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Euro-zone Flash PMIs (June)

June’s euro-zone PMI surveys showed a further slowdown in the services sector, while activity in the manufacturing sector now seems to be falling outright. With the price indices remaining extremely strong, the euro-zone appears to have entered a period of stagflation.
Jack Allen-Reynolds Senior Europe Economist
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European Data Response

German ZEW Survey (August)

The ZEW survey fell again in August and is at a level consistent with the economy contracting. We now think a recession is unavoidable in the second half of this year as the impact of high energy prices on both households and industry takes effect. Europe Drop-In (18th Aug.): Winter is coming to the European economy – but how harsh will it get? Join this special briefing on the economic impact of Russia’s gas supply threat. Register now.  

16 August 2022

European Economics Weekly

Energy crisis hotting up

The biggest problem in Europe’s energy markets is the reduction in Russia’s gas exports. But extreme weather conditions are compounding the problem by making life difficult for nuclear, hydro and coal-fired power plants. Next week, we expect to learn that employment increased slightly in the second quarter. Drop-In: Europe under siege – The economic impact of Russia’s gas threat Thursday, 18th August 10:00 ET/15:00 BST. Register now.

12 August 2022

European Economics Focus

Why we expect a euro-zone recession

We think the euro-zone will soon fall into recession as high inflation, tighter monetary policy and weak global growth take their toll. While the economy should recover next year, the rebound will be held back by a lack of policy support. What’s more, we think the biggest risks to our forecasts are to the downside, notably from Russia turning off the gas taps completely or the ECB failing to avert a sovereign debt crisis.

11 August 2022

More from Jack Allen-Reynolds

European Economics Weekly

ECB has done the easy bit, harder work is to come

This week, the ECB arrested the sell-off in peripheral bond markets without announcing very much at all, but there’s only so long that markets will be soothed by encouraging words about a possible anti-fragmentation tool. We think there is a significant risk that it will disappoint at the next meeting on 21st July. Meanwhile, the polls suggest that President Macron’s group is far from guaranteed to win a majority in parliament following the second round of voting this weekend. But in that event, support from centre-right parties should avoid a lame-duck presidency. Markets Drop-In (22nd June, 10:00 ET/15:00 BST): Join our Markets team for this special briefing on the outlook for equities, bonds and FX and a discussion about revisions to our forecasts. Register now

17 June 2022

European Economics Update

Pressure is on for ECB spread-fighting tool in July

The ECB’s press release following its unscheduled meeting fell short of announcing a fleshed out spread-fighting tool that could provide a permanent solution to the problem. Flexible PEPP reinvestments might buy policymakers a little time, but the new “anti-fragmentation instrument” that the Bank is working on will need to go a whole lot further. And there is no guarantee that they reach a consensus on such a tool at the next policy meeting in July, so we could see spreads widen further before a new tool is in place.

15 June 2022

European Economics Update

Spreads will keep widening before ECB takes action

We suspect that the spread between 10-year Italian and German government bonds would need to widen by another 100bp or so, to around 3.5%, to force the ECB to make a stronger formal statement of support for peripheral bonds. And even then, any initial announcement may well be underwhelming.

14 June 2022
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