Filtered by Subscriptions: Europe Economics Use setting Europe Economics
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
Following the surge in Covid-19 cases over the past week, we are cutting our forecast for euro-zone economic growth to 0.5% for the year, from 0.7% previously, due to a sharp drop in household spending in Q2. For now, we are assuming that the economy …
Broad-based improvement in February, but the story has moved on The increases in the manufacturing PMIs in February in Switzerland and the Nordics suggest that conditions in the industrial sector were improving before the surge in coronavirus cases in …
Spread of virus a potential game-changer The ten-fold increase in the number of confirmed coronavirus cases in Europe over the past week has increased the risk of a recession. So long as the virus was confined to China, the main threat to Europe was from …
28th February 2020
Covid-19 dominates proceedings in Switzerland The geographic proximity of Switzerland to Italy has understandably raised fears about the potential spread of the coronavirus. With the number of confirmed cases in Switzerland up to 15 at the time of …
Swedish economy will struggle to regain momentum The Swedish economy ended last year on the back foot, and a combination of the rising threat from the coronavirus, weak growth in the neighbouring euro-zone, and persistently below-target inflation lend …
The possibility of the Olympics and/or the European Football Championships being cancelled as a result of the coronavirus poses downside risks to headline Swiss GDP growth this year. Nonetheless, this will not trouble the SNB, whose focus will remain on …
27th February 2020
Little sign of coronavirus impact, but euro-zone still on course for weak Q1 The rise in the euro-zone Economic Sentiment Indicator (ESI) for February adds to the evidence that the coronavirus has had little impact on the economy so far. But the survey …
The outsized importance of cross-border commuters to the Swiss economy means that it is particularly vulnerable to any disruption to flows of people within Europe as a result of the coronavirus. Partly because of this, the chances of a rate cut by the SNB …
26th February 2020
Portugal’s economy has been a relative bright spot in the euro-zone in recent years and we think it will fare better than average again this year. Nonetheless, quarterly GDP growth looks set to slow from Q4’s stellar pace as investment eases and slower …
25th February 2020
Falling business investment will continue to weigh on economy After flat-lining in Q4 last year, we suspect that the German economy will not grow in the first half of this year either, even if the effects of the coronavirus are contained. With no change …
So far, the knock-on effects from the downturn in China on the euro-zone economy have been negligible. However, the jump in confirmed cases in Italy this weekend adds another channel through which the virus could hurt the economy. It also makes another …
24th February 2020
Small rise leaves Ifo at low level The small increase in the Ifo Business Climate Index in February will be a relief for those braced for a big hit from the coronavirus. However, the index is still below its level in December and remains consistent with …
Contrary to what we and the consensus had expected, the euro-zone Composite PMI edged up in February, with both the services and the manufacturing output components increasing. The rise in the PMI echoed the message from other surveys this week, which …
21st February 2020
Policymakers agree to disagree Having drawn criticism for its optimistic projections for interest rates in the past, the Riksbank is keen to show that it means business with its forecast to leave the repo rate unchanged over the coming years. However, …
Limited impact from coronavirus but growth still anaemic The unexpected rise in the euro-zone Composite PMI in February will have assuaged fears that the region’s economy has been adversely affected by supply-chain disruption as a result of the …
The account of the ECB’s January meeting suggests that the ECB was becoming a little more positive on the economic outlook. But weak data and the spread of the coronavirus since then will have surely added to the downside risks. We are sticking to our …
20th February 2020
Industry ends 2019 on the back foot While pharmaceuticals output supported Swiss manufacturing again in Q4, conditions in the rest of the sector weakened at the end of last year. With the German industrial recession likely to drag on, and the coronavirus …
Weaker-than expected inflation to test the Riksbank’s resolve The sharper-than-expected fall in Swedish inflation in January may test the Riksbank’s resolve to keep policy unchanged. With subdued GDP growth likely to weigh on underlying inflation this …
19th February 2020
While we suspect that the SNB has intervened to slow the rise of the franc in recent weeks, it has not prevented it from reaching a multi-year high against the euro. At the margin, an increased tolerance for a stronger currency argues against the Bank …
18th February 2020
After Italy’s economy shrank at the end of last year, it looks set to continue to struggle in 2020. In fact, there is a clear risk that it falls back into recession for the fourth time since 2008. The 0.3% q/q contraction in Italy’s economy in the final …
The recent election result in Ireland has made the prospect of reunification slightly less remote. In this Update , we answer four political questions and four economic questions about what it might mean. Although Sinn Féin won the highest share of the …
17th February 2020
Support for the current policy stance Speeches this week by members of the ECB Executive Board, Philip Lane and Isabel Schnabel, were clearly part of a concerted effort to rebuff criticism of the ECB’s ultra-loose monetary policy. Ms Schnabel’s talk was …
14th February 2020
Riksbank will need to ease policy soon It was no surprise that the Riksbank left its repo rate on hold at zero percent this week or that it continued to forecast rates staying there until 2022. However, we think that underlying growth and inflation will …
Germany to continue flirting with recession Given that the German economy stagnated in Q4 last year it will have come as a relief that GDP growth for the euro-zone as a whole was not revised down from +0.1% q/q. We think that Germany will continue to …
