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Sweden’s exceptionally strong GDP growth was driven entirely by domestic demand and highlights the need for monetary policy normalisation. Meanwhile, July’s rise in the Swiss KOF points to a pick-up in GDP growth there, but weak inflationary pressure …
28th July 2017
After fairly big rises in yields in June, July was a quieter month for Nordic & Swiss government bonds. There was more action in the currency market, with the Norwegian krone and Swedish krona rising against both the US dollar and euro while the Swiss …
27th July 2017
June’s euro-zone money and credit data point to downside risks to growth. But firms and consumers have scope to fund extra spending without borrowing, and with confidence high, we remain optimistic about the economic outlook. … Euro-zone Monetary …
Both the Swedish Economic Tendency Survey and labour market indicators point to increasing wage and price pressures. This supports our view that the Riksbank and markets are underestimating how soon monetary policy will need to be tightened. … Swedish …
July’s increase in German Ifo business sentiment to a new record high suggests that neither the euro’s rise nor hints of QE tapering have taken the steam out of the economic upturn so far. … German Ifo & French INSEE Business Confidence …
25th July 2017
July’s fall in the euro-zone Composite PMI leaves it still consistent with fairly strong growth. While the survey’s price indices also edged down, this seems unlikely to deter the ECB from tapering its asset purchases next year. … Euro-zone Flash PMIs …
24th July 2017
At this week’s ECB press conference, President Mario Draghi highlighted the continued improvement in the euro-zone’s economic performance. He reiterated that the region looks set for a period of solid, broad-based growth. We agree. In fact, our forecasts …
21st July 2017
Economic prospects are fairly bright in the Nordic and Swiss countries. Switzerland is benefitting from faster growth in the euro-zone, Swedish firms are optimistic about their prospects, and Norway is recovering from its oil-related slowdown. As Swedish …
The renewed rise in the euro since yesterday’s ECB press conference may increase speculation that the Bank will have to change tack. But we doubt that it will be too worried about the currency at current levels. A further appreciation might force it to …
Today’s ECB press conference made us more confident that tapering will come next year. An announcement of the policy now seems most likely to come in October, rather than at the next meeting in September as we had previously assumed. But we still think …
20th July 2017
July’s rise in headline inflation was driven entirely by higher house prices and far overstates the extent of price pressures in Iceland. With underlying inflation set to stay below zero, we expect the central bank to loosen policy further. … Iceland …
The European economies are still in good shape, with the euro-zone benefitting from reduced political uncertainty and high levels of business and consumer confidence. We think that this strong performance will continue. While consumer spending growth …
19th July 2017
July’s dip in German investor sentiment presumably reflects the recent tightening of financial market conditions in response to the ECB’s talk of policy normalisation. But we do not take this as a sign of an economic slowdown to come. … German ZEW Survey …
18th July 2017
In contrast to the latest business surveys, the ECB’s Q2 Bank Lending Survey provided some evidence that the economic recovery might slow. However, with demand for credit still increasing, and banks loosening their lending standards, the ECB is unlikely …
The krona’s recent rise means that exchange rate effects will detract from Swedish inflation in 2018. But with domestic inflation set to rise further above 2%, this should not prevent the Riksbank from tightening policy. In fact, we think that the repo …
17th July 2017
The latest inflation data for June suggest that underlying price pressures remain subdued in Switzerland and Norway, but continue to build in Sweden. In Switzerland, core inflation, which excludes fresh and seasonal products as well as energy and fuels, …
14th July 2017
Euro-zone member states appear to have put their public finances largely in order now, with the European Commission deeming this week that even Greece has made sufficient progress to become compliant with European fiscal rules. However, while fiscal …
The fall in Ireland’s GDP in Q1 is not a major concern. The data are notoriously unreliable as a measure of underlying activity, and other indicators suggest that the economy is performing well. We continue to expect Ireland’s economy to grow at a fairly …
The widening of the euro-zone’s trade surplus in May adds to signs that GDP growth may have accelerated in the second quarter. And in contrast to the situation last year, we expect net trade to boost euro-zone GDP growth in the quarters ahead. … Euro-zone …
We expect the ECB to renew its hints of future QE tapering at its forthcoming meeting, despite the modest tightening of financial market conditions that such hints have caused already. We still see the Bank tapering its purchases to zero in the first half …
13th July 2017
As underlying inflation is within touching distance of the Riksbank’s target, today’s rise in the krona should be followed by further gains as the remaining doves on the Executive Board come round to the view that ultra-loose policy is no longer required. …
May’s sharp rise in euro-zone industrial production left it at its highest level since September 2008 and bodes very well for GDP growth in Q2. … Euro-zone Industrial Production …
12th July 2017
Household debt has remained elevated in the euro-zone as a whole, but there has been significant deleveraging in the countries that needed it most. Given positive trends in the labour market, we expect households across the region to withstand ECB policy …
11th July 2017
Headline inflation in Norway slowed in June, and we think that it will fall further. Over the next few years, it is likely to remain below the Norges Bank’s target, so we think that interest rate hikes are a very long way off. … Norwegian Consumer Prices …
10th July 2017
Angela Merkel’s Christian Democratic Union unveiled its manifesto this week, including plans income tax cuts and increased child benefits. But the proposed giveaways are small and the party, which seems likely to win September’s federal election, remains …
