Filtered by Subscriptions: Europe Economics Use setting Europe Economics
Swiss economic growth returns to trend rate Switzerland’s sporting event-adjusted GDP growth accelerated to 0.5% q/q in Q2, its fastest pace in over a year and slightly above our forecast of 0.4%. At the margin this may give the SNB some caution against …
15th August 2024
Since the Riksbank’s last meeting in June, Swedish inflation and activity data have been weaker than policymakers expected. We think this will encourage them to cut the key policy rate from 3.75% to 3.5% next week and to indicate at least a further 50bp …
14th August 2024
Euro-zone growth likely to remain weak Data released today confirmed that the euro-zone economy expanded by 0.3% q/q in Q2, but surveys published for July suggest that it may be slowing again. The second estimate of euro-zone GDP in Q2 was unchanged from …
The brief turmoil in global financial markets following the release of weaker-than-expected US payrolls data and a resurgence of concerns about a hard landing there has been the main event of the past week. We think three points are worth making about the …
9th August 2024
Inflation in Norway has continued to fall more quickly than policymakers expected. But with the krone coming under renewed pressure recently, we think they will maintain a hawkish tone next week. At the last meeting, in June, Norges Bank left its policy …
Recent safe haven flows into the franc may have prompted limited FX interventions by the SNB. But we think that the policy rate will remain its main policy tool, even for dampening the franc’s strength. Indeed, we now expect the SNB to cut its policy rate …
8th August 2024
Several organisations have estimated that a universal 10% tariff on US imports, as proposed by Donald Trump, would reduce euro-zone GDP by at least 1%. We think the hit would be much less than 0.5%. We commented previously on the impact that Donald …
We suspect that the boost to euro-zone economic growth from interest rate cuts over the next year or two will be quite small. The ECB is likely to lower its policy rates only gradually and leave them well above pre-Covid levels. So borrowing costs in the …
7th August 2024
German industrial output rebounded in June and may well expand a bit over the coming year or so. But any recovery will be weak and the sector will remain in structural decline. German industrial output rose more than expected in June. Data released today …
The euro-zone data do not scream “rate cut” – the economy is growing at a steady pace and domestic inflation has stabilised at a high level. But we suspect that most ECB policymakers will judge that a cut is justified next month, and recent concerns about …
6th August 2024
Retail sector to pick up over the coming months Retail sales fell in June but we think they will gradually rise over the remainder of the year on the back of strong real household income growth and falling interest rates. The 0.3% m/m decline in retail …
Tourism in the euro-zone is likely to continue growing at a decent pace over the coming quarters due to rising real wages and increased capacity. This will be a particular boon to the southern economies, which in general we think will continue to grow …
5th August 2024
This week saw the publication of a raft of activity and inflation data for the euro-zone. There are two key takeaways in our view. First, the economic recovery remains fragile. Admittedly, GDP expanded by a solid 0.3% q/q in Q2, the same pace as in Q1. …
2nd August 2024
This publication has been updated with additional analysis. Headline inflation steady and to remain around current level for the rest of the year. Switzerland’s inflation rate was unchanged in July at 1.3%, keeping it below the SNB’s Q3 forecast of 1.5%. …
This page has been updated with additional analysis since first publication. Services inflation easing, but still too high for comfort The small fall in services inflation in July is probably just enough for a September rate cut to remain the base case. …
31st July 2024
In detailed analysis last year, we concluded that equilibrium nominal interest rates would settle at between 3% and 4% in advanced economies in the next ten years. We maintain that opinion and in fact some of the forces boosting equilibrium rates seem to …
30th July 2024
This page has been updated with additional analysis since first publication. Services inflation still sticky The increase in German HICP inflation from 2.5% in June to 2.6% in July left it a little higher than expected and means that the aggregate …
This page has been updated with additional analysis since first publication. Recovery continued in Q2 but surveys weakening at start of Q3 The euro-zone’s recovery continued at a moderate pace in Q2 and it should get a small boost from the Paris Olympics …
Recovery slowing National-level data released so far suggests that euro-zone GDP growth slowed to 0.2% q/q in Q2 and the weakening of the surveys in July suggests GDP growth may have eased further this quarter. GDP figures for the euro-zone’s largest …
Tight monetary policy and low consumer confidence have pushed the euro-zone’s household saving rate up to unusually high levels. While interest rates are set to keep falling and confidence might improve, we think that a big decline in the saving rate is …
29th July 2024
Italy has become quicker at spending NextGenerationEU (NGEU) funds over the past year but it is still likely to spend only around two-thirds of the total funds allocated to it unless the programme is extended. Italy is set to receive €194bn (around 10% of …
Economy contracted sharply in Q2, but will return to growth over coming quarters Preliminary data released this morning show that the Swedish economy contracted by 0.8% q/q in Q2, more than offsetting the 0.7% increase in Q1. The data were significantly …
Surveys suggest recovery is petering out Data released this week suggest that the euro-zone recovery is fizzling out and leave us comfortable with our below consensus forecasts. Data released on Wednesday showed that the Composite PMI fell in July for the …
26th July 2024
Net immigration to euro-zone countries will probably be higher than the UN assumes in its latest population forecasts. But we still think the working age population will decline over the coming decade and that is a key reason to expect GDP growth to be …
25th July 2024
This page has been updated with additional analysis since first publication. German recovery petering out The large fall in the German Ifo BCI in July, which follows a similar drop in the Composite PMI published yesterday, adds to the impression that the …
