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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 …
After rising to a five-year high in February, Swedish headline inflation is set to ease back in the coming months as energy inflation cools. But with signs that underlying price pressures are rising, we expect the Riksbank to tighten policy this year. … …
The Icelandic króna has fallen after the final step in the lifting of capital controls. But with tourism set to grow strongly, we suspect that the króna will rise and put downward pressure on import prices. That will prompt the Central Bank of Iceland to …
13th March 2017
The PVV’s declining support suggests that is now even less likely to govern after the Dutch election. But the eventual governing parties will still respond to the populists by loosening fiscal policy. … Dutch election likely to result in small fiscal …
We think that the Norges Bank will leave monetary policy unchanged at its meeting next week. While inflation has fallen much more quickly than policymakers expected, accelerating house prices are a concern. So for now, we expect the Bank to leave its …
10th March 2017
ECB President Mario Draghi last week reiterated the plan to buy assets throughout this year and keep interest rates at or below current levels for an extended period. But he also explained that additional interest rate cuts or non-standard policies are …
February’s inflation data revealed that inflation is falling much more quickly than the Norges Bank expected. While activity surveys have strengthened recently, we think that inflation will continue to fall, prompting interest rate cuts later this year. … …
The Swiss National Bank will reiterate after its meeting on 16th March that it remains fully prepared to act to prevent any significant appreciation of the Swiss franc in the coming months. Although inflation has picked up since the start of the year, the …
9th March 2017
The ECB today reiterated its commitment to buying assets throughout this year and keeping interest rates at current or lower levels for an extended period. While the Bank believes that downside risks to growth have diminished, it will apparently not …
The positive message from France’s business surveys suggests that economic growth will accelerate sharply in the coming months. But they probably overstated growth again in Q1, while political fears may dampen activity further ahead, suggesting a more …
Ahead of the Central Bank of Iceland’s meeting next week, today’s data revealed that Icelandic GDP expanded by a strong 2.6% in Q4. Despite the strength of the economy, the recent appreciation of the króna points to looser monetary policy. On balance, …
January’s rise in German industrial production reversed December’s fall and provided a solid start to Q1. But so far, hard data on Germany and elsewhere in the euro-zone suggest that growth will not be as strong as the surveys have implied. … German & …
8th March 2017
Switzerland’s consumer prices data for February revealed that prices are finally rising again. But with the franc likely to strengthen this year, underlying price pressures are set to remain subdued. … Swiss Consumer Prices …
Survey data for February suggest that euro-zone GDP growth accelerated in Q1 following two healthy quarterly gains of 0.4% in the second half of last year. After February’s rise, the PMI pointed to an expansion of about 0.6%. That said, there was evidence …
7th March 2017
The final estimate of euro-zone GDP in Q4 showed that growth was driven mainly by household spending. But with rising energy inflation now weighing on households’ real income growth, we expect the consumer recovery to slow. … Euro-zone GDP Expenditure …
This month see the first of a number of key elections in the euro-zone this year. Investors are likely to become increasingly worried about the potential for anti-euro parties to enter government and the implications that that might have for the future of …
6th March 2017
The European Commission recently released new forecasts agreeing with our view that the peripheral economies will miss their fiscal deficit targets again this year. While bond yields dropped back in February, they remain vulnerable to an increase in …
Q4’s sharper-than-anticipated drop in Greek GDP is clearly very bad news. While Prime Minister Tsipras claims that the economy is now poised to recover, the business surveys suggest otherwise. This will add to the IMF’s scepticism about Greece’s ability …
If Italy left the euro-zone, we think that its new currency would depreciate by about 30% against the euro. In the year or so following its exit, the economy would probably contract sharply, but we suspect that Italy’s medium-term prospects would be …
3rd March 2017
The recent strength of activity surveys, as well as increases in headline inflation and inflation expectations, are all good news for the ECB. But for now, we doubt that this will be enough to sway the Bank from its plan to continue purchasing assets …
Retail sales fell again in January and quarterly growth is likely to be weak in Q1. While Italy’s economy slowed in Q4, the PMI points to a pick-up this quarter. … Italy GDP (Q4), Euro-zone Retail Sales (Jan.) & Final PMIs …
Both industrial production and services output in Sweden rose at a decent pace in January. And with surveys pointing to further gains, the Swedish economy is set for another strong quarter in Q1 and inflationary pressures should continue to build. … …
The recent run of positive data may lead the ECB to judge that downside risks to the economic outlook have receded when it meets next week. But core inflation has remained low despite the rise in the headline rate. And with political risks still a cause …
2nd March 2017
February’s rise in euro-zone inflation to the ECB’s 2% price stability ceiling reflected temporary energy and food effects. With core inflation set to remain subdued, we think that the ECB’s plans to buy assets throughout this year are justified. … …
None of the three frontrunners in this spring’s French presidential election looks likely to be able to depend on majority support in Parliament should they be elected. This will weaken their capacity to implement their proposals and could paralyse …
The lacklustre expansion of Swiss GDP in Q4 suggests that the negative effects of deflation and the strong franc are still lingering. And with political risks in the euro-zone set to keep the franc strong, exporters are likely to remain under pressure. … …
There is a significant chance of populist, eurosceptic parties entering government in Italy. While populists’ chances in Germany, France and the Netherlands are more limited, they may nevertheless take enough seats in their respective parliaments to gain …
1st March 2017
