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It’s always darkest before the dawn The prospect of a vaccine offers hope of faster growth next year than we have factored into our current forecasts. That said, there is less scope for a “vaccine bounce” in Switzerland and the Nordic economies in 2021 …
13th November 2020
The announcement on Monday of Pfizer & BioNTech’s successful trial of their COVID-19 vaccine was unambiguously good news that sent European stock markets earlier this week to their highest levels since early March. The widespread distribution of a highly …
Third quarter rebound will be partly reversed in Q4 The second estimate that euro-zone GDP rose by 12.6% q/q in Q3 was little different to the “preliminary flash” estimate published a fortnight ago and means that GDP was 4.4% below its Q4 2019 level. …
The vaccine offers hope of faster growth next year than we have factored into our current forecasts. However, the recent surge in virus cases in Switzerland (see Chart 1.), the rising strain on the healthcare sector in Sweden, and steps taken to contain …
12th November 2020
Industrial production should increase in Q4 despite new lockdowns September’s decline in euro-zone industrial output was largely due to the reversal of temporary effects in Italy, rather than a result of the second wave of COVID-19. We expect industrial …
Weak core inflation set to persist The October inflation data from Sweden do not move the needle for policymakers. However, the persistent weakness of underlying price pressures is likely to remain a headache for the Riksbank over the coming years. CPIF …
In her opening remarks to today’s ECB Forum on Central Banking, President Christine Lagarde gave a clear message that encouraging news about a vaccine would not stop the Bank from loosening policy in December. An expansion of the PEPP, and additional …
11th November 2020
The news that mutated versions of SARS-CoV-2 have been transmitted from minks to humans in Denmark has raised fears that the goalposts for a vaccine may have already shifted. This Update answers six key questions about the new strain of the virus and its …
While an effective vaccine would greatly improve the outlook for next year, the latest data show that the virus is still spreading rapidly. Unless this is reversed soon, the one-month lockdowns in place in many euro-zone countries may be extended, keeping …
10th November 2020
Norwegian inflation set to fall back next year While Norwegian inflation edged further above target in October, it is set to fall back sharply in H1 2021 and so the Norges Bank will be in no rush to raise interest rates. The small increase in the …
If an effective vaccine is rolled out in the euro-zone in the coming months, it would lead to stronger growth next year but slower growth in 2022. With light at the end of the tunnel, policy support may be just as generous in the short term and be more …
9th November 2020
Italy’s new tiered COVID-19 restrictions are likely to cause GDP to fall by about 2.5% q/q in Q4, and there is a risk that government is forced into a more severe national lockdown. That said, the news today on a potential vaccine is an upside risk to our …
A survey of firms from France’s central bank and high frequency mobility for last week suggest that the new national lockdown will have a smaller impact on France’s GDP than the first, perhaps of “only” 8%-points. This is broadly in line with our own …
Recoveries are on borrowed time In case you missed it, we cut our near-term GDP forecasts this week following the imposition of new national lockdowns in parts of Europe. (See here .) The virus was spreading rapidly in Switzerland when we published our …
6th November 2020
Downside risks become central forecast This week, the downside risks to our forecasts continued to crystalise. First, the economic data added to the evidence that activity was slowing even before the new lockdowns in Germany and France were implemented. …
Industry should be resilient during second lockdown Germany’s manufacturing sector should be able to continue its recovery in the fourth quarter, even as much of the hospitality sector is closed down again. The 1.6% m/m increase in industrial production …
Euro-zone economic activity looks set to slow sharply again in November and to remain weak for a while beyond that. The number of patients in intensive care units is rising rapidly (see Chart 1.) and we suspect that the new restrictions will bring the …
5th November 2020
As expected, the Norges Bank did not set off any fireworks this morning, and the decision to leave its key interest rate on hold at zero was never in doubt. The economy is likely to prove comparatively resilient during the second wave, but we still expect …
Retail sales fall before new restrictions introduced September’s data show that euro-zone retail sales were coming off the boil even before many non-essential retailers were forced to shut up shop. Online spending will probably pick up again, but by …
Rebound set to shift into reverse in Q4 The 4.3% q/q increase in Swedish GDP in Q3 was below both our and the consensus forecast, but leaves the economy on track for a comparatively shallow drop in output this year – broadly in line with the record …
While Switzerland has not yet followed France and Germany in announcing a new national lockdown, we now expect GDP to contract in Q4, broadly in line with the euro-zone. Meanwhile, although the Nordics economies will remain comparatively resilient, we …
4th November 2020
The new lockdowns in Germany and France, as well as the stricter virus containment measures in other countries, are likely to cause low inflation in the region to become even more entrenched. The lockdowns being implemented across the euro-zone are …
A bleak winter ahead The final Composite PMIs suggest that economic activity in the euro-zone flat-lined in October. But with countries throughout the region entering new lockdowns or substantially tightening restrictions in November, the euro-zone …
We now expect euro-zone GDP to contract by 3% q/q in Q4 and to be unchanged in Q1 2021, based on the latest lockdown measures staying in place for three months. A return to the stricter measures of the first wave, which is a quite plausible, would result …
3rd November 2020