Spain’s new government has downgraded its forecasts for economic growth and eased up on the planned pace of budget deficit reduction. But we think that GDP growth this year will be even slower than it expects, due to weakening domestic demand and the …
13th February 2020
The initial financial market reaction in Switzerland and the Nordics to the coronavirus followed the familiar pattern during times of uncertainty: the Swiss franc rose and Swiss bond yields tumbled on the back of safe-haven demand, while the Swedish krona …
Few signs of a rebound after a dreadful Q4 The sharp fall in euro-zone industrial production in December came as no surprise after the very weak national data already published. The timelier surveys suggest that industry will continue to struggle, even if …
12th February 2020
This morning’s decision by the Riksbank to leave its repo rate on hold at zero percent was never in doubt. While policymakers appear happy to stay in wait-and-see mode for the time being, we suspect that they will come under pressure to loosen policy …
Ireland’s general election result does not change our view on the near-term outlook for the economy, which should maintain a decent pace this year and next. But it does raise questions about the longer-term risks to public finances, particularly if Irish …
10th February 2020
Pick-up in Norwegian inflation points to tightening bias at the Norges Bank The unexpected jump in underlying inflation in Norway lends support to our view that the Norges Bank is more likely to hike than to cut interest rates next. Meanwhile, the …
Activity in Norway set to regain pace this year The release of Q4 GDP data from Norway this morning confirmed that the mainland economy lost momentum at the end of last year. The slowdown in quarterly growth, from a downwardly-revised 0.6% in Q3 to 0.2% …
7th February 2020
More disappointing data Data published this week shed a little more light on the euro-zone slowdown in Q4, and the strength of any possible rebound at the start of this year. We won’t get the output or expenditure breakdowns of fourth-quarter GDP until 14 …
Industrial recession has not yet ended The 3.5% slump in industrial production in December flies in the face of the widely-held view that Germany’s manufacturing sector was on the mend at the end of last year. And even before the coronavirus appeared, …
Provided that the coronavirus is brought under control reasonably soon, the consequences for the euro-zone economy should be quite small. Nonetheless, with growth likely to be very sluggish in any case, it could be enough to cause the euro-zone economy to …
6th February 2020
Hopes for a substantial boost to economic growth in the euro-zone from fiscal policy in the next year or two are likely to be disappointed. It seems likely that any fiscal stimulus will be very small. And even if governments agreed on a larger tax and …
The step-up in interventions by Denmark’s Nationalbank (DNB) to strengthen the krone in January puts to bed the idea that the Bank is comfortable with allowing the krone to trade in a more symmetric band. But while the chances of a unilateral rate hike by …
The euro-zone economy ended 2019 on a weak note and the outlook for early 2020 remains gloomy. Euro-zone GDP slowed from 0.3% q/q in Q3 to 0.1% q/q in Q4, with contractions in French and Italian GDP. Although the euro-zone surveys for January point to a …
5th February 2020
Growth to stay weak even if no impact from coronavirus December’s euro-zone retail sales data suggest that household consumption growth slowed sharply in Q4. Meanwhile, the upward revision to January’s euro-zone Composite PMI implies that the coronavirus …
This morning’s decision by the Central Bank of Iceland (CBI) to resume its easing cycle came as no surprise to us following the recent fall in inflation. Given the potential for the coronavirus to exacerbate the deep downturn in the tourism sector, the …
A decade after the start of its first bailout programme, the Greek government has still not reined in the cost of its pension system. And the government’s recent decision to raise pensions suggests that pension costs will increase, rather than fall, in …
3rd February 2020
Mixed messages from the PMIs The mixed set of manufacturing PMIs from January adds to signs that conditions in the Swedish industrial sector have turned the corner but indicate that activity in Switzerland remains stuck in a rut. The jump in the headline …
Weak growth in Q4 not just a one-off The Q4 GDP data published this week were weaker than we or the consensus had anticipated. And the region’s poor performance was not just down to Germany and Italy, with France’s economy contracting. It’s also not clear …
31st January 2020
Manufacturing appears to have passed the worst January’s surge in the Swiss KOF was the most eye-catching data release of the week. While we suspect that the scale of the improvement from December may have been a bit of a rogue reading, the fact that the …
Weak Q4 provides low base for 2020 The Q4 GDP and January consumer prices data published today support our view that euro-zone growth and inflation will be weaker this year than most expect. This underlies our forecast that the ECB will eventually be …
Inflation likely to remain subdued The increase in Germany’s headline HICP inflation rate to 1.6% in January was a little smaller than most had expected and was driven by higher energy inflation. Underlying inflation seems to have fallen in January, and …
30th January 2020
Euro-zone ESI points to still-weak growth at the start of 2020 Despite increasing in January, the euro-zone Economic Sentiment Indicator suggests that the economy is unlikely to have gained much momentum in Q1. Meanwhile, the unemployment rate, which fell …
A positive start to the year The surge in the Swiss KOF Economic Barometer in January may yet prove to be a bit of a rogue reading. Nonetheless, it adds to signs from elsewhere in Europe that conditions for industrial firms have stabilised at the start of …
As long as the number of coronavirus cases remains low in Europe and contained elsewhere in the world, the impact of the virus on euro-zone GDP is likely to be small and temporary. It would need to be much worse than the SARS outbreak in 2003 for economic …
29th January 2020
The Swedish economy appears to have stabilised in recent months, but we doubt that this will mark the start of a sustained pick-up in growth. While the Riksbank will stay in wait-and-see mode for the time being, we think it is only a matter of time before …