Business surveys released this morning add to evidence that the Olympics will lift activity in France slightly in Q3. However, activity is likely to drop back again in Q4 and we still think annual GDP growth will only be around 1%. Meanwhile, we don’t …
24th July 2024
This page has been updated with additional analysis since first publication. Recovery stalling The flash PMIs for July suggest that the euro-zone’s recovery may be fizzling out at the start of Q3, while output price pressures eased but remained high in …
Donald Trump has said that he could quickly end the war in Ukraine if he is re-elected as US President. This Focus answers key questions on what the shape of any agreement might look like, what might happen to sanctions on Russia, and the possible …
23rd July 2024
Fiscal policy has become almost as fraught in Germany as it is in France and Italy, but rather than from a desire to run very loose fiscal policy, Germany’s woes stem from its strict “debt brake”. Some loosening of the debt brake is likely in the coming …
The detailed breakdown of June inflation data, released this week, confirmed that the headline rate ticked down to 2.5% in June and that services inflation was unchanged at 4.1%. We, and ECB Chief Economist Philip Lane, had thought that services inflation …
19th July 2024
After a roller-coaster ride over the past couple of years, we think euro-zone retail sales are likely to rise gradually in the coming quarters. Consumption has recovered a long way following the disruption caused by the pandemic and the energy price …
Today’s decisions to leave interest rates on hold and give no clear signals about the future path of interest rates were in line with expectations. The overall tone was arguably slightly dovish, making a September cut more likely. But the risks to our …
18th July 2024
No cut, no guidance Today’s decisions to leave interest rates on hold and give no clear signals about the future path of interest rates was in line with expectations. A cut in September still seems more likely than not, but it will depend on whether …
The Bank Lending Survey suggests that there was a pick-up in demand for bank loans in the second quarter particularly for residential mortgages and consumer credit. This is consistent with the consensus and our own view that the economy is recovering and …
16th July 2024
This page has been updated with additional analysis since first publication. Euro-zone manufacturing still struggling Industrial production in the euro-zone fell again in May and we think the outlook remains poor. The 0.6% m/m decrease in euro-zone …
15th July 2024
Other than the European Championship, the key event this week was the second round of the French legislative elections. The left-wing New Popular Front (NFP) and President Macron’s Ensemble group both did better than expected and the right-wing National …
12th July 2024
We think Spain’s economy will grow strongly over the next few years, substantially outperforming the euro-zone. This is partly due to strong domestic demand which has been supported by the rapid expansion of the labour force driven by high immigration. …
Inflation drops sharply and will remain below 2% over coming months The Riksbank’s target measure of inflation, CPIF, dropped to just 1.3% in June, almost half the level in May and the lowest level since the end of 2020. This was far below the consensus …
No change in interest rates and no new guidance. Emphasis will be on continued strength of underlying inflation. Rate cut in September still likely, but isn’t nailed on. The ECB is likely to leave the deposit rate on hold at 3.75% next week and refrain …
11th July 2024
This page has been updated with additional analysis since first publication. Inflation falls further than Norges Bank predicted The continued decline in inflation in Norway supports our view that Norges Bank will start cutting interest rates before the …
10th July 2024
The latest data suggest that the recovery in euro-zone activity will continue – notwithstanding the uncertainty created by France’s snap election. The euro-zone labour market is tight, with unemployment at a record low and wage growth picking up in Q1. …
9th July 2024
The results of France’s parliamentary elections mean it should avoid the large, unfunded fiscal expansion that two of the three major political groups were advocating. But it also means France is very unlikely to be able to reduce the deficit as required …
8th July 2024
The budget deal struck by the governing coalition in Germany reduces the risk of the country being forced into early elections. But it does little to address Germany’s structural problems, in part because of the strict cap on borrowing imposed by the …
Left-wing coalition becomes biggest group as National Rally underperforms The exit polls for the second-round of France’s legislative election are certainly a surprise. The left-wing New Popular Front (NFP) appears to have become the biggest group in …
7th July 2024
The latest polls ahead of Sunday’s second round of French parliamentary elections suggest that the far-right National Rally (RN) will win the most seats but fall well short of an absolute majority. (See Chart 1.) This will make it very difficult to form a …
5th July 2024
This page has been updated with additional analysis since first publication. Retail sector probably past the worst Retail sales ticked up in May and we expect them to continue to rise gradually from here. The 0.1% m/m rise in retail sales in May was …
This page has been updated with additional analysis since first publication. German industry still struggling The slump in German industrial production in May fully reverses the increase in output at the start of the year and suggests that German industry …
This page has been updated since first publication. Headline inflation edged down slightly, but unlikely to fall much further this year Switzerland’s inflation rate fell to 1.3% in June from 1.4% in May, but concerningly for policymakers, private services …
4th July 2024
This page has been updated with additional analysis since first publication. Continued strength of services inflation all but rules out July ECB cut It already seemed unlikely that the ECB would cut interest rates at its meeting in July, and June’s …
2nd July 2024
Much of the recent focus has been on France’s political turmoil, but Germany has had its own troubles with disagreement over the 2025 budget threatening the survival of the governing coalition. While we think an agreement will eventually be found, budget …
1st July 2024
