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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 …
31st May 2017
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), …
The first estimate of Italian Q1 GDP showed that the economy grew more slowly than the euro-zone as a whole. With growth likely to remain fairly subdued, the economy remains vulnerable, perhaps most immediately to political risk. … Italian GDP (Q1) & …
Norway’s recovery gathered pace in Q1, and forward-looking indicators suggest that this should continue. That said, we doubt that this will have much of a bearing on monetary policy. Meanwhile, Finland’s economy performed very well in Q1. … Norwegian GDP …
Greece’s return to recession in Q1 has highlighted the damage done by stalled bailout negotiations and suggests that the Government’s newly-updated economic forecasts are far too optimistic. This will make a deal to allow Greece to meet its debt …
15th May 2017
The election of Emmanuel Macron as France’s next president has removed a big risk to the euro-zone economic outlook. This could allow the ECB to stop worrying about political risks and to concentrate more on the euro-zone’s healthy economic performance. …
12th May 2017
In the past month, central bank meetings have highlighted contrasts in the responses of policymakers towards inflation. In Sweden, inflation has been on an upward trend recently and is close to the Riksbank’s 2% target. But the Bank still announced an …
March’s fall in euro-zone industrial production confirms that the sector had a poor Q1. But that was partly due to the effects of unseasonably warm weather on energy output, while surveys point to a sharp pick-up in overall production growth to come. … …
The first estimate of German Q1 GDP showed that the economy got off to a fairly strong start to the year. But April’s inflation data confirmed that, ignoring Easter timing effects, underlying price pressures are still subdued. … German GDP (Q1), Consumer …
Following the sharp drop in the Icelandic króna after the lifting of capital controls in March, we pushed back our forecast for an Icelandic interest rate cut from May to August. But since the currency has recovered quicker than even we had expected, a …
11th May 2017
The sharp divergence in Swiss and Swedish inflation in April supports our views that the Swiss National Bank will need to keep monetary policy loose for a long time to come but that Sweden’s Riksbank will raise rates next year. … Swiss & Swedish Consumer …
New French President Emmanuel Macron has a better chance than his predecessors of overhauling France’s sclerotic labour market and bloated public sector. But he may still have to dilute some of his reforms, limiting the effect on GDP growth. … Can Macron …
10th May 2017
Today’s Riksbank minutes suggest that the proponents of last month’s shock QE extension are unlikely to change their minds on the direction of monetary policy any time soon. So there is little chance of a material shift in the Riksbank’s policy stance …
The sharp decline in Norwegian CPI-ATE inflation has paused over the past three months, but it should soon resume. We think that it will fall to 1.0% later in the year, and remain well below the Norges Bank’s target in the medium term. … Norwegian & …
Anti-euro parties probably have a better chance of forming a government in Italy than in France. The election of an Italian eurosceptic government would not spell immediate disaster, but risks to the economy and the country’s struggling banks would rise …
9th May 2017
Despite declining, German industrial production remained at a high level in March and grew strongly in Q1 overall. Other German hard data have been weaker, but surveys imply that GDP growth was strong in Q1 and point to a good start to Q2. … German …
While Angela Merkel’s prospects for September’s federal elections have improved recently, a surprise defeat probably wouldn’t be a game-changer for the German economy. Meanwhile, the rise of small parties that oppose the sharing of fiscal burdens limits …
8th May 2017
Yesterday’s election of centrist liberal Emmanuel Macron as the next French President bodes well for the revitalisation of France’s lacklustre economy and the European project more generally. But he will encounter plenty of opposition and may have to …
Centrist liberal Emmanuel Macron looks set to comfortably defeat populist eurosceptic Marine Le Pen in Sunday’s final round of France’s presidential election and might even manage to secure a parliamentary majority in June’s National Assembly elections. …
5th May 2017
March’s Swedish production data suggest that GDP growth picked up further in Q1. And as stronger activity is consistent with a rise in inflationary pressure, we think that the Riksbank will have to raise interest rates sooner than it currently …
Survey data suggest that economic momentum among the major euro-zone economies has converged in 2017. Indeed, in April the spread between the Composite PMIs for Germany, France, Italy and Spain was the second lowest on record. Each economy has benefited …
4th May 2017
Centrist presidential candidate Emmanuel Macron reaffirmed his proposals to overhaul the French labour market in last night’s head-to-head television debate with his rival Marine Le Pen. While his plans will meet with strong resistance from unions and …
Despite March’s rise in retail sales, consumer indicators suggest that household spending growth slowed in Q1. Meanwhile, the final euro-zone Composite PMI implies that the economy made a strong start to Q2. … Euro-zone Retail Sales (Mar.) & Final PMIs …
The Norges Bank’s decision to leave interest rates unchanged came as no surprise, but we are among a very small minority of forecasters who think that the Bank will cut rates later in the year. … Norges Bank stands pat, but a rate cut not far …
After depreciating against the euro in April, we think that the Swiss franc, Swedish krona and Norwegian krone will rebound, but for different reasons. Political risk could yet re-escalate in Europe and elsewhere, boosting demand for the safe-haven franc. …
3rd May 2017
National Front presidential candidate Marine Le Pen has often been at pains throughout this election campaign to avoid the topic of a French exit from the European Union and the euro. But this is merely presentational; her “Frexit” ambitions are as strong …
The “preliminary flash” estimate of euro-zone GDP supported the message from earlier national data that the recovery maintained a decent pace in Q1. However, economic growth is still putting little upward pressure on inflation. … Euro-zone GDP (Q1 Prel. …
