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July’s rise in Swiss inflation was driven by faster energy and food inflation, while underlying price pressures remained very weak. And with the franc set to remain strong by historical standards, we expect the Swiss National Bank to leave interest rates …
3rd August 2018
The Spanish economy recorded its smallest quarterly expansion in four years in Q2 and the business surveys weakened again in July, suggesting that the period of very strong growth is at an end. But there is still spare capacity in the labour market, so …
2nd August 2018
The Norges Bank will soon start to tighten monetary policy. But in contrast to the consensus view, we think that as interest rates rise over the next few years, the krone will depreciate against the euro. … Norwegian krone to weaken even as interest rates …
1st August 2018
Even after Q2’s disappointing euro-zone GDP data, we still think that the ECB is unlikely to extend its net asset purchases into next year. But it might vary the reinvestment of funds from its huge bond portfolio in 2019 to keep longer-dated government …
31st July 2018
Q2’s 0.3% quarterly rise in euro-zone GDP was a disappointment given hopes that the slowdown in Q1 reflected temporary factors. We still see growth regaining some pace as the year goes on, but for now the continued slowdown will certainly add to the ECB’s …
July’s very small fall in the EC measure of economic sentiment supports our view that euro-zone growth is slowing only slightly from a strong pace. But producers’ price expectations remain weak and July’s German CPI data point to a lack of underlying …
30th July 2018
The Swedish economy grew very strongly in the first half of the year and is likely to continue performing well. This is set to drive wage growth gradually higher, prompting the Riksbank to raise interest rates at the end of this year. … Swedish GDP (Q2) & …
Given the openness of the Nordic & Swiss economies, their policymakers will have breathed a sigh of relief at the easing of trade tensions this week between the EU and the US. But should the current ceasefire end, we think that Switzerland’s position …
27th July 2018
The easing of trade tensions between the US and EU this week reduces the risk that the US will soon increase tariffs on EU cars, but it still leaves us a long way from any action to reduce trade barriers. Meanwhile, ECB President Draghi’s comments at …
The 0.2% expansion in France’s GDP in Q2 was disappointing. But since temporary factors weighed on growth, we still think that euro-zone growth picked up in Q2. … French GDP (Q2, 1st …
The ECB made no changes to its policy or forward guidance today and strongly endorsed financial markets’ expectations for interest rates to remain on hold until autumn next year. It also made clear that it would not be rushed into early rate hikes by …
26th July 2018
The Swedish economy continues to perform well. And with inflationary pressures gradually rising, we expect the Riksbank to raise interest rates this year. … Sweden Econ. Tend. Survey (Jul.) & Unemploy’t …
Government bond yield curves in the Nordics and Switzerland have flattened this year, but we doubt that this signals that recessions are imminent in any of these economies. … Flatter yield curves not a cause for …
25th July 2018
The very low level of long-term bond yields across the euro-zone suggests that there is no urgent need for the ECB to copy the US Fed’s “Operation Twist” by replacing short-dated securities with longer-dated ones. But this is a tool that it could deploy …
July’s very small fall in the Ifo Business Climate Indicator (BCI) left it still pointing to strong German GDP growth, which will encourage the ECB to maintain a fairly optimistic tone when it meets tomorrow. … German Ifo Survey …
Swiss and Nordic financial markets have been a mixed bag over the past month. Equities in most countries have risen, supported by continued fairly strong economic growth. But equities in Norway and Iceland have fallen. In Norway, this largely reflects the …
24th July 2018
The ECB’s Q2 Bank Lending Survey adds to the evidence that the euro-zone economy will continue to perform well. And there is little sign that the uncertainty about the Italian Government’s policies has led to a tightening of credit conditions in the …
July’s fall in the euro-zone PMI comes as something of a disappointment but the index is still consistent with a decent pace of GDP growth at the start of Q3. Accordingly, the ECB is likely to push ahead with its plans to normalise policy very gradually. …
While Swiss politicians have long railed against the strength of the franc, Finance Minister Ueli Maurer appeared to throw in the towel this week. But we doubt that exporters, which fared very well in Q2, will have to cope with a very strong currency for …
20th July 2018
Recent euro-zone data releases have generally been encouraging, supporting our view that GDP growth picked up from 0.4% in Q1 to 0.5% in Q2. Meanwhile, the EU-Japan trade deal, signed this week, is unlikely to have a significant macroeconomic effect. Next …
Economic growth in Switzerland and across the Nordics looks set to remain pretty strong over the coming years. But inflationary pressures vary significantly between countries. We think that central banks in Sweden and Norway will start to raise interest …
Having announced last month that asset purchases will end in December, the ECB is unlikely to make any policy changes at its July meeting. We doubt that President Draghi will offer more explicit forward guidance than to reiterate that interest rates will …
19th July 2018
Ireland’s GDP contracted in Q1, but this tells us next to nothing about the underlying state of the economy. Other indicators are much more encouraging and, despite some big risks to the outlook, we think that the economy will continue to perform well. … …
Most European economies have experienced a slowdown since last year, but growth is still strong by historic standards and prospects are fairly bright. Admittedly, trade protection poses a serious threat, particularly to the most open economies like …
According to the minutes of the Riksbank’s July meeting, Sweden’s monetary policymakers were particularly worried about the weakness of non-energy inflation. And with some justification. Data published this week showed that in June the CPIF excluding …
13th July 2018
