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The recent fall in euro-zone consumer confidence has reflected a decline in optimism about the general economic outlook, which may well continue. But this need not imply that a slowdown in spending growth is to come. Households’ perceptions of their own …
29th November 2018
November’s modest decline in the EC’s euro-zone Economic Sentiment Indicator (ESI) left it consistent with solid GDP growth which will encourage the ECB to end its asset purchases next month as planned. … Euro-zone EC Business & Consumer Survey …
The very weak Swiss Q3 GDP data make us more confident that the SNB will keep monetary policy ultra-loose longer than investors expect. Meanwhile, the contraction in the Swedish economy in Q3 suggests that the Riksbank will push back the first interest …
We doubt that the recent rally in Italian government bonds will last. And higher yields are already feeding through to higher borrowing costs in the private sector. We think that this will offset any positive impact on GDP from looser fiscal policy in …
28th November 2018
The housing boom that has been one of the prime drivers of Dutch economic growth in recent years is likely to be close to its peak. As a result, growth is likely to slow in the coming years. But we do not expect another house price crash, mostly due to …
Provided that it is reasonably orderly, a “no deal Brexit” would probably reduce economic activity in the euro-zone by 0.1-0.2% points next year, though the impact would be much larger for Ireland. The blow would be concentrated in Q2 and Q3, after which …
November’s fall in the Ifo Business Climate Indicator (BCI) adds to evidence that the German economy is slowing, but suggests that the particular weakness of Q3 will not be repeated at the end of the year. We still expect growth to regain pace in 2019 as …
26th November 2018
The Riksbank’s Financial Stability Report highlighted the risks that higher interest rates would pose to the housing market and to households. But we continue to expect a first rate hike in December and the Riksbank to raise rates more quickly than …
23rd November 2018
The sharp drop in oil prices this month supports our long-held view that lower inflation will give consumer spending a boost. And we doubt that the sell-off in the equity market will do much damage to the wider economy. … Fall in oil prices to boost …
Sunday’s referendum on whether to place Swiss law above international law threatens to undermine treaty negotiations currently taking place between Switzerland and the EU. Failure to strike a deal on the treaty would hurt financial services and harm …
November’s fall in the Composite PMI raises doubts about whether the economy will rebound after a weak Q3. This won’t be enough to stop the ECB from ending its asset purchases next month, but it increases the chance that the Bank will wait longer to raise …
The ECB has a range of tools at its disposal to respond to the situation in Italy and its effects on the wider euro-zone. But for it to use them, there would have to be a serious escalation of the crisis. And even then, the ECB would force Italy to agree …
20th November 2018
October’s weaker-than expected inflation data, published this week, are unlikely to deter the Riksbank from raising interest rates in the coming months, with a December hike most likely in our view. Meanwhile, although temporary factors weighed on …
16th November 2018
The EU looks set to launch disciplinary proceedings against Italy, perhaps as soon as next week. But unless the situation in Italy escalates dramatically, the ECB is unlikely to respond. Instead, the Bank is more focused on the risks to the wider outlook …
Economic growth in Switzerland, Sweden and Norway looks set to slow next year. In fact, survey evidence in Switzerland suggests that the economy has already shifted down a gear, with the KOF Economic Barometer pointing to a decline in annual GDP growth …
15th November 2018
The small changes that Italy’s Government has made to its Budget are unlikely to placate the European Commission. So Italy looks set for greater budget oversight, which could eventually lead to sanctions. But we doubt that even this would make the …
14th November 2018
Q3’s slowdown in euro-zone GDP growth partly reflected temporary factors, so we remain optimistic that the economy will perform better in the coming quarters. This would allow the ECB to push ahead with its plans to start tightening monetary policy next …
The slight fall in Swedish inflation in October will not significantly influence the Riksbank’s decision on the timing of its first rate hike, which we still expect in December. Underlying inflation will be strong enough next year to allow for a steeper …
The 0.2% quarterly fall in German GDP in Q3 partly reflected temporary factors, but will still serve as a warning to the ECB to bide its time before communicating any policy normalisation. … German GDP …
Norway’s economic slowdown in Q3 reflected temporary factors. But growth still looks set to weaken next year as oil prices fall. So we expect the krone to weaken and the equity market to underperform. … Norway’s economy to slow in …
13th November 2018
The Central Bank of Iceland this week raised interest rates slightly sooner than we had anticipated and we expect it to tighten policy further in the coming months. The Riksbank is also set to raise interest rates soon, probably next month. But comments …
9th November 2018
Tensions between Italy and the EU are likely to escalate next week. Indeed, the Government has until Tuesday to submit a re-drafted budget, and despite coming under pressure from European policymakers this week, it is unlikely to make enough changes to …
October’s weaker-than-expected inflation data suggest that the Norges Bank will be in no hurry to raise interest rates again. We expect it to wait until next March before making its next move, and then to end its tightening cycle sooner than investors …
The slowdown in quarterly euro-zone GDP growth to just 0.2% in Q3 came as a major disappointment, but there are good reasons to expect the economic expansion to regain a little pace in the quarters ahead. For a start, we estimate that about half of the …
8th November 2018
Higher inflation and inflation expectations have prompted the Central Bank of Iceland to raise interest rates today, sooner than we had anticipated. And as upcoming wage negotiations look likely to result in inflation-busting pay deals, we expect the Bank …
