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The euro-zone has shifted down a gear but has not (yet) gone into reverse. Italy probably experienced a technical recession last year and Germany only narrowly avoided one. More importantly, the breadth of the downturn, which affected all major countries …
16th January 2019
The preliminary estimate of GDP for 2018, and comments by the Federal Statistics Office, suggest that Germany narrowly avoided a recession last year. But this is of limited comfort: the bigger picture is that, having slowed sharply last year, Germany’s …
15th January 2019
The broad-based slump in industrial production in November underlines how serious the malaise is in Europe’s industrial sector. While the euro-zone may have eked out a small increase in GDP in Q4, it has clearly shifted down a gear. And there is little …
14th January 2019
Sharp falls in industrial production in November last year mean that Germany and Italy may have experienced technical recessions in 2018. And GDP in the euro-zone as a whole probably increased by only around 0.2% in Q4. Meanwhile, officials at the ECB are …
11th January 2019
Recent developments suggest that both the Riksbank and Norges Bank will tightening monetary policy more slowly than we had previously anticipated. This is partly because we have revised down our forecasts for economic growth in the euro-zone. But there …
The account of the ECB’s last meeting confirms that the Governing Council was less confident about the economic outlook, even in mid-December. While policy loosening is very unlikely for now, the account implies that if further support were needed, the …
10th January 2019
December’s stronger-than-expected inflation data for Norway suggest that the Norges Bank is almost certain to follow through with its plan to raise interest rates in March. But we think it will then wait until 2020 before raising rates again, which would …
We are revising our forecasts for economic growth in the euro-zone and now expect GDP to increase by only 1% this year and a bit less in 2020. Core inflation is also likely to be around 1% this year and, as a result, the ECB will probably leave rates on …
9th January 2019
The drop in headline inflation in Switzerland in December is a sign of things to come, as inflation is set to fall to just above zero in the coming months. Meanwhile, the minutes of the Riksbank’s December meeting suggest that it is likely to hike at most …
Following on from the disappointing German industrial production data released earlier today, the drop in the EC’s Economic Sentiment Indicator (ESI) for December is yet another sign that there was a broad-based loss of momentum in the euro-zone towards …
8th January 2019
November’s decline in German industrial production adds to the evidence that the euro-zone’s largest economy grew at a meagre pace in Q4. … German Industrial Production …
PMIs for December pointed to robust growth in Q4 in Switzerland, Sweden, Norway and Denmark. However, the breakdowns pointed to weak growth ahead in Switzerland and Sweden, and only the Danish economy is set to perform especially well in 2019. … PMIs …
4th January 2019
Data released this week suggest that the economy lost more momentum at the end of last year and that GDP growth in 2019 won’t be as good as in 2018. … Euro-zone economy continues to lose …
Data released this morning add to the evidence that economic growth in the currency union has shifted down a gear and, with underlying inflation still low, it now looks likely that the ECB will wait much longer before raising interest rates than its …
The Riksbank’s decision to hike interest rates this week supported our long-held view that it would tighten policy more aggressively than investors anticipate. But the risks from high household debt and weak construction output are mounting. Meanwhile, …
21st December 2018
This week, Italy’s Government again showed itself to be more flexible than many had anticipated. But its fiscal problems are far from over and, in our view, public debt still looks unsustainable in the long run. Meanwhile, data released this week added to …
The Riksbank’s surprise decision to hike interest rates today supported our long-held call that it would tighten policy more aggressively than investors anticipate. But there is a clear risk that a housing-related economic slowdown could leave the Bank …
20th December 2018
As oil prices have fallen over the past few months, investors’ expectations for interest rates in Norway have fallen roughly into line with our own. Rate expectations in Switzerland have edged down too, reflecting the weakness of the latest economic data. …
18th December 2018
While business surveys have weakened throughout the euro-zone, they imply quite different things for growth in each economy. The Spanish surveys still bode well. But the German and French indicators are consistent with very slow growth while the Italian …
December’s fall in the Ifo Business Climate Indicator (BCI) to a twenty-seven month low adds to evidence that the slowdown in Germany is more than just a soft patch. … German Ifo Survey …
Following this week’s ECB meeting, and the latest data on economic growth in the currency union, the chance that the Bank raises interest rates next year has fallen. … ECB dovish as PMI confirms growth …
14th December 2018
Central bank meetings in Norway and Iceland this week suggested that interest rate hikes are on the horizon in both economies. By contrast, the Swiss National Bank again signalled that it won’t raise rates anytime soon. Next week we expect the Riksbank to …
December’s fall in the euro-zone Composite PMI was almost entirely driven by a sharp drop in France, perhaps suggesting that the ‘gilets jaunes’ protests have had a serious economic effect. But even if France’s PMI bounces back as the effects of the …
While the ECB has ended its net asset purchases, it plans to reinvest funds from maturing securities for a long time to come and has stressed that any future rate hikes will depend on a build-up of inflationary pressure. We are still pencilling in a first …
13th December 2018
Italy’s government has agreed to reduce its budget deficit forecast for next year, which reduces the risk of a crisis in the near term. But this does not spell the end of its fiscal troubles. With the country’s economic prospects bleak, government debt …
