … German …
At its meeting on 14th September, the Swiss National Bank will surely draw some comfort from the depreciation of the franc since it last met in June. But renewed geopolitical tensions and the ECB’s reluctance to commit fully to QE tapering suggest that …
7th September 2017
Despite reiterating the Governing Council’s concern about the strength of the euro exchange rate today, ECB President Draghi indicated that the Bank’s plan to taper asset purchases will be unveiled at the October meeting. He stressed, however, that …
The third release confirmed that euro-zone GDP rose by a healthy 0.6% q/q in Q2, with the region’s largest five economies expanding by between 0.4% and 1.5% on the quarter. On the face of it, the Composite PMI for July and August points to another 0.6% …
The third estimate of euro-zone GDP in Q2 confirmed that the 0.6% expansion was driven mainly by domestic demand. While GDP growth might have slowed in Q3, it is likely to remain fairly strong by past standards. … Euro-zone GDP Expenditure Breakdown …
While inflation in Sweden is higher than the Riksbank’s 2% target, the Bank’s decision to keep its forward guidance unchanged was not a major shock. The Riksbank is unlikely to shift its guidance until after the ECB signals that it is set to taper its own …
July’s weak German industrial production and French trade data add to signs that euro-zone GDP growth will slow in Q3. But we expect the slowdown to be modest, so while the ECB is unlikely to announce its QE tapering plan today, it will ultimately still …
Italy’s eurosceptic parties have recently eased up on their most anti-euro rhetoric, but it is far too early to sound the all clear. With the banking sector weak, public debt very high and the economy likely to continue to underperform, risks from …
6th September 2017
A large gain in services output offset a fall in industrial production in July and suggests that overall the Swedish economy started Q3 on a fairly strong note. While the PMI surveys point to slower growth ahead, as the economy is already operating above …
July’s fall in retail sales and the downward revision to August’s Composite PMI suggest that euro-zone GDP growth softened in Q3. But with consumer and business confidence still at very high levels, the outlook for economic growth in the euro-zone remains …
5th September 2017
Switzerland’s Q2 GDP release confirmed that the economy expanded only very slowly in the first half of the year. While survey indicators suggest that growth will pick up, subdued inflation will keep interest rates on hold for a long time yet. … Swiss GDP …
Polls suggest that the Green Party might emerge from Norway’s general election, on 11th September, as “kingmaker”. In that case, confidence in the large oil sector would probably fall. But overall, we doubt that the election will alter the economic …
4th September 2017
Euro-zone peripheral economies largely continued to improve their budget positions in July, with Ireland once again making the most progress. Portugal too is faring reasonably well. But Greece’s and Italy’s fiscal improvements remain far from assured. … …
1st September 2017
French consumers are, rather unusually, very upbeat at the moment, with measures of consumer confidence at or close to multi-year highs. In particular, they are much less worried about being made unemployed. We think that this is justified, even though …
