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The ECB revised its inflation forecast down this week, but we doubt that this has meaningfully changed the outlook for monetary policy. After all, the change was small, and largely reflected tweaks to the assumptions about oil prices and the euro exchange …
9th June 2017
Norwegian inflation resumed its decline in May, and we think that the fall has further to run. So we still forecast one interest rate cut by the Norges Bank later this year. … Norwegian Consumer Prices …
The Swiss National Bank will once again stress after its meeting on 15th June that it remains prepared to act to prevent any significant renewed appreciation of the Swiss franc. Granted, the recent depreciation of the currency against the euro, as …
8th June 2017
Ahead of next week’s meeting, today’s soft GDP data are unlikely to concern the Central Bank of Iceland too much. The fact that last month’s interest rate cut has done little to stem the króna’s strength will receive more attention. While we expect …
The ECB removed its reference to possible interest rate cuts today, judging that the threat of deflation has passed. But it is still far from convinced that inflation is on a sustained path towards its target, supporting our view that interest rate hikes …
The euro-zone economy grew in Q1 at a faster pace than previously indicated, despite a slowdown in consumer spending. And with activity surveys pointing to a pick-up in GDP growth in Q2, the euro-zone economy is set for a strong 2017. … Euro-zone GDP …
April’s rise in German production is an encouraging sign that the industrial upturn is back on track, and surveys point to a sharp acceleration to come. … German Industrial Production & French Trade …
Banco Popular’s difficulties jar with improving conditions elsewhere in Spain’s banking sector, so its forced sale does not appear to signal further trouble ahead and will not hold back the economic recovery. But elsewhere, and in Italy in particular, …
7th June 2017
Net trade probably contributed little to euro-zone GDP growth in Q1, but the outlook for exports is encouraging. The monthly goods export and import values data show a decline in the goods trade surplus from €65.3bn in Q4 to €57.3bn in Q1. Admittedly, …
Nordic and Swiss equities have generally performed very well this year, but prospects differ significantly between countries. We expect Norwegian equities to outperform over the next 18 months as oil prices rise, but Swedish equities to struggle next year …
As April’s surprise drop in Swedish industrial production was probably due to temporary factors, we expect output to rebound in May. And while the hard data have been weaker than the surveys suggested, there are still signs that domestic demand is growing …
The weak outlook for real disposable income growth in Spain, combined with the fact that the savings rate is already low, suggests that household spending growth is unlikely to rebound following Q1’s slowdown. That said, spending growth will remain …
6th June 2017
Retail sales made a subdued start to Q2, but May’s rise in consumer confidence to a 10-year high suggests that growth should pick. … Euro-zone Retail Sales …
Emmanuel Macron’s party, La République En Marche, looks set to win a parliamentary majority in elections that kick off this Sunday, diminishing fears of political paralysis. But the path to reform will be far from smooth given the likely opposition of …
We think that the ECB will taper its asset purchases to zero in the first six months of 2018 and begin raising interest rates in 2019. The euro-zone economy as a whole should continue to perform well regardless, but there is a risk of more damaging …
5th June 2017
May’s final Composite PMI points to a pick-up in euro-zone GDP growth in Q2. And this strength is broad based. While growth has remained strongest in Germany and Spain, recoveries in France and Italy seem to be gaining pace. … Euro-zone Final PMIs …
Although the euro-zone’s consumer sector currently appears to be in good shape, the combination of higher inflation compared to last year and continued weak wage growth points to annual household spending growth slowing this year. But other sectors of the …
2nd June 2017
At its meeting on 8th June, the ECB is likely to change its forward guidance, dropping the references to lower interest rates and expanding QE. But Mr Draghi will want to avoid stoking expectations of imminent policy tightening. So he is likely to repeat …
1st June 2017
The recent pick-up in growth in Finland has been broad-based, and Government reforms have improved the medium-term outlook. We expect GDP growth to beat the consensus forecast this year. … What’s behind the turnaround in …
The PMIs in Switzerland, Sweden and Norway weakened again in May, but still point to faster manufacturing growth. But the Danish PMI rebounded after April’s plunge. … Manufacturing PMIs …
The upward revision to Italy’s GDP in Q1 is not as encouraging as it first appears. And with the chance of an early election rising, Italy’s already-weak economy looks vulnerable to the rise of euro-sceptic parties. … Italian GDP Breakdown …
Switzerland’s economic recovery gained pace in Q1 and business surveys suggest that this momentum will continue. But with inflation set to remain very subdued, we think that the SNB will keep policy very loose in the coming years. … Swiss & Finnish GDP …
The latest fiscal data revealed mixed performances by the euro-zone’s peripheral economies, with the largest countries faring best. There was also good news for Portugal, which is no longer deemed to be in breach of EC budget rules. But the prospect of …
31st May 2017
The Nordic and Swiss currencies all appreciated against the US dollar in May, but performances against the euro were mixed. Following global trends, government bond yields generally declined. While sovereign yield curves in some countries flattened, the …
April’s euro-zone money and credit data point to steady economic growth. But they remain consistent with core inflation below the ECB’s near-2% target. … Euro-zone Monetary Indicators Monitor …
