Euro-zone Flash PMIs (July)

July’s euro-zone PMIs confirm that the economy is still rebounding rapidly and that price pressures are continuing to build. While the Delta variant poses a risk to our above-consensus GDP forecasts, it seems most likely that governments will avoid strict new lockdowns. And we think that the sharp increases in input and output prices will be temporary.
Jack Allen-Reynolds Senior Europe Economist
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European Economics Weekly

ECB rate hikes a distant prospect, Merkel era at an end

Even as other central banks hinted this week at a shift towards tighter monetary policy, we doubt that the ECB will follow suit. Meanwhile, the business surveys suggested that while supply-chain disruptions and rising input prices took the shine off the region’s recovery in September, GDP probably still grew very strongly in Q3. Next week brings the results of Germany’s federal election on Sunday and the start of probably lengthy coalition negotiations and the usual month-end raft of data.

24 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 Economics Update

Five questions and answers about Germany’s election

The federal election in Germany on Sunday will result in a new chancellor for the first time since 2005 and opinion polls suggest that the result will be extremely close with potentially months of coalition talks ahead. In this Update, we answer five key questions about the election.

23 September 2021

More from Jack Allen-Reynolds

Nordic & Swiss Economics Weekly

SNB not following ECB; Sweden bucks inflation trend

The SNB confirmed this week that it wouldn’t be following the ECB in raising its inflation target, but that doesn’t change the big picture that it looks set to leave interest rates on hold for a very long time. Meanwhile inflation in Sweden bucked the recent trend in the US and UK by falling below target in June, and we think the Riksbank will also leave rates on hold for longer than investors anticipate. If the Riksbank ends up tightening sooner than expected, it would be due to concerns about rising house prices rather than consumer prices.

16 July 2021

European Data Response

Euro-zone Industrial Production (May)

The euro-zone’s industrial sector took a step backwards in May as the global semiconductor shortage hit auto production. Supply disruptions look set to drag on for a while yet, constraining the sector’s recovery, but the business surveys point to strong underlying demand.

14 July 2021

European Economics Weekly

Investors’ ECB rate hike expectations look premature

There has been very little market reaction to the ECB raising its inflation target to 2%, probably because the change was broadly in line with expectations. But markets are discounting ECB rate hikes beginning in 2023, which we think is far too soon. Meanwhile, data published this week confirmed that consumers continue to build up large amounts of “excess” savings that could turbo-charge the economic recovery.

9 July 2021
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