German Industrial Production (August)

The whopping 4.7% m/m fall in German manufacturing production in August left industrial output 9.0% below its February 2020 level. With conditions having worsened since then, Germany’s manufacturing problems threaten to keep overall economic activity well below its pre-pandemic level until next year.
Andrew Kenningham Chief Europe Economist
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European Economics Weekly

ECB’s line on inflation contrasts with the Fed’s

In contrast to those at the US Fed, ECB policymakers are not ready to retire their argument that the current bout of high inflation is temporary. This reflects the significant difference in inflationary pressures between the two economies. Next week, we will get the detailed breakdown of November’s German inflation data, which will shed more light on the stronger-than-expected outturn. Meanwhile, with less than two weeks to go until December’s ECB meeting, the Governing Council appears to have reached a consensus on some aspects of its asset purchase programmes. But comments from Christine Lagarde today suggest that it will avoid making any long-term commitments.

3 December 2021

European Data Response

Euro-zone Retail Sales (Oct) & Final PMIs (Nov.)

Euro-zone retail sales have levelled off since June, but rising Covid cases and the return of restrictions are likely to weigh on sales and other components of consumption in the coming months.

3 December 2021

European Data Response

EZ Unemployment (Oct.)

While labour market conditions continued to improve in October, the recent deterioration of the Covid situation and increased uncertainty due to the Omicron variant are likely to mean the recovery takes a breather over the next couple of months, just as it did when restrictions were in place at the start of 2021.

2 December 2021

More from Andrew Kenningham

European Economics Weekly

“Transitory” inflation won’t spook the ECB

We have revised up our inflation forecasts this week and expect the surge in gas prices to keep inflation above the ECB’s target for longer than previously anticipated. Nonetheless, inflation looks sure to drop back early next year, and the ECB will not be following other major central banks in preparing to raise interest rates anytime soon. Meanwhile, we expect German industrial production and euro-zone retail sales data for August (due next week) to be underwhelming. But other parts of the economy should be holding up better.

1 October 2021

European Economics Update

ECB could claim inflation is “transient” for years

The ECB is likely to argue that the increase in inflation to above its 2% target is “transient” even if it continues for much longer than currently expected. The key question is not how long inflation has been above target but whether it is expected to come back down within policymakers’ forecast horizons.

30 September 2021

European Economics Update

No major policy shift likely following German election

With the CDU/CSU and SDP having won very similar shares of the vote, the composition of Germany’s next government still hangs in the balance. An SDP-led coalition would probably pursue a slightly less restrictive fiscal policy, but any change of direction would be small.

27 September 2021
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