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The European economy appears to have weathered the initial impact of the UK’s vote to leave the European Union reasonably well. However, the vote could yet have important indirect effects by fuelling euroscepticism elsewhere in the region and hence …
11th October 2016
We think that the rise in government bond yields and slight appreciation of the euro after last week’sreports that the ECB is considering tapering its asset purchases were overdone. After all, in order totaper its purchases, it would first need to extend …
7th October 2016
Sharp rises in industrial production in Germany, France and Spain suggest that industry might contribute positively to euro-zone GDP growth in Q3. … German, French & Spanish Industrial Production …
There have been further signs of fiscal slippage in the peripheral economies this month. Germany is also planning a tax cut, but this does not mark a dramatic change in its fiscal stance. It intends to keep running balanced budgets and will maintain the …
The uncertainty surrounding capital account liberalisation suggests that the Central Bank of Iceland will keep interest rates unchanged for a while longer. But with inflationary pressures set to build, we think that the Bank will raise rates next year. … …
5th October 2016
The uncertainty surrounding capital account liberalisation suggests that the Central Bank of Icelandwill keep interest rates unchanged for a while longer. But with inflationary pressures set to build, wethink that the Bank will raise rates next year. … …
August’s data suggest that euro-zone retail sales growth picked up in Q3, whileSeptember’s Composite PMI implies that growth in the wider economy slowedonly slightly. But headline inflation will soon accelerate, weighing on growth. … Euro-zone Retail …
Recent activity indicators have provided mixed messages about euro-zone growth. The Composite PMI fell to an 18-month low in September, whereas the EC’s Economic Sentiment Indicator (ESI) reached a nine-month high. (See Chart.) There are some signs that …
4th October 2016
The euro-zone’s two main activity surveys have given conflicting evidence about the state of the economy at the end of the third quarter, with the Composite PMI apparently pointing to slowing GDP growth but the EC’s Economic Sentiment Indicator (ESI) …
30th September 2016
Headline inflation in the euro-zone has started to pick up as the effects of previous falls in energy prices fade. But with a large amount of slack in the labour market, underlying price pressures will remain subdued, meaning that pressure on the ECB to …
The consequences of a third election in Spain would be worse than those of earlier votes. And with Catalonia renewing its push for independence, politics represent a clear risk to the economic outlook. … Spanish economy could suffer from political …
29th September 2016
September’s rise in German inflation to +0.5% suggests that euro-zone inflation rose to a 23-month high in the same month. But in Germany at least, the rise reflected energy effects while underlying price pressures remained subdued. … German Flash CPI …
While the EC Business and Consumer Survey revealed a rise in sentiment in September, it still suggests that growth remains moderate and inflation expectations are weak. … EC Business & Consumer Survey …
Today’s relatively positive news about Deutsche Bank adds to the evidence that it is not the next Lehman Brothers for the global financial system and that its troubles are unlikely to trigger a German recession. But recent developments have highlighted …
28th September 2016
August’s money and credit data suggest that the euro-zone economy has continued to grow at a decent pace in Q3. Nevertheless, the data suggest that inflation will remain well below the ECB’s target. … Euro-zone Monetary Indicators Monitor …
27th September 2016
The Government confirmed today that the constitutional reform referendum will take place on 4thDecember. We think that a rejection of the reforms is a major risk to the economic outlook. … Italy’s constitutional referendum poses economic …
26th September 2016
September’s rebound in the German Ifo Business Climate Indicator (BCI) offered hope that the economy remains in good health after the more negative signs from other surveys and hard data. … German Ifo Survey …
The Bank of Japan’s announcement that it will replace its target for the monetary base with a 0% target for 10-year government bond yields has prompted speculation about whether the ECB might follow suit. But we think that this is unlikely. … ECB unlikely …
23rd September 2016
September’s fall in the euro-zone Composite PMI to a 20-month low implies that the already sluggish pace of expansion in the currency union lost further momentum at the end of the quarter. … Euro-zone Flash PMIs …
The Norges Bank left its key policy rate on hold today and signalled that no change was likely in the remainder of the year. But we think that more monetary loosening will be needed in 2017. … Norges Bank to cut interest rates to zero next …
22nd September 2016
The minutes of the Riksbank’s latest meeting revealed that at least half of the Executive Board thought that there is little need for the Bank to extend asset purchases beyond December. Indeed, increasing inflationary pressure could see the Bank raising …
21st September 2016
Rising inflation may be less of a drag on the growth of euro-zone household spending than we had previously feared. But spending growth is still likely to slow, weakening a key support for overall economic growth in the region. … Low inflation won’t …
19th September 2016
Despite the improvement in financial market conditions, continued recovery of the Swiss economy and softening of the franc, the Swiss National Bank (SNB) re-emphasised today that it intends to maintain its very supportive policy stance for the foreseeable …
