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The Norges Bank’s decision to leave interest rates unchanged came despite a deterioration in the outlook for growth and inflation. While policymakers remain concerned about the impact of loose monetary policy on house price inflation, we suspect that they …
15th December 2016
The Swiss National Bank’s decision to leave interest rates on hold and pledge continued currency intervention was as expected. The Bank may have drawn some comfort from the franc’s recent decline against the US dollar. But the currency’s strength against …
December’s unchanged euro-zone Composite PMI implies that GDP growth picked up slightly in the fourth quarter. But the weakness of some of the hard data at the start of Q4 suggests that an acceleration of growth is not guaranteed. … Euro-zone Flash PMIs …
October’s fall in euro-zone industrial production contrasts with the brighter picture painted by the business surveys. While industrial growth might pick-up slightly in the near term, it is unlikely to prevent a broader economic slowdown in 2017. … …
14th December 2016
The Central Bank of Iceland’s (CBI’s) decision to cut interest rates before the next phase of capital account liberalisation came as a surprise. While the strong economy calls for policy tightening in the long term, a further sharp appreciation of the …
As inflation was a touch weaker in November than the Riksbank anticipated, monetary policy is set to be loosened further. While we expect the Riksbank to announce an extension of QE, the already-weak level of the krona suggests that it will hold back from …
13th December 2016
In October, signs of fiscal slippage eased somewhat in the euro zone’s periphery. But the Greek bailout deal remains at risk of collapse and the growing likelihood of a bail-out for Italian banks threatens to increase the public debt load there. … …
The Swiss National Bank will stress after its meeting on 15th December that it is prepared to act decisively to prevent any significant appreciation of the Swiss franc in the coming months. Indeed, the Bank has already increased its intervention in …
December’s ZEW survey suggested that investors were not too concerned about the effects of euro-zone political uncertainty on the German economy, although the index still points to a slowdown in GDP growth. … German ZEW Survey …
Italy’s new Prime Minister has two major challenges ahead of him – reforming the electoral system and managing the banking crisis – both of which could spell disaster for his party at the next election. … Has Italy’s new PM been handed a poisoned …
12th December 2016
While the ECB opted to extend its Asset Purchase Programme (APP) at a slower monthly pace than anticipated, there is no immediate end in sight in terms of its duration. Indeed, we think that the ECB will continue purchases far beyond 2017 and it will be …
9th December 2016
The Norges Bank is almost certain to leave monetary policy unchanged at its meeting on 15th December. Indeed, in October, the Bank repeated its message that “the key policy rate would most likely remain at [0.50%] in the period ahead”. However, we think …
October’s French industrial production and German trade data, combined with soft data released earlier in the week, suggest that the euro-zone’s largest economies made a slower start to the fourth quarter than business surveys had implied. … French …
Little has changed since the Central Bank of Iceland (CBI) last met and so, like last month, policy will be unchanged next week. As political and exchange rate uncertainty fades next year, concerns that the CBI will continue to miss its inflation target …
8th December 2016
While the ECB announced today that it would slow the pace of its asset purchases from next April, it also committed to buying for longer than anticipated. What’s more, it expressed a clear bias towards increasing the degree of support in future if …
The euro-zone economy still seems to be weathering the effects of political upsets and uncertainty at home and abroad well. The PMI and EC survey indicators rose in November, consistent with an acceleration in GDP growth from Q3’s modest 0.3% q/q. …
The Nordic and Swiss economies generally recorded positive growth in Q3 and look set to do so again in Q4. But with growth in their main trading partner, the euro-zone, set to slow and a number of political risks on the horizon, there are challenges …
7th December 2016
Following Italy’s referendum last weekend, some form of government support for the country’s weakest banks looks likely. But looking ahead, if an early general election were to take place next year, this could cause more widespread damage to the banking …
October’s German industrial production and French trade data suggest that the euro-zone’s largest economies made a slower start to the fourth quarter than the business surveys had implied. … German Industrial Production & French Trade …
The Eurogroup made some progress yesterday, confirming limits on Greek loan interest rates and tweaks to maturities. But it remains strongly opposed to the debt forgiveness that Greece needs. And with the IMF still unwilling to participate in the bailout, …
6th December 2016
The final estimate of Q3 GDP confirmed that growth was driven mainly by household spending. But with consumers’ real income growth now slowing as energy inflation rises, spending growth, and thus GDP growth, is set to slow in 2017. … Euro-zone GDP …
While November’s fall in Swiss inflation was mainly due to energy effects, the weakness of core inflation will do little to ease fears that the economy may be experiencing a sustained bout of damaging deflation and keeps the onus on the Swiss National …
October’s rise in retail sales and November’s decent euro-zone PMIs are consistent with an acceleration of GDP growth in Q4. But with Italy’s “No” vote heightening political risks, the prospects for growth in 2017 are weaker. … Euro-zone Retail Sales …
5th December 2016
Swedish industrial and services output started Q4 on a fairly weak note, but forward-looking indicators also released this morning were more positive. As such, it still seems likely that Swedish GDP growth will pick up in Q4. … Swedish Industrial & …
Italy has taken the first step along a path that could lead it out of the euro-zone. There are still many obstacles to an Italian exit. But as long as the country’s future is uncertain, bond yields are likely to rise and the government might need to …