Absence of price pressures limits the SNB’s options The absence of price pressures in Switzerland will remain a headache for the SNB over the coming years. And with the ECB set to loosen policy again next month, Swiss policymakers’ focus will remain …
We think that the Swedish krona will appreciate a little further against the euro and the dollar in 2021, but doubt that it will remain one of the best-performing G10 currencies, as it has been this year. The Swedish krona has been the …
2nd November 2020
Ongoing industrial rebounds to provide limited cheer The positive set of manufacturing PMIs for October suggest that the industrial rebound gathered momentum at the beginning of Q4. However, this is of little comfort given the imposition of new lockdowns …
Smaller, but perhaps longer, hit to the economy This week has seen governments in France and Germany impose new national lockdowns in an effort to bring the virus under control. In both cases, all restaurants, bars, sports and entertainment venues will be …
30th October 2020
Time running out on Swiss recovery Data published on Friday showed a smaller-than-expected fall in the Swiss KOF Economic Barometer in October, from a downwardly-revised 110.1 in September to 106.6. This left it above its February level and suggests that …
Low inflation and lockdowns pile pressure on policymakers The post-lockdown rebound in euro-zone GDP was stronger than anticipated, which provides some hope that eventually things may get back to normal more rapidly than feared. But in the meantime, the …
Record growth is of no comfort The massive increase in GDP in Q3 is of no comfort to French policymakers or households, who are now contending with a second national lockdown. Indeed, we expect GDP to fall by 2.5% q/q or so in Q4. The 18.2% q/q increase …
The ECB left its policy settings unchanged at today’s meeting, but explicitly stated that it would “recalibrate” them in December. We think this will include an increase in the size and duration of the PEPP and lower TLTRO interest rates. More radical, …
29th October 2020
The Norges Bank will almost certainly leave its key interest rate on hold at zero next Thursday and will probably reiterate that it is in no rush to hike. However, given the backdrop of rising house prices, we think that policymakers will start to …
We think the one-month national “lockdowns” will result in GDP contracting by around 2.5% q/q in France in Q4 while in Germany GDP will be flat at best. There is obviously a big risk that the lockdowns stay in place for much longer than a month, are …
Recovery is over The fact that the EC’s euro-zone Economic Sentiment Indicator (ESI) was unchanged in October was a bit surprising given the surge in virus cases and associated restrictions in recent weeks. With governments ramping up curbs to slow the …
Outperforming at the start of Q4 The rise in Sweden’s Economic Tendency Indicator (ETI) in October came as a bit of a surprise given the recent surge in COVID-19 cases there and suggests that the economic recovery – which monthly GDP data suggest had …
28th October 2020
Tightening bank lending standards another headwind The ECB’s Bank Lending Survey shows that bank lending conditions tightened in Q3. And there is a growing risk that they tighten further in Q4, just as economic activity has begun to slow again. The …
27th October 2020
Recovery slowing and set to get worse The small decline in the Ifo Business Climate Index provides more evidence that Germany’s recovery is running out of steam. We expect GDP to increase slightly in the fourth quarter thanks to the ongoing, slightly …
26th October 2020
Risks to the outlook tilted to the downside This week has brought more gloomy news on COVID-19, with virus cases in the euro-zone continuing to rise at a rapid rate and, as we expected, governments responding by ramping up restrictions. In Ireland, for …
23rd October 2020
Nordics not immune, but comparatively resilient In case you missed it, we released our latest Nordic & Swiss Economics Outlook this week. Of course, virus developments are the key uncertainty. However, assuming that the Nordics continue to avoid the scale …
Services sector dragging the economy down The further decline in the euro-zone Composite PMI in October is consistent with our view that the second wave of COVID-19 infections, and the new raft of containment measures, will cause the economy to stagnate …
We think that Swiss policymakers would be prepared to match any small interest rate cut by the ECB, albeit reluctantly. However, if policymakers in the euro-zone opt to ease policy in other ways, as we think is more likely, this may help to reduce …
22nd October 2020
More restrictions to weigh on sentiment Given the surge in virus cases and new restrictions over the past few weeks, it was no surprise that euro-zone consumer confidence deteriorated in October. With governments ramping up their restrictions on “social …
PEPP “envelope” likely to be raised in December, perhaps to €2trillion. ECB may also cut the interest rate charged on TLTROs. A deposit rate cut unlikely unless the euro appreciates further. With the economy flagging again, policymakers at the ECB are …
We think that the second wave of COVID-19 infections and new containment measures will cause the euro-zone economy to stagnate over the next six months or so. In quarter-on-quarter terms, GDP would still increase slightly in Q4, but it would mean zero …
20th October 2020
Having outperformed in H1, the Nordic economies are set for some of the smallest falls in output in Europe this year. Of course, the virus is the key uncertainty for the outlook, but it is encouraging that Denmark’s second wave already looks to have …
Overview – The second wave of coronavirus has caused the recovery to stall and we forecast euro-zone GDP to stagnate for the next six months, with an outright recession a significant downside risk. We think Spain’s economy will probably contract in Q4, …
19th October 2020
Growth to slow sharply in Q4 COVID-19 infections continue to rise and the authorities have tightened their restrictions further. (See here .) In a few countries (e.g. Ireland and the UK), public health officials have recently advocated so-called “circuit …
16th October 2020
Switzerland in the grip of a second wave The share of virus tests returning positive results in Switzerland doubled in the first two weeks of October and mirrored similar rises seen in Italy and the UK over the same period. At about 7%, the positivity …
