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While the Riksbank maintained a very dovish tone today, the strength of the Swedish economy and rising inflationary pressures mean that the Bank will soon have to change its stance. We expect the repo rate to be increased by the end of this year. The …
15th February 2017
Former Prime Minister Matteo Renzi’s decision to call a Democratic Party leadership contest reduces the chance of an early general election this summer. But an election could still take place later in the year. So if anti-euro parties’ poll ratings …
14th February 2017
The second estimate of euro-zone Q4 GDP suggested that economic conditions at the end of last year were not quite as positive as previously estimated by Eurostat. And growth looks set to slow this year due to rising energy prices and political risks. … …
Following this morning’s release of German and Italian Q4 GDP data, we are sticking to our forecast that euro-zone Q4 GDP growth will be left unrevised at +0.5%. … German & Italian GDP (Q4), German Consumer Prices …
Switzerland’s consumer and producer prices data for January provided some hope that the prolonged period of falling prices may finally be over. But with the franc likely to strengthen this year, underlying price pressures are set to remain subdued. … …
Marine Le Pen’s announcement of her radical vision for France, particularly her intentions for an exit from the European Union and the euro, unnerved euro-zone financial markets last week. Her main opponent, the centrist M. Macron, would be a much more …
10th February 2017
The decline in French industrial production in December marked a weak end to 2016, echoing falls in a number of other euro-zone countries. But Italian industry put in an unexpectedly strong performance. … French & Italian Industrial Production …
In January, the Norges Bank’s favoured measure of inflation fell to a 37-month low. We think that it will fall further, prompting the Bank to cut its key policy rate by 25 basis points in the second half of the year. … Norwegian Consumer Prices …
Compared to 2012, when ECB President Draghi’s pledge to do “whatever it takes to preserve the euro” helped to bring the currency union back from the brink, the central bank’s ability to address euro-zone break-up risks has diminished. … Can the ECB still …
9th February 2017
Recent economic data support our view that the Riksbank will raise interest rates this year. But given the recent appreciation of the krona, the Riksbank is likely to maintain a very dovish tone in its communications next week. … Riksbank to maintain …
Norway’s economic recovery picked up in Q4, and surveys suggest that growth might edge up further in the near term. This should add to the upward pressure on the krone as oil prices rise this year. … Norwegian GDP …
Germany, Belgium and particularly Ireland are the euro-zone members most exposed to US protectionism, while Portugal and the other peripheral euro-zone economies are the least exposed. … Which countries are most exposed to US …
8th February 2017
The IMF’s latest Greek debt sustainability analysis reveals that the Fund now sees debt rising even more sharply than it had assumed last year. This further reduces the likelihood that it will contribute to the bailout, increasing the risk that payments …
The Central Bank of Iceland (CBI) kept monetary policy unchanged today, but struck a hawkish note in its accompanying statement. However, we believe that the downward effects of a further strong appreciation of the króna on import prices will more than …
Marine Le Pen’s desire to take France out of the euro zone and the European Union if she is elected President in May faces political and legal hurdles. They are not insurmountable but the process is unlikely to be as straightforward as she has been keen …
7th February 2017
December’s drop in German industrial production is unlikely to be a sign of things to come, but it does suggest that the economy entered 2017 on a slightly weaker footing than the surveys have implied. … German Industrial Production & French Trade …
Recent data have brought further signs that public finances in the euro-zone’s periphery are improving. But January saw the sharpest monthly rises in bond yields since mid-2015, probably caused by heightened political risk and concerns over future ECB …
6th February 2017
The recent appreciation of the Swiss franc suggests that the Swiss National Bank (SNB) may now be willing to tolerate a (slightly) stronger currency. But we see the franc rising even further to reach parity with the euro later this year. Given the seismic …
After reaching a 47-month high of 1.8% in January, euro-zone consumer price inflation is set to rise further in the coming months. While we expect headline inflation to surpass the ECB’s near-2% target, core inflation is set to rise only gradually and …
3rd February 2017
December’s retail sales data suggest that household spending contributed to the pick-up in euro-zone GDP growth in Q4. And January’s Composite PMI implies that the economy got off to a steady start in 2017. … Euro-zone Retail Sales (Dec.) & Final PMIs …
Both Swedish industrial production and services output growth picked up over Q4 and are thus consistent with a rise in GDP growth. Meanwhile, this morning’s services PMI is consistent with strong growth at the start of 2017 as well. … Swedish Industrial & …
The króna has depreciated fairly sharply since the Central Bank of Iceland (CBI) last met. But given our expectation that it will rise again, we do not think the Bank will respond to recent currency movements by changing policy next week. … Icelandic …
2nd February 2017
Recent data on the euro-zone’s labour market have been encouraging. December’s decline in the unemployment rate to 9.6% left it at its lowest since May 2009. We expect the labour market recovery to continue this year, albeit at a slower pace. On the face …
1st February 2017
The accusation by US policymakers that Germany’s currency is “grossly undervalued” is partly justified. Indeed, while the euro’s current low level seems warranted by economic fundamentals in the region as a whole, we have long argued that Germany should …
January’s PMIs add to the evidence that the Swedish economy has made a strong start to the year. They also suggest that price pressures are building in Switzerland. … Manufacturing PMIs …