In an otherwise quiet week, the main economic news was the publication of the minutes of June’s ECB meeting. They showed that members of the Governing Council “widely agreed” to update their forward guidance, which now states that interest rates will be …
May’s strong increase in euro-zone industrial production offered welcome reassurance that the slowdown in GDP growth in Q1 did not mark the start of a downward trend. … Euro-zone Industrial Production …
12th July 2018
June’s rise in Swedish CPIF inflation entirely reflected higher energy inflation. But with domestic price pressures building, and the latest minutes showing that Riksbank officials are increasingly concerned about stronger inflation, we continue to think …
The further decline in German ZEW investor sentiment seems to reflect concerns about the impact of possible protectionist measures. But May’s industrial production data for France and Italy support the message from the earlier German release that Q2 was a …
10th July 2018
June’s decline in core inflation won’t stop the Norges Bank from raising interest rates in September. But with price pressures building only slowly, the subsequent tightening cycle will be very slow. … Norwegian Consumer Prices …
The main event this week was the Riksbank meeting , at which the Bank reiterated that it expected to raise interest rates in December. And data released since the meeting support the case for the Riksbank to begin tightening policy soon. Elsewhere, data …
6th July 2018
Immigration has remained very high up the political agenda this week, and while EU leaders reached a compromise on Monday, this is not a closed issue and tensions may well flare up again. Meanwhile, the news on the German economy has been much better this …
May’s industrial data add to the evidence that the weakness in the sector earlier in the year was at least partly down to temporary factors. Overall, the German economy has clearly shifted down a gear this year, but we expect growth to remain fairly …
Hard data relating to euro-zone activity in Q2 have been a little disappointing so far, denting hopes that GDP growth would rebound strongly after Q1’s 0.4% quarterly expansion. Industrial production declined by 0.9% m/m in April, while retail sales fell …
5th July 2018
June’s rise in Swiss inflation was driven by faster imported inflation, which we doubt will last. Domestic price pressures remain subdued, so we expect the SNB to leave interest rates unchanged until 2020. Elsewhere, private sector production data in …
The deterioration in French consumer morale suggests that household spending growth will remain fairly subdued in the next couple of quarters. But we doubt that this will last. The bright outlook for the labour market, weak inflation and solid bank …
3rd July 2018
May’s euro-zone retail sales data were a little weaker than expected, but still imply that the consumer sector fared better in Q2 than in Q1. And looking ahead, we think that household spending will remain a key driver of economic growth in the region. … …
The Riksbank looks very likely to raise interest rates in December. We think that the Bank will then raise interest rates more quickly in 2019 and 2020 than investors expect, causing the krona to strengthen. … Tighter monetary policy on the way in …
Germany is the only major euro-zone economy where underlying inflation looks set to rise meaningfully in the next year or so. But even there, inflation is likely to remain lower than in major economies elsewhere such as the US and UK. This suggests that …
2nd July 2018
May’s unemployment data revealed that the steady recovery in the euro-zone labour market had continued despite signs of a slowdown in the wider economy. But with wage growth remaining subdued, the ECB is unlikely to change its guidance that interest rates …
Switzerland’s manufacturing PMI survey for June suggested that the economy is growing strongly, but inflationary pressures are weak. By contrast, Sweden’s survey implies that growth will slow, but inflation pressures are building. So higher interest rates …
In our opinion, this week’s media coverage of the June EC and Ifo surveys was too downbeat. Both indicators are still consistent with annual GDP growth of over 2%. Other data told a familiar story of subdued underlying price pressures. Meanwhile, at this …
29th June 2018
The Swiss Government this week made no progress towards reaching a deal with Brussels that would see Switzerland retain its unrestricted access to the Single Market. With the anti-immigrant SVP party announcing that it has collected enough signatures to …
June’s inflation data are unlikely to change the ECB’s assessment of the outlook for monetary policy. We maintain our long-held view that the Bank will leave its interest rates unchanged until September next year before raising interest rates a little …
The small rise in the KOF Economic Barometer in June suggests that the Swiss economy will continue to grow at a decent pace. But with still little sign that this is generating inflationary pressures, we expect the SNB to stick to its ultra-accommodative …
After falling only marginally in June, the EC’s measure of economic sentiment provides further evidence that the softness in activity recorded in Q1 does not mark the start of a sharp downturn. … EC Business & Consumer Survey …
28th June 2018
While most forecasters now agree with our long-held view that the first ECB rate hike will come in September 2019, there is no clear consensus over which rate will rise first or why. In this Update , we explain why the deposit rate is now the best gauge …
27th June 2018
Norway’s labour market recovery should continue to push up wage growth over the coming years. But with wage expectations still quite low, wage growth will probably rise only slowly, so the Norges Bank will be very cautious about tightening monetary …
President Trump’s threat to retaliate to EU tariffs with a 20% tax on EU car exports sounds alarming. In fact, the direct effect on the euro-zone would be smaller than you might think, perhaps reducing GDP by 0.1%. But the threat points to a rising risk …
26th June 2018
We think that Italy’s bond yields will rise more quickly than most expect. But as long as the Government waters down its fiscal plans, and is committed to the euro, its interest costs should remain manageable. … How big a problem for Italy are rising …
25th June 2018
