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As next week’s monetary policy meeting is the last before asset purchases are set to end in June, the Riksbank will probably signal whether they will be extended. While CPIF inflation, which excludes the direct effect of interest rate changes, …
20th April 2017
Assuming that Marine Le Pen loses in the second round of the French presidential election, her most radical eurosceptic and protectionist policies will gain little traction at home over the next five years. But if her loss is a narrow one, she may have …
The euro-zone has continued to perform very well and we now expect growth to be stronger than the consensus forecast this year and next. Inflation has been lower than we had assumed, meaning that household spending growth should not slow too sharply. …
19th April 2017
The euro-zone goods trade surplus rose in February but probably narrowed in Q1 as a whole. With higher energy prices explaining much of that narrowing, trade volumes may still have boosted GDP in Q1. What’s more, we expect net trade to make a strong …
Activity surveys suggest that economic growth in the largest Nordic and Swiss economies is set to pick up. In Switzerland, the KOF Business Barometer points to annual GDP growth rising from Q4’s 0.6% to around 2.5%. In Sweden, the NIER Economic Tendency …
13th April 2017
The strength of economic survey indicators in Q1 has not yet been reflected in either the retail sales or industrial production data. But construction appears to have boomed and car registrations, which help to gauge non-retail consumer spending trends, …
France’s presidential election puts the country, and arguably the entire European Union, at a historic crossroads. The more likely path is one of liberal reforms that could boost growth and strengthen European cooperation. But a lurch towards …
While conventional metrics give some support to the Swiss National Bank’s view that the franc is “significantly overvalued”, the evidence from the economy implies that it is not. What’s more, we think the currency is more likely to rise in the near term …
March’s fall in inflation was partly due to temporary effects and inflation should rise in April. As there is now an increasing risk that inflation will overshoot the Riksbank’s target, later this month we expect the Bank to signal that its asset …
12th April 2017
11th April 2017
February’s small fall in euro-zone industrial production suggests that the sector had a weak Q1, but the slowdown should have been offset by stronger growth in other sectors. What’s more, the industrial surveys point to a sharp acceleration to come. … …
March’s small rise in the Norges Bank’s preferred measure of inflation was probably just a blip. Indeed, we think that inflation will fall to about 1.0% later this year, prompting the central bank to cut its key policy rate from 0.50% to 0.25%. … …
10th April 2017
Greek government revenues fell sharply at the start of the year. While there has been a provisional deal on new reforms, the next bailout payment is still some way off. With uncertainty weighing on the economy, there is little chance of Greece meeting its …
7th April 2017
Last week’s communications from the ECB confirmed our judgement that it is in no hurry to begin the process of policy normalisation despite the health of the economy. Indeed, the Bank still intends to stick to its plan to keep loosening policy by buying …
February’s sharp rise in German industrial production and wider trade surplus help to reconcile the recent gap between the hard data and surveys, and imply that GDP rose sharply in Q1. But the French data suggest that the economy barely expanded. … German …
March’s Swiss inflation data do little to alter the picture of extremely subdued price pressures. With the core rate barely positive and inflation expectations very low, we expect the Swiss National Bank to maintain supportive policies including FX …
6th April 2017
Central banks in Switzerland, Sweden and Norway have all voiced concerns about overheating in their housing markets. In Switzerland, macro-prudential policies have already served to cool house price inflation and there is scope to do more. This should …
5th April 2017
Survey data for March added to the evidence that euro-zone growth gained pace in the first quarter. Meanwhile, headline consumer price inflation fell in March and appears to have passed its peak, suggesting that the drag from higher inflation on real …
The latest raft of positive Swedish data supports our view that the Riksbank’s extremely accommodative monetary policy is no longer justified – we expect the Bank to stop purchasing assets in June and to raise interest rates by the end of this year. … …
February’s retail sales data suggest that consumer spending growth slowed in Q1. That said, high consumer confidence and firms’ strong employment intentions suggest that household spending growth won’t slow sharply this year. … Euro-zone Retail Sales …
4th April 2017
February’s fall in euro-zone unemployment and the rise in the manufacturing PMI in March supported other evidence that the economy is performing well. But February’s producer prices data confirmed that underlying inflation pressures are subdued. … …
3rd April 2017
March’s PMIs point to faster manufacturing growth in Switzerland, Sweden and Norway. They also imply that price pressures are building in Sweden, which we think will force the Riksbank to tighten policy before the end of the year. … Manufacturing PMIs …
Market movements across the Nordic and Swiss economies were fairly limited in March. The main exceptions were in the currency market, with both the Norwegian krone and Icelandic króna recording sharp declines against the euro and US dollar. Despite our …
31st March 2017
Last week brought more evidence that the euro-zone economy has continued to perform very well and we have decided to upgrade our forecasts for the region significantly. Indeed, inflation has been more subdued than we had assumed. In turn, this should mean …
March’s sharp slowdown in euro-zone inflation was partly driven by temporary factors that will reverse in April, but the big picture is that inflation is now on a downward trend. So we expect the ECB to continue purchasing assets and leave interest rates …