The Nordic and Swiss currencies have generally strengthened this month, albeit for different reasons. This is a trend that we expect to continue this year. … Currencies make a strong start to the …
31st January 2017
The latest data revealing that euro-zone GDP ended 2016 on a positive note and that inflation rose sharply in January will give the ECB food for thought, but we still expect the Bank to be buying assets well into 2018. … Euro-zone GDP (Q4), Unemployment …
Provisional data revealed that the French economy performed fairly well in Q4, while inflation picked up in January. But uncertainty surrounding the forthcoming presidential election looks set to dampen GDP growth in the coming quarters. … France GDP (Q4, …
January’s rise in German consumer price inflation to 1.9% reflected energy effects while core inflation remained subdued. Price pressures are weaker elsewhere in the euro-zone and there is still little chance of the ECB hitting its target of near-2% …
30th January 2017
January’s rise in the European Commission’s Economic Sentiment Indicator (ESI) to a 70-month high suggests that the euro-zone economy started 2017 on a positive note. … EC Business & Consumer Survey …
Following the nomination yesterday of left-winger Benoît Hamon as the Socialist Party’s presidential candidate, the battle lines on which the election will be fought have become clearer. At this stage, France looks likely to get a reform-minded president, …
Data released last week suggested that the euro-zone economy started 2017 on a pretty strong footing. January’s Composite PMI remains consistent with quarterly GDP growth of about 0.4%, while the rise in consumer confidence suggests that households have …
27th January 2017
December’s euro-zone money and credit data are consistent with steady economic growth. But they still point to inflation undershooting the ECB’s target. … Euro-zone Monetary Indicators Monitor …
Despite falling in January, the Swedish Economic Tendency Indicator is consistent with an acceleration in annual GDP growth to about 6%. As such, underlying price pressures should pick up and the Riksbank’s next move will be to tighten policy. … Swedish …
Italy’s widening Target2 imbalance suggests that investors are reducing their exposure to Italy. And capital outflows may well rise in the run-up to a general election, which could happen this year. … How worrying is Italy’s widening Target2 …
26th January 2017
December’s labour market data suggest that wage pressures are building in Sweden, supporting our view that the Riksbank will tighten policy this year. But in Norway, despite November’s fall in unemployment, slack remains in the labour market. … Sweden …
January’s fall in the German Ifo survey suggests that the economy has lost some of the strong momentum seen at the end of last year. And while the weak euro exchange rate should boost exports in the coming months, that effect is likely to be offset by …
25th January 2017
On the whole, the activity data suggest that GDP growth in the Nordic and Swiss economies has picked up. Granted, Icelandic consumer confidence suggests that growth might have slowed slightly. But it is still at a level consistent with annual GDP growth …
Despite January’s fall, the euro-zone PMI suggests that the economy continued to expand at a steady pace at the start of 2017. But the survey still points to a lack of inflationary pressure, which will keep the ECB on a path of policy loosening. … …
24th January 2017
The tightening of credit standards in the Netherlands suggests that political uncertainty may be having an impact on economic conditions. The chance of eurosceptics gaining power is limited and the Dutch economy is in a good position to cope with a short …
23rd January 2017
With the euro-zone economy performing fairly well and headline inflation on the up, the results of last week’s Bank Lending Survey were a timely reminder to the ECB that its job is far from done. Indeed, tighter credit conditions for firms and slower …
20th January 2017
Prospects for the Nordic and Swiss economies’ are fairly good, with Sweden and Iceland likely to be the best performers. But the outlook for inflation, and therefore monetary policy, varies substantially. The Swedish economy is firing on all cylinders, …
President Draghi explained today that the ECB saw the recent rise in inflation as transient and outlined some tough conditions for future policy normalisation which are unlikely to be met for a very long time. Accordingly, we still expect asset purchases …
19th January 2017
December’s rise in Swiss producer and import price inflation does not change our view that headline consumer price inflation will be barely positive in the medium term. Accordingly, monetary policy will have to remain extremely loose. … Swiss Producer & …
The US President-elect’s perceived attempts to talk the dollar down and threat to impose tariffs on BMW imports to the US have limited implications for the euro-zone’s export prospects. But his comments risk exacerbating political problems in the region, …
18th January 2017
The European economies have continued to fare relatively well, with euro-zone growth in particular supported by a weaker currency and low inflation. However, a temporary surge in inflation this year coupled with persistently weak wage growth looks set to …
17th January 2017
January’s rise in ZEW investor sentiment showed that optimism about the German economy is gradually returning. The ECB’s Q4 Bank Lending Survey revealed a further pick-up in demand for loans, but there was a slight tightening of credit conditions. … …
Portuguese government bonds rallied last week, but we doubt that this will continue. Sooner or later, we think that concerns about the sovereign credit rating and falling ECB asset purchases will push Portugal’s bonds yields higher. Our end-2017 forecast …
16th January 2017
The euro-zone’s goods trade surplus widened in November, but over Q4 as a whole it was probably broadly unchanged from Q3. Looking ahead, export growth might pick up, but we doubt that it will be strong enough to offset the impact of a slower consumer …
Wage growth was subdued in 2016, but the recent decline in the euro-zone unemployment rate to an 87-month low, taken in isolation, points to a strong pick-up from here. On the face of it, that suggests that the ECB’s plans to buy assets throughout 2017 …
13th January 2017