7th July 2017
May’s industrial production data for Germany, France and Spain show that output rose sharply across the board. This suggests that overall economic growth in the euro-zone accelerated further in Q2 from what was already a healthy pace. … German, French & …
The EU-Japan trade deal is unlikely to have a major impact on euro-zone GDP growth. In the context of US President Trump’s protectionist leanings and the UK’s impending exit from the EU, the deal is a powerful symbol of the Union’s pro-globalisation …
6th July 2017
The fall in Swiss inflation in June largely reflected lower energy prices. With core inflation holding close to zero, the SNB will stick to its ultra-loose policy stance over the next couple of years. … Swiss Consumer Prices …
While euro-zone headline CPI inflation fell to 1.3% in June, the core rate, which excludes the volatile food and energy components, rose from 0.9% to 1.1%. This left it above the 0.8% average recorded since the start of 2014, suggesting that underlying …
5th July 2017
The euro’s rise has not yet been sharp enough to cause a significant tightening of monetary conditions and we doubt that it will dissuade the ECB from tapering QE next year. But a further appreciation might cause the Bank to opt for a long taper or to …
May’s increase in euro-zone retail sales suggests that household spending growth picked up in Q2. And the final euro-zone Composite PMI for June implies that the wider economy also had a strong second quarter. … Euro-zone Retail Sales (May) & Final PMIs …
While both industrial and services output grew in May, both sectors are set to record weaker growth in Q2 than in Q1. But as the monthly data were a poor guide to GDP growth in Q1, we are inclined to believe the more positive message from the surveys. … …
By indicating that it no longer expects to cut interest rates, the Riksbank has taken a small step toward monetary policy normalisation. While the Bank indicated that it will continue to guard against a rapid appreciation of the krona, we expect its …
4th July 2017
Government bond yields in the Nordic and Swiss economies have risen recently, and for the most part we expect this to continue. Yields in Sweden are likely to rise the furthest, while those in Switzerland will only edge higher, and in Norway they may even …
3rd July 2017
While the euro-zone unemployment rate was unchanged in May, survey indicators point to strong employment gains ahead. Nevertheless, the high degree of slack in some countries suggests that it will be some time before wage growth and inflation pick up …
The Nordic and Swiss PMIs strengthened in June, pointing to faster manufacturing growth. The Swedish survey suggests that inflation will fall, probably reflecting energy effects. But we still expect strong economic growth to push core inflation up this …
The latest fiscal data revealed a mixed performance by the euro-zone’s peripheral countries, with Ireland faring particularly well. Meanwhile, Greece reached a deal with its creditors but, in the absence of debt relief, the economy will continue to …
30th June 2017
Bond yields across the Nordic and Swiss economies increased in June, in line with global market moves following major central bank speeches that prompted investors to bring forward their expectations for monetary policy normalisation. Meanwhile, equity …
The warning from France’s fiscal watchdog that the country’s budget deficit is set to exceed 3% of GDP this year and next puts pressure on Emmanuel Macron to find extra savings in order to avoid antagonising Brussels and Berlin. This will not be an easy …
ECB President Draghi’s speech earlier this week prompted investors to re-assess the outlook for monetary policy. They now seem to expect the Bank to raise interest rates around the middle of next year. However, nothing in his speech changes our view that …
June’s fall in euro-zone consumer price inflation reflected energy effects. But with core inflation only edging up, the ECB will proceed cautiously in normalising policy. … Euro-zone Flash CPI (Jun.), German & French Sales …
June’s rebound in the Swiss KOF Economic Barometer leaves it consistent with a pickup in annual GDP growth to around 2%. But with inflation still very low, we expect the SNB to keep the stance of monetary policy very loose. … Swiss KOF Economic Barometer …
June’s rise in German HICP inflation and a sharper fall in the Spanish rate suggest that euro-zone inflation probably edged down from May’s 1.4%. German core inflation is now rising, but underlying price pressures remain weak elsewhere in the euro-zone. … …
29th June 2017
June’s EC business and consumer surveys point to a sharp acceleration of euro-zone growth, which will increase speculation about ECB asset purchase tapering to come and add to upward pressure on the euro. But with inflation expectations still subdued, we …
We think that the euro’s latest rise against the US dollar was a justified reaction to Mario Draghi’s hints that QE will be tapered early next year, despite warnings from the ECB that the comments were over-interpreted. We still expect the euro to edge …
28th June 2017
The Norges Bank’s latest projections suggest that it is unwilling, or unable, to loosen policy by enough to hit its inflation target. This will weigh on economic growth over the coming years, and probably hinder the necessary medium-term rebalancing of …
May’s euro-zone money and credit data point to continued steady economic growth. But problems in Italian banks have seen lending there continue to contract. … Euro-zone Monetary Indicators Monitor …
Since the Riksbank last met in April, underlying inflation has been stronger than expected, international political risks have diminished and economic conditions in Sweden’s trading partners have improved. In light of these developments, next week we …
While the state aid granted to two regional Italian lenders over the weekend has reduced the risks to the Italian economy in the near term, it shows that the so-called “doom loop” between the banking sector and the public finances remains strong. And the …
27th June 2017
June’s German Ifo survey suggests that GDP growth will accelerate sharply in the months ahead. While growth is unlikely to match the pace implied by this survey, we see the German economy outperforming consensus expectations this year. … German Ifo Survey …
26th June 2017