Even when the euro-zone economy seems to have performed fairly well, it has still been unable to generate any inflationary pressure. Indeed, despite the reasonably strong rate of employment growth in Q2, wage growth slowed to its weakest rate in almost …
16th September 2016
This Sunday’s election in Berlin is set to bring more evidence of the growing influence of the far-right AfD. While the party does not have enough support to govern Germany, its rise will encourage a tougher stance on immigration and reduce the chance of …
July’s euro-zone goods trade data suggest that net exports were a drag on GDP growth at the start of Q3. Looking ahead, we expect the trade surplus to narrow further this year as global demand growth remains fairly soft. … Euro-zone Trade (Jul.) & Final …
15th September 2016
The Swiss National Bank’s decision to leave policy on hold came as no surprise as easing Brexit fearsand the ECB’s inaction have led upward pressure on the franc to abate. But the SNB made clear that itwill renew its currency interventions if needed. With …
The Swiss National Bank’s decision to leave policy on hold came as no surprise as easing Brexit fears and the ECB’s inaction have led upward pressure on the franc to abate. But the SNB made clear that itwill renew its currency interventions if needed. …
The “Juncker plan” has done little to boost investment. Accordingly, an extension of the scheme, proposed by President Juncker this morning, is unlikely to raise the euro-zone’s growth prospects. … Extension of “Juncker plan” would not be a …
14th September 2016
Looking through the massive distortions in the Irish GDP data, today’s Q2 release suggests that the impressive recovery might have slowed. And survey evidence suggests that growth has slowed further since the UK’s vote to leave the EU. … Ireland GDP …
The weakness of euro-zone industry in July suggests that industrial production will struggle to expand at all over Q3 and doesn’t bode well for GDP growth this quarter. … Euro-zone Industrial Production …
As euro-zone inflation picks up over the coming months, short-term inflation expectations should rise.But long-term expectations are less responsive to movements in current inflation and are likely toremain very low. We think that the ECB will eventually …
13th September 2016
The fact that ZEW investor sentiment was unchanged in September despite the easing of fears about the effects of Brexit adds to signs that underlying growth in the German economy is set to slow. … German ZEW Survey (Sep.) & Euro-zone Employment …
Despite weaker-than-expected Swedish inflation in August, price pressures are set to increase in the coming months. And as higher inflation feeds through to inflation expectations, the Riksbank will need to start to thinking about tightening policy. … …
Since the UK’s Brexit vote, eurosceptic parties elsewhere have increased their calls for referendumson EU or euro membership. While the potential for eurosceptics to gain power and hold votesvaries widely across Europe, growing unrest over the issue looks …
12th September 2016
The ECB’s decision last week not to announce an extension to its asset purchase programme led us to revise our year-end forecast for the euro exchange rate. But we still think that looser monetary policy will eventually weaken the single currency. … …
9th September 2016
President Draghi suggested today that a dramatic increase in ECB policy support is not imminent. But we still expect the Bank to extend its QE programme by six months to next September and it may yet have to increase the pace of its assets purchases next …
8th September 2016
The first official euro-zone data release for July – retail sales – suggested that the consumer sector made a strong start to Q3. Indeed, the 1.1% rise in sales pushed the annual growth rate up to 2.7%, its strongest in five months. However, this is …
With the Riksbank on hold, rising inflation means that real interest rates in Sweden are set to dropto a 40-year low. Such an accommodative stance seems unnecessary given the sound economic outlook and we suspect that the Bank will raise interest rates …
7th September 2016
July’s drop in German industrial production may have partly reflected temporary factors, but it provides a very weak base for GDP in Q3. The industrial sector should resume its expansion in the coming months, but at a fairly slow pace. … German …
With the Riksbank on hold, rising inflation means that real interest rates in Sweden are set to drop to a 40-year low. Such an accommodative stance seems unnecessary given the sound economic outlook and we suspect that the Bank will raise interest rates …
Today’s final estimate of Q2 GDP confirmed that the slowdown in growth from the first quarter was largely due to household spending. Over the rest of the year, we think that consumer spending will remain subdued, while export growth will slow. … Euro-zone …
6th September 2016
Q2’s healthy rise in Swiss GDP suggests that the economy was coping well with the franc’s continued strength, but the increase was flattered by temporary factors. And while CPI inflation edged up in August, deflationary risks remain acute. … Swiss GDP …
As Mariano Rajoy would benefit most from another election, his opponents may yet let him form a government. But with the public finances deteriorating and the deadline for the 2017 budget to be submitted to the European Commission looming, the risk of …
5th September 2016
Euro-zone government finances at the start of the third quarter of 2016 were much more of a mixed bag than the reasonably impressive figures from the first half of the year. Worryingly, the data suggest that Portugal and Spain, having recently avoided …
Euro-zone retail sales started Q3 strongly but growth is set to slow in the coming months. Indeed, the downward revision to August’s euro-zone Composite PMI hints at the challenges facing the economy during the remainder of the year. … Euro-zone Retail …