Today’s expenditure data gave mixed messages on the health of the euro-zone’s consumer sector. While higher inflation does not appear to have hit German consumer spending in Q1, spending growth may have slowed in France and Spain. … Ger. & Spa. Retail …
March’s declines in headline consumer price inflation in Germany, Spain and Belgium reflected some temporary factors. But the big picture is still that underlying inflation throughout the euro-zone remains too weak for the ECB’s comfort. … German, Spanish …
30th March 2017
Despite edging down in March, the EC Economic Sentiment Indicator suggests that euro-zone growth picked up in Q1. But with consumers’ inflation expectations levelling off recently, talk of tighter monetary policy seems premature. … EC Business & Consumer …
March’s rise in the Swiss KOF Economic Barometer to a three-and-a-half-year high provided further evidence that the economy made a positive start to 2017. But with inflation still low and persistent worries about the impact of a strong franc on exporters, …
There are some positive signs for Portugal’s banks, suggesting that they have become less of a risk to the public finances. But a meaningful recovery in lending over the next few years seems unlikely. As a quick recap, Portugal’s banking sector is one of …
29th March 2017
Despite softening in March, Sweden’s Economic Tendency Indicator still points to a surge in GDP growth. With the survey breakdown suggesting that domestic demand is increasingly driving growth, the Riksbank will become more confident that underlying price …
While today’s data suggests that Swedish growth may have slowed in Q1, it still looks set to be strong. And as PPI inflation remains high, inflationary pressures appear to be rising and we expect the Riksbank to tighten monetary policy later this year. … …
28th March 2017
The ECB’s forward guidance about asset purchases and an extended period of low interest rates need not prevent it from starting to normalise policy should the inflation outlook so warrant. But it raises the bar to policy changes somewhat and reduces the …
March’s German Ifo supported other survey evidence that growth is accelerating sharply. The hard data so far paint a less positive picture, but the balance of evidence suggests that German growth this year will be stronger than the 1.3% that we had …
27th March 2017
February’s euro-zone money and credit data point to steady economic growth. But they still suggest that core inflation will remain very weak. … Euro-zone Monetary Indicators Monitor …
Underlying Swedish inflation is set to pick up further and means that the Riksbank’s ultra-loose policy is no longer justified. Conversely, the outlook for Norwegian inflation calls for an interest rate cut. Economic surveys for the largest two Nordic …
24th March 2017
The euro’s rise against the US dollar over the past few weeks has probably reflected speculation of ECB tapering, as well as perceptions of diminished political risk in the currency union. We doubt that these forces will be sustained, while we also expect …
While the euro-zone Composite PMI points to the strongest pace of GDP growth in two years in Q1, there are still fundamental reasons to expect growth to slow in 2017. As such, policymakers will not yet be convinced that the pick-up in activity will …
We doubt that the labour market is recovering as quickly as the decline in the Labour Force Survey measure of unemployment suggests. While things are gradually improving, wage growth looks set to remain subdued in the first half of this year. … Norwegian …
22nd March 2017
Spain’s political situation is fragile and we cannot rule out a snap election being called this year. But regardless of the politics, deteriorating economic fundamentals mean that economic growth will slow. … Spanish growth to slow regardless of …
21st March 2017
Although Switzerland’s economy registered another disappointing quarter of growth in Q4, expanding by just 0.1% q/q, business and consumer surveys paint a more positive picture for 2017. The KOF Business Barometer rose to a 41-month high in February and …
The annual rate of euro-zone inflation may be nearing a peak, but its effects on consumer spending growth have yet to come. With nominal wage gains unlikely to offset higher prices, we still see expect weaker consumer spending growth to drive a …
20th March 2017
Dutch Prime Minister Mark Rutte described last week’s election as the “quarter finals to beat the wrong sort of populism”. The forthcoming French presidential election will be the semi-final, and the German election the final, he said. While those matches …
17th March 2017
The Norges Bank’s decision to leave interest rates unchanged came despite a deterioration in the outlook for inflation. Policymakers remain concerned about the impact of loose monetary policy on the housing market. But we still think that the Bank will …
16th March 2017
The Swiss National Bank’s decision to leave interest rates on hold was as expected given the recent rise in inflation. But with euro-zone political developments likely to put upward pressure on the franc, we think that the SNB will continue to intervene …
The next Dutch government is likely to be a centre-right coalition with a broadly similar stance towards the EU as before and a slightly looser fiscal policy. But the balance of power in the Netherlands has still shifted in the favour of eurosceptics, …
We suspect that a better-than-expected result for eurosceptic and populist parties in today’s Dutch general election would have little direct effect on support for eurosceptic parties elsewhere. … Is the Dutch election a litmus test for the rest of …
15th March 2017
The Central Bank of Iceland’s decision to keep policy unchanged after the lifting of capital controls was unsurprising. The recent drop in the króna reduces the need for the CBI to cut interest rates soon. But with the króna set to rise again before long, …
Portugal’s anti-austerity Government has continued to implement economic reforms and cut its budget deficit, which reduces the risk of sanctions from the EU. But major challenges still lie ahead. … Are things finally looking up for …
14th March 2017
January’s rise in euro-zone industrial production did not reverse December’s fall and, together with earlier retail sales data, suggests that the message from the business surveys that growth gained pace in Q1 may be too optimistic. … Euro-zone Industrial …