7th November 2018
September’s euro-zone retail sales data rounded off a weak quarter for the sector, implying that overall household spending rose only marginally in Q3. Nevertheless, we still think that the outlook for consumer spending is bright. … Euro-zone Retail Sales …
September’s small rise in German industrial production suggests that delays to car output are not doing quite as much damage as we had feared, but it still seems likely that GDP barely expanded in Q3. … German Industrial Production …
October’s PMI data suggest that most of the major euro-zone economies will perform a little better in Q4 than in Q3. The exception is Italy, where the PMI implies that output contracted. … Euro-zone Final PMIs (Oct.) & PPI …
6th November 2018
Sweden’s monthly private sector production data suggest that overall GDP growth slowed in Q3. But with the timelier surveys continuing to paint a fairly positive picture, we remain fairly optimistic on the economy. … Swedish Private Production …
The EU bank stress tests suggest that even in a severe economic downturn, the region’s largest lenders would remain solvent. That said, the EBA’s very pessimistic “adverse scenario” might still be too bullish if the situation in Italy escalates. … Bank …
2nd November 2018
Surveys published this week suggest that the Swiss economy is faltering after a strong first half of 2018, while inflationary pressures remain weak. This supports our view that the SNB will keep interest rates on hold much longer than investors expect. By …
Delays to car production appear to have had a big impact on GDP in Q3, particularly in Germany and Italy. But these effects should be temporary, so we expect growth to rebound in Q4. This suggests that after stagnating in Q3, Italy is not on the brink of …
While the minutes to the Riksbank’s October meeting all but confirmed that interest rates will start to rise in the coming months, a December hike is not a done deal. But regardless of whether the Bank starts tightening in December or February, we think …
Although Swiss headline inflation edged back up in October, the core rate was unchanged at a very low level. And as surveys of both manufacturers and consumers suggest that price pressures are muted, we expect the Swiss National Bank to stick to its very …
1st November 2018
Data on car production imply that delays related to emissions testing may have been entirely responsible for the slowdown in euro-zone GDP growth from 0.4% in Q2 to 0.2% in Q3. While the underlying pace of growth has slowed compared to last year, we …
31st October 2018
October’s increase in euro-zone inflation supports the ECB’s judgement that underlying price pressures are gradually building despite the slowdown in activity over recent months. … Euro-zone Flash CPI (Oct.) & Unemployment …
While the 0.2% expansion in the euro-zone economy was disappointing, it probably in part reflects temporary factors. As a result, we expect there to be some recovery in the coming quarters. … EZ Q3 GDP (Prelim. Flash) & EC Survey …
30th October 2018
The news that Angela Merkel will step down as head of the CDU has limited implications for the German economy since she will stay on as Chancellor for now and her likely successors broadly support her policies. But it may well slow decision-making over …
29th October 2018
While both the Riksbank and the Norges Bank kept monetary policy unchanged this week, they signalled in their policy statements that they intend to raise interest rates in the coming months. With inflationary pressures building, we expect the Riksbank to …
26th October 2018
Euro-zone surveys published this week painted a pretty gloomy picture of the economy at the start of Q4. Some of that weakness probably reflected temporary factors and the ECB didn’t appear to be too concerned, reaffirming its plans to end asset purchases …
The ECB today reaffirmed its plans to normalise monetary policy gradually, expressing little concern about the recent run of weaker economic data or the clash between Italy and the European Commission. Risks to the outlook mean that the first interest …
25th October 2018
The further fall in the Ifo Business Climate Indicator (BCI) in October suggests that while the German economy is still growing at a decent pace, we are unlikely to see a return to the rates of growth seen in the second half of last year. … German Ifo …
Although it left its policy stance unchanged today, the Norges Bank struck a slightly more hawkish tone. We continue to think it will raise rates again next March. But even as the Bank tightens policy, we think that falling oil prices will cause the krone …
The unexpectedly sharp decline in the Composite PMI in October left it pointing to the slowest pace of quarterly euro-zone GDP growth for two and a half years. … Euro-zone Flash PMIs …
24th October 2018
Although the Riksbank left monetary policy unchanged today, it is still on track to begin raising interest rates in December. We think that the Bank will then tighten more quickly than investors expect, causing the krona to strengthen in 2019 and 2020. … …
The latest data suggest that underlying inflation is picking up in Sweden, Norway and Iceland and we expect the central banks in all three countries to respond by tightening monetary policy. In Sweden, non-energy CPIF inflation rebounded in September and …
23rd October 2018
The ECB’s Q3 Bank Lending Survey provided further evidence that euro-zone economic growth will continue to hold up fairly well. And, at least for now, there is little sign that the political uncertainty in Italy is causing credit conditions there to …
The Italian Government’s reply to the European Commission suggests that there is unlikely to be a quick resolution to the current fiscal impasse. We expect yields to rise in the coming years. … No end in sight for Italian fiscal …
22nd October 2018
Safe-haven demand for the Swiss franc increased this week as the Italian Government clashed with the EU over its 2019 Budget. With worries about Italy set to persist, we think that the franc will weaken only slightly against the euro as the SNB lags …
19th October 2018
The EU is almost certain to reject Italy’s draft budget. In our view, it is most likely that a re-drafted budget would still fail to meet the EU’s rules, so Italy will probably be put into an Excessive Deficit Procedure. There are other possibilities …