A rejection of Matteo Renzi’s proposed constitutional reforms in Sunday’s referendum could plausibly set Italy on a path towards an eventual exit from the euro-zone, an outcome not remotely priced in to financial markets. … Crunch time for …
2nd December 2016
The stagnation of Swiss GDP in Q3 demonstrates the negative impact that deflation and the strong franc have had on the economy. With a plethora of political risks inthe euro-zone set to keep the franc strong, exporters are unlikely to get a respite soon. …
The election of Donald Trump in the US drove large moves in Nordic and Swiss financial markets last month, with currencies generally depreciating against the US dollar while long-term bond yields increased. … External market drivers Trump domestic …
1st December 2016
Amid heightened political and economic uncertainty, President Mario Draghi seems set to announce another six-month extension to the ECB’s Asset Purchase Programme this month. We expect purchases to continue at the current pace of €80bn per month. The Bank …
October’s euro-zone unemployment data show that the labour market recovery has regained some pace. But the rate of unemployment is still high and recent developments are consistent with pretty slow wage growth. … Euro-zone Unemployment (Oct.) & Italian …
November’s PMIs suggest that Swiss and Swedish manufacturers are performing well, while their Norwegian and Danish counterparts are still lagging behind. … Manufacturing PMIs …
Don’t draw too much comfort from the markets’ muted response to political risks in the euro-zone. It may not tell us much about the scale of the threats facing the currency union and it may not last. … Are markets under-estimating political …
30th November 2016
November’s small pick-up in euro-zone headline inflation is unlikely to deter the ECB from announcing further policy stimulus next week. Indeed, underlying price pressures remain subdued and inflation expectations are low. We expect the Bank to announce a …
November’s German inflation data suggest that euro-zone inflation was unchanged at a low level. And while energy effects should cause headline inflation to rise sharply in the months ahead, the German figures confirm that underlying price pressures are …
29th November 2016
November’s rise in the European Commission’s measure of economic sentiment supports the message from the PMI that euro-zone growth accelerated towards the end of the year. But with inflationary pressures weak, we still expect the ECB toannounce an …
Sweden’s decent economic expansion in Q3 masks a sharp slowdown in domestic demand growth. But with survey indicators pointing to a renewed acceleration in GDP growth in Q4, that slowdown looks set to be temporary. … Swedish GDP (Q3, 1st …
October’s euro-zone money and credit data remain consistent with steady economic growth. But a renewed pick-up in money and lending growth will be needed before the ECB can feel comfortable about hitting its inflation target. … Euro-zone Monetary …
28th November 2016
According to both market measures and survey measures, inflation expectations have been rising. Yet both short and longer-term inflation expectations remain undesirably low. And while the recent depreciation of the euro will help to boost inflation, other …
25th November 2016
November’s German Ifo Business Climate Indicator (BCI) adds to the evidence that the economy has performed fairly well so far in Q4. However, we expect growth to slow next year, putting pressure on the ECB to loosen policy further. … German Ifo Survey …
24th November 2016
The Economic Tendency Indicator now points to annual Swedish GDP growth of over 4%, while consumers’ inflation expectations have also jumped. Both factors suggest that any further loosening by the Riksbank will have to be reversed before long. … Swedish …
Taken in isolation, the euro’s decline against the dollar is a welcome development for the euro-zone economy. But in trade-weighted terms, the currency has still strengthened this year. And given that its slide against the dollar has partly reflected …
23rd November 2016
November’s rise in the euro-zone composite PMI suggests that GDP growth should edge up in Q4, implying that political uncertainty has yet to take a toll on the economy. … Euro-zone Flash PMIs …
September’s Norwegian Labour Force Survey (LFS) provided some hints that the recent rise in unemployment might be coming to an end. Meanwhile, other perhaps more reliable measures of unemployment have painted a more positive picture of the labour market. …
Swedish inflation is set to rise sharply over the next year. As such, the Riksbank’s intention to loosen monetary policy further seems like a mistake and any additional interest rate cuts will have to be reversed before long. Ultimately, we expect the …
22nd November 2016
The final opinion polls ahead of Italy’s forthcoming referendum suggest that the public will reject the proposed constitutional reforms. The low level of bond yields suggests that investors are not very concerned about the vote. However, a “no” vote could …
21st November 2016
Recent events seem to have further boosted the chances of the National Front’s Marine Le Pen in next spring’s presidential election. Of course, she has been quick to claim that Donald Trump’s victory in the US underlines the credibility of her bid to …
18th November 2016
October’s consumer prices data highlight the contrasting inflation outlooks in Sweden, Switzerland and Norway. In Sweden, consumer price inflation picked up to its strongest rate in four-and-a-half years. And the krona’s depreciation, as well as the …
After narrowly avoiding EU fines for its excessive fiscal deficit, the Portuguese Government has a lot of work to do to get its finances in order. But strong political resistance to austerity and continued slow economic growth mean that the deficit is …
17th November 2016
The Swiss National Bank’s (SNB’s) pledge to intervene in foreign exchange markets appears to havealleviated upward pressure on the franc in the wake of the US election. But experience has shown itspolicy limitations and we suspect that the franc will …
16th November 2016
The Central Bank of Iceland’s decision to keep interest rates unchanged rests on overly cautious assumptions for the króna and on fears about fiscal policy and capital controls that will probably not be realised. As such, interest rates may yet be cut …