May’s decline in euro-zone inflation to a five-month low does not change our view that the ECB will alter its forward guidance next week. … Euro-zone Flash CPI (May) & Unemployment …
The Danish economy made a good start to 2017, posting another decent quarterly expansion in Q1. Although the composition of growth was not that encouraging, the outlook is more positive. … Danish GDP …
May’s declines in harmonised CPI inflation in Germany and Spain suggest that the euro-zone rate fell back from the ECB’s target of close to 2%. With core inflation subdued across the region, we doubt that the ECB will raise rates any time soon. … German & …
30th May 2017
Despite softening in May, the EC’s business and consumer surveys suggest that eurozone economic growth picked up in Q2. But with inflation expectations falling back, there is little indication that core inflation will rise towards the ECB’s target. … EC …
The slowdown in Swedish quarterly GDP growth in Q1 masked a strong rise in domestic demand. And with April’s pick-up in retail sales boding well for growth in Q2, underlying inflation should continue to increase towards the Riksbank’s target. … Swedish …
The message from survey evidence that activity in the euro-zone has picked up substantially since the end of last year has yet to be fully reflected in the official data. Indeed, quarterly growth of 0.5% in Q1 was weaker than the rate implied by the …
26th May 2017
Given the improvement in the euro-zone’s political and economic outlook and the relative stance of monetary policy, we no longer expect the Swiss franc to appreciate against the euro. But the franc will remain historically strong, leading the SNB to keep …
25th May 2017
Euro-zone construction sentiment is now back above pre-crisis norms. And with low borrowing costs set to continue supporting property prices and activity, prospects for the sector are the best in years. … Is the recovery in construction built on strong …
Amid continued discord between the IMF and Germany, any commitment to Greek debt relief looks set to be delayed for another year. The Eurogroup has proposed new loan extensions to make the debt sustainable, but we agree with the IMF’s view that its growth …
The second release of Spanish GDP confirmed that quarterly growth edged up in Q1 despite a slowdown in consumer spending. While we expect growth to slow in the coming quarters, Spain is still set to be one of the euro-zone’s top performers. … Spanish GDP …
The ECB is edging towards ending asset purchases and raising interest rates. But there are good reasons to think that it won’t repeat the mistake that it made in 2011 of tightening policy too soon. … Will the ECB tighten prematurely …
24th May 2017
Despite slipping in May, the Swedish Economic Tendency Indicator continues to point to very strong economic growth. With the labour market therefore set to tighten further, we expect stronger wage growth to drive a pick-up in underlying inflation. … …
The euro’s recent appreciation against the US dollar appears to reflect better prospects for euro-zone growth and has occurred despite expectations that ECB monetary policy will remain very loose. Accordingly, while we still expect interest rates to rise …
23rd May 2017
The strength of both the euro-zone Composite PMI and the German Ifo in May provide further evidence that the economic recovery gained pace in Q2. … Euro-zone Flash PMIs & German Ifo …
Despite April’s rise in the Swedish unemployment rate, it remains low by recent standards. And with over one third of firms suffering from a shortage of labour, we still expect wage growth to pick up. … Swedish Labour Force Survey …
The second release of German GDP confirmed that the economy made a good start to 2017 despite a slowdown in consumer spending growth. We expect a pickup in export growth to cause the upturn to gain more pace as the year goes on. … German GDP Breakdown …
Portugal is on the brink of exiting the “corrective arm” of the EU’s Excessive Deficit Procedure, but it is a long way from escaping strict EU oversight of its budget. … Portugal out of the EDP, but not out of the …
22nd May 2017
Diminishing political risk and early expectations of ECB asset purchase tapering have driven the euro up to around its highest level since before QE began. We think that the single currency will fall back again later in the year. But its rise has added to …
19th May 2017
President Emmanuel Macron’s ministerial appointments suggest that he is serious about pushing through economic reforms. However, the challenge of the National Assembly elections looms large and it may be tricky for him to hold such a politically diverse …
18th May 2017
While the recent pick-up in euro-zone growth has owed much to temporary factors, the economy now seems to be gaining its own momentum and we expect it to outperform consensus forecasts this year and next. But a lack of price pressures should keep ECB …
The collapse of Austria’s ruling grand coalition has triggered an early general election, to be held in October, which could see the far-right and eurosceptic Freedom Party entering government. An immediate push for an EU referendum seems unlikely. But …
17th May 2017
The recovery in the labour market is unlikely to put significant upward pressure on wage growth. Accordingly, the ECB will be very cautious when it comes to tightening policy. … How much slack is there in the euro-zone labour …
Today’s decision by the Central Bank of Iceland to cut interest rates is likely to be followed by another cut later this year. Granted, strong economic growth will put pressure on domestic inflation. But we think that the CBI is still underestimating the …
The Riksbank has stated that its new inflation tolerance band will have no effect on policy. But with some Board members growing increasingly concerned about the effects of ultra-loose monetary policy on the housing market, the added flexibility could …
16th May 2017
The second estimate of euro-zone Q1 GDP confirmed that the recovery maintained a decent pace, and growth is set to pick up further. But with inflation pressures subdued, we doubt that the ECB will alter its asset purchase plans. … Euro-zone GDP (Q1), …
