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.
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 Update

New Covid restrictions another headwind

Several euro-zone governments have tightened coronavirus rules lately and more measures are on the cards, including in Germany. On the whole, these are set to be less severe than they were earlier this year and have less economic impact. But “lockdowns” in parts of Austria suggest there are big downside risks.

18 November 2021

European Data Response

German Inflation (October)

The breakdown of October’s inflation data confirms that most of the increase, from 4.1% in September to 4.6% on the HICP measure, was due to higher energy prices. We suspect that inflation will edge up a bit further before year-end but it should then come down next year as energy inflation declines.

10 November 2021

European Chart Book

Recovery slowed by supply chain problems

Economic growth has slowed sharply as output approaches its pre-pandemic level. We think that GDP will probably increase by only around 0.5% q/q in the final quarter, down from 2.2% in Q3. Manufacturing firms in Germany are struggling more than most and a large majority of them are reporting shortages of materials. At the same time, price pressures have continued to increase, with both the input price and output price components of the euro-zone Composite PMI reaching record highs in October. The euro-zone inflation rate reached 4.1% in October and is likely to edge up a bit further before year-end. However, it should then fall over the course of 2022 as energy inflation declines. The ECB is likely to leave its key policy rate unchanged at -0.5% throughout next year, and probably well beyond that, as it will continue to judge that the increase in inflation will prove transitory.

8 November 2021
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