In today’s statement, the Norges Bank clearly signalled that an interest rate hike in March is a near certainty. But beyond that, we think that lower oil prices will prompt the Bank to end its tightening cycle sooner than investors expect, causing the …
The Swiss National Bank reiterated its commitment to its ultra-accommodative policy stance today and revised down its forecasts for inflation and GDP. As we think inflation will be even lower than they forecast, we continue to expect the SNB to keep its …
The euro-zone economy’s recent performance has been worse than we or the consensus expected. But for now at least, it seems to be a garden variety slowdown rather than something more worrying. The exception is Italy, where the risk of stagnation or even a …
12th December 2018
October’s small rise in euro-zone industrial production provides some grounds for optimism that GDP growth will pick up a bit in Q4. But the big picture is that the euro-zone economy has lost momentum, increasing the chance that the ECB waits longer …
The Central Bank of Iceland left interest rates unchanged today, but hinted strongly that hikes are on the horizon. We think that it will raise interest rates twice next year, leaving the deposit rate at 5.00%. … Central Bank of Iceland tightening cycle …
The slight drop in core inflation in November further decreases the chances of the Riksbank raising rates next week. Nonetheless, we still expect the first hike in February as underlying inflation is set to rebound. … Swedish Consumer Prices …
Protests in France are likely to put a serious dent in GDP growth in Q4. And while the giveaways announced yesterday will boost disposable incomes next year, any positive effect on the economy is likely to be offset by deteriorating confidence and tax …
11th December 2018
November’s unexpectedly-sharp rise in inflation in Norway is unlikely to change the Norges Bank’s mind about leaving policy unchanged at Thursday’s meeting. The Bank is likely to raise interest rates again in Q1, but the recent decline in oil prices …
10th December 2018
The latest data on economic activity in the euro-zone have been weak, but policymakers at the ECB will have been encouraged by the continued acceleration in wage growth. At its meeting on Thursday, the Bank looks set to confirm that it will end its net …
7th December 2018
Switzerland’s Federal Council has been debating this week on whether to align itself more closely with the EU, a decision with serious implications for the country’s status as an international financial centre. Meanwhile, although Q3’s stagnation in the …
The breakdown of euro-zone Q3 GDP suggests that the slowdown was down to more than just disruption to car production. Nevertheless, for now we still think that quarterly growth will probably pick up a touch early next year as lower oil prices boost …
At next week’s monetary policy meeting, the Swiss National Bank is set to reiterate its ultra-dovish stance. Meanwhile, recent developments in Sweden and Norway suggest that policymakers in both countries will give more dovish messages than at previous …
October’s industrial production data for Germany and France add to the evidence that the euro-zone economy is unlikely to bounce back strongly after Q3’s slowdown in GDP growth. … German & French Industrial Production …
While the ECB will confirm the end of its net asset purchases at its December meeting, it will keep its options open about the future path of policy. The weakness of recent data may well lead it to concede that the risks to growth have shifted to the …
6th December 2018
After contracting in Q3, activity surveys suggest that Italy’s economy is on the brink of recession. Indeed, the Composite PMI was unchanged at 49.3 in November, which on past form points to GDP falling by as much as 0.3%. Whether or not the economy tips …
November’s final euro-zone PMIs suggested that the weakness of GDP growth in Q3 was more than just a blip. But October’s rise in retail sales provides some comfort and we expect consumer spending growth to accelerate next year. … Euro-zone Retail Sales …
5th December 2018
Sweden’s private sector production data for October suggest that the economy bounced back after Q3’s contraction. This reduces the risk of the Riksbank delaying its first rate hike beyond February. … Swedish Private Production …
November’s falls in headline and core inflation highlight the lack of price pressures in Switzerland. And with GDP growth also weak, the SNB looks set to keep policy looser for longer than investors expect. … Swiss CPI …
4th December 2018
Riots over living costs in France have not altered our view that the economy will outperform most of its neighbours in the next two years. But they highlight how difficult it will be for President Macron to implement more controversial growth-boosting …
3rd December 2018
The increase in manufacturing PMIs for Switzerland, Sweden and Norway in November offers hope that the weakness of economic activity in Q3 was not the start of a deeper downturn. But since the surveys also point to easing price pressures, the three …
We think that this week’s decline in Italian bond yields will be reversed before long, weighing on the economy. Meanwhile, data released this week showed that core inflation in the euro-zone edged down to just 1.0% in November. But there are still …
30th November 2018
Data released this week which showed that Swiss GDP contracted in Q3 support our view that the SNB will keep interest rates on hold longer than investors currently expect. Meanwhile, other data showed that Sweden’s economy also shrank, which is likely to …
The second estimate of Italy’s GDP in Q3 showed that the economy performed even worse than previously thought. And while we know that temporary disruption in the car industry weighed on the economy in the third quarter, more recently the underlying pace …
We doubt that November’s decline in euro-zone inflation will cause the ECB to alter its plans for a gradual normalisation of monetary policy, with asset purchases set to end next month. … Euro-zone Flash CPI (Nov.) & Unemployment …
November’s fall in the KOF Economic Barometer adds to the evidence that Swiss growth has shifted down a gear. And with inflation weak, we expect the SNB to keep policy ultra-loose until at least 2020. … Swiss KOF (Nov.), Finnish & Danish GDP …
