Euro-zone Retail Sales (Aug.)

August’s euro-zone retail sales data suggest that consumer spending on goods is flatlining. But overall consumption is still likely to have grown fairly strongly in Q3 as spending on services increased.
Michael Tran Assistant Economist
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European Economics Weekly

Rising Covid fears will keep policymakers dovish

It is too early to judge how serious the B.1.1.529 variant will turn out to be, but it certainly reinforces the case for central banks to be ultra-cautious when withdrawing their policy support. We now think that at its next meeting, the ECB will make clear that even if it intends to end net PEPP purchases in March, it stands ready to start them again if needed. That in turn should help to keep bond yields and spreads low. Meanwhile, we are braced for some “shock” inflation numbers next week, but they should mark the peak and inflation is likely to fall quite sharply next year.

26 November 2021

European Economics Update

PEPP not guaranteed to end in March

The account of October’s ECB meeting suggests that it is by no means guaranteed that net PEPP purchases will end in March. And even if they do, the Bank may well leave open the possibility of re-starting PEPP purchases later in 2022 if needed. Meanwhile, we agree with the ECB’s message that investors have got ahead of themselves by pricing in interest rates hikes for next year.

25 November 2021

European Data Response

German Ifo Survey (November)

The fall in the Ifo Business Climate Index (BCI) for November was in line with expectations and suggests that the German economy was struggling even before the recent tightening of Covid restrictions. Things will be much worse in December as coronavirus restrictions are tightened further.

24 November 2021

More from Michael Tran

European Data Response

EZ Unemployment (Aug.)

The fall in euro-zone unemployment in August brings the jobless rate back very close to its pre-pandemic level. But employment is still below pre-virus levels, highlighting that the labour market recovery still has a long way to go. Labour market slack will continue to weigh on wage growth.

30 September 2021

European Data Response

German Ifo Survey (September)

The third successive decline in the Ifo Business Climate Index in September provides further evidence that Germany’s recovery is losing steam, as supply chain difficulties persist and the surge in gas prices piles additional pressure on prices and production. That said, we still expect strong GDP growth in Q3, given the low base at the start of Q2.

24 September 2021

European Data Response

Euro-zone Retail Sales (July) & Final PMIs (Aug)

The recovery in euro-zone retail sales ended in July as sales fell sharply compared to June. However this does not affect our view that consumption will grow strongly in Q3, not least because we think the fall in retail sales partly reflects consumers shifting their spending from goods to services.

3 September 2021
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