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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 …
31st January 2017
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
In the land of fire and ice, currency movements in 2016 resembled an erupting volcano rather than a creeping glacier. The appreciating króna put downward pressure on inflation, prompting the Central Bank of Iceland (CBI) to cut interest rates twice. While …
The ECB will not announce any policy changes next week after last month’s pledge to buy at least €60bn of assets per month until the end of 2017. President Draghi is likely to restate the Governing Council’s commitment to the plan despite the recent sharp …
12th January 2017
November’s rise in euro-zone industrial production added to the evidence that GDP growth picked up in Q4. But while industrial growth might accelerate further in the near term, this is unlikely to prevent a broader economic slowdown in 2017. … Euro-zone …
Today’s minutes confirmed that only half of the Riksbank’s Executive Board supported the extension of its QE programme. And with inflation surpassing expectations in December, there is little cause for further monetary policy loosening – we expect the …
November’s data brought further signs of public finances improving in the euro-zone’s periphery. But the Greek bail-out deal is at risk of collapse, and the Italian banking sector remains in a parlous state. … Euro-zone Fiscal Monitor …
11th January 2017
In December, the Norges Bank’s favoured measure of inflation edged down to a 19- 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 …
10th January 2017
Recent hard data for the euro-zone have generally been encouraging. Despite falling in November, the level of retail sales remains fairly high after a strong rise in October. And while industrial production edged down in October, timelier national data …
9th January 2017
November’s euro-zone unemployment data reaffirm our view that the labour market is experiencing only a gradual recovery. Indeed, the unemployment rate is still high, while survey indicators point to limited wage growth. … Euro-zone Unemployment …
November’s rise in German industrial production suggests that industry had a decent quarter in Q4. And with trade data also painting a positive picture of the economy, it seems likely that GDP growth picked up in the final quarter of the year. … German …
Marine Le Pen’s suggestion last week that France could leave the euro-zone, devalue and then peg the new currency to the euro to limit exchange rate volatility has been written off as a hopeless attempt to have her cake and eat it. We agree that it is …
6th January 2017
We expect euro-zone government bond spreads to reach multi-year highs in 2017, with the largest increases in Italy and France, due to rising doubts about their futures in the currency union. … Will euro-zone government bond spreads balloon in …
December’s rise in the European Commission’s euro-zone Economic Sentiment Indicator (ESI) left it at its highest level since March 2011, thus supporting the message from the PMIs that GDP growth accelerated in the final month of 2016. … EC Business & …
In December, Swiss headline inflation exited negative territory for the first time in two years, but core inflation remained below zero. So the latest data will do little to ease fears that the economy is experiencing a sustained bout of damaging …
5th January 2017
Following a host of central bank meetings last month, most of the Swiss and Nordic currencies fell against the US dollar. While there were few major changes for bond yields, equities in most countries recorded impressive gains. … Currencies depreciating …
4th January 2017
December’s rise in euro-zone inflation mainly reflected anticipated energy effects and will therefore not deter the ECB from its commitment to sustained policy loosening. … Euro-zone Flash CPI & Final PMIs …
While German inflation surged to a three-year high in December, the French rate barely increased. And with underlying price pressures still very subdued throughout the euro-zone, the ECB need not rethink its high level of policy support. … German & French …
3rd January 2017
December’s PMIs suggest that Swiss, Swedish and Danish manufacturers ended 2016 on a strong note, but their Norwegian counterparts are still lagging behind. … Manufacturing PMIs …
In 2016, weak inflation resulted in strong real disposable income growth for consumers, which in turn helped to support better-than-expected real GDP growth. The decent pace of growth, combined with worries about the strength of growth and political …
22nd December 2016
While the Riksbank extended QE today, a number of the Executive Board dissented, suggesting that today’s announcement marks the beginning of the end for policy loosening in Sweden. Indeed, despite its dovish rhetoric, we think that the Riksbank will be …
21st December 2016
There is little chance of March’s Dutch general election resulting in a referendum on EU membership. But the shift in political sentiment towards euroscepticism may derail EU policymaking in other ways. … Nexit is not next, but Dutch voters still pose …
20th December 2016
A huge rise in manufacturing confidence, to within touching distance of a record high, pushed the Swedish Economic Tendency Indicator higher still in December. This calls into question the Riksbank’s commitment to loosen policy further and supports our …
Recent national accounts data showed a marked divergence in quarterly economic growth in Q3, with the Swiss economy stagnating while the Icelandic economy expanded by an impressive 4.6% q/q. In the middle of the pack, Sweden, Denmark and Finland recorded …
December’s German Ifo survey suggests that the economy ended the year on a high note despite political upheaval elsewhere. … German Ifo Survey …
19th December 2016
The euro-zone’s trade surplus with the UK is likely to fall as a result of sterling’s depreciation. We think that this will reduce euro-zone GDP growth by about 0.1 percentage points per year in 2017 and 2018, but the effect could be up to 0.2 percentage …
16th December 2016
Rising euroscepticism and a packed election timetable next year mean that there is a significant risk that the euro-zone breaks up. Even in our central scenario in which the currency union holds together, growth will be held back by political uncertainty, …
The short-term outlook for euro-zone industry is positive. Surveys suggest that output growth will rise in the coming months and, if sustained, the recent decline of the euro should provide a boost for exporters throughout next year. But with slowing …
