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The euro-zone economy performed better in 2017 than we and most forecasters had anticipated at the year’s outset. Investment growth picked up despite intense political uncertainty. And while a rise in inflation dampened households’ real incomes growth as …
21st December 2017
The Swedish and Norwegian central banks delivered fairly hawkish assessments of the outlook for monetary policy this month, but that did not stop their currencies from depreciating. Meanwhile, the Swiss franc has weakened to its lowest level since the …
The Riksbank’s announcement that it will end its net asset purchases this month is the beginning of a shift towards tighter monetary policy in Sweden. We think that it will ultimately raise interest rates more quickly than most other analysts anticipate, …
20th December 2017
December’s small decline in German Ifo business sentiment from a record high suggests that the outlook for next year is bright despite the uncertain political backdrop and the prospect of ECB QE tapering. But with wage growth still very subdued in Q3, the …
19th December 2017
Government bond yields in Portugal started 2017 almost twice as high as those in Italy, but look set to end the year at around the same level. While we think that yields will edge up across the region in 2018, we suspect that Portugal’s bonds will again …
18th December 2017
At this week’s press conference, Mario Draghi confirmed that the ECB’s corporate bond purchases will continue in “sizeable” quantities next year. The exact amount that it intends to buy is unclear, but we suspect that it will keep its corporate …
15th December 2017
The narrowing of the euro-zone’s goods trade surplus in October revealed that the external sector had a poor start to Q4. But with the global economy in good health and world trade growing at a decent pace, we doubt that this will be sustained. … …
We think that the euro-zone economic recovery is strong enough to cope with a gradual removal of policy support by the ECB over the coming years. The weak outlook for inflation will allow the ECB to tread carefully, limiting the adverse impact on …
While ECB President Draghi was upbeat about the economy at today’s press conference, he stated that the desire of some Governing Council members to signal an end to asset purchases is far from a consensus view. With the inflation outlook still reliant on …
14th December 2017
The Norges Bank left its key policy rate unchanged after its meeting today and brought the date at which it forecasts raising interest rates forward to autumn 2018. We think that it will wait until late 2019. … Interest rate hikes in Norway still a long …
The Swiss National Bank today reiterated that the Swiss franc remained “highly valued” and that it still needed to keep interest rates at rock-bottom levels and intervene in the currency markets as necessary. And with inflation set to remain low, we …
The rise in the euro-zone Composite PMI capped off a strong year and puts the economy on a very firm footing for the start of 2018. But with the survey’s price indices edging down in December, the ECB will continue to take a cautious approach to …
While there are some reasons to think that the Riksbank will extend its quantitative easing programme when it meets next week, we think that policymakers will let it expire. We also think that the Bank will keep its forward guidance on interest rates …
13th December 2017
October’s small rise in industrial production marked a soft start to Q4 but the surveys suggest that the sector will finish the year on a positive note. Meanwhile, employment data for Q3 showed that the labour market recovery is continuing to gain pace. … …
Following today’s decision to keep interest rates unchanged, the Central Bank of Iceland (CBI) noted that looser fiscal policy is a short-term risk to the monetary policy outlook. While we expect the new Government to announce a small fiscal expansion in …
The Nordic and Swiss Q3 GDP data revealed large differences between the best and worst performing economies. A quarterly contraction of 0.6% meant that Denmark underperformed the rest of the pack by a large margin. The drop in GDP was mainly due to a …
12th December 2017
Macro-prudential policies to cool the housing markets in Switzerland and Norway will allow their central banks to keep monetary policy loose, boosting inflation from its current low rates. By contrast, inflationary pressures in Sweden suggest that tighter …
December’s dip in German ZEW investor sentiment leaves it still at a high level and suggests that investors do not see political uncertainty as a major threat to the economic outlook. … German ZEW Survey …
Swedish inflation was higher than the Riksbank forecast in November, supporting our view that next week the Riksbank will not announce an extension of its asset purchase programme into 2018. … Swedish Consumer Prices …
The Greek crisis has abated and the Government may be able to exit its bailout next August as planned. But the exit will not be “clean” and the official creditors who still own the vast bulk of the debt will insist on continued politically toxic reforms. …
11th December 2017
The recent strength of German house price inflation is a justifiable response to increased urbanisation and a shift towards home ownership there. Given that mortgage lending growth remains moderate, there seems to be little risk to the German economy. And …
Inflation in Norway has probably reached a trough, but it is unlikely to rebound strongly. With house price inflation also slowing very sharply, we suspect that at its meeting on Thursday the Norges Bank will push back the date at which it forecasts …
The European Commission’s (EC) latest proposals for euro-zone reform and integration centred on the transformation of the European Stability Mechanism into a European Monetary Fund (EMF). The EC plans to give the EMF a wider remit, with it acting as a …
8th December 2017
Very strong Icelandic growth in Q3 somewhat overstates the health of the economy, given that consumer spending was stagnant and exports slumped. That said, surveys bode well for the outlook. … Icelandic GDP …
The unexpected jump in French industrial production in October was fairly broad-based and shows that the sector made a very healthy start to Q4. Meanwhile, German trade data for the same month were soft, echoing the weak message from yesterday’s …
The Norges Bank is very unlikely to change its policy rate next week, but we think that it will push back the date at which it forecasts raising interest rates to the end of 2019. After all, the mainland economy is expanding at a decent pace, but spare …
7th December 2017
Despite signs that core inflation in Germany picked up in November, euro-zone core inflation remained unchanged at 0.9%. This suggests that despite strong economic growth, underlying inflationary pressures in the rest of the euro-zone actually softened …
Having announced a plan to buy assets at a reduced pace of €30bn per month from January until September 2018 after its last meeting, the ECB seems very unlikely to make any changes this month. It should confirm that corporate bonds will make up a greater …
Although the Swiss franc has weakened further over the past three months, we doubt that the Swiss National Bank (SNB) will sound any more relaxed about the exchange rate in its policy statement next week. Admittedly, the ECB’s gradual shift towards policy …
The third estimate of euro-zone GDP in Q3 confirmed that the 0.6% expansion was driven mainly by domestic demand. Timelier evidence suggests that the economy has performed well so far in Q4, setting it up for a strong 2018. We think that the economy will …
October’s drop in German industrial production largely reflected the timing of holidays – high levels of industrial orders and business confidence point to a renewed acceleration to come. … German Industrial Production …
At its last meeting in November, the Central Bank of Iceland (CBI) kept policy on hold. Nothing has happened since then to alter our view that interest rates will remain unchanged until 2019. … Icelandic interest rates to remain on …
6th December 2017
November’s rise in Swiss inflation reflected both higher energy prices and a weaker franc. But with inflation still very weak, we doubt that the Swiss National Bank will decide to alter its ultra-loose monetary policy stance at its meeting next week or …
In this Watch, we evaluate the performance of Nordic and Swiss economies in 2017 and set out our key calls for next year. … Reviewing 2017 and looking ahead to …
5th December 2017
Warm weather weighed on clothing sales and therefore overall retail sales in October, but November’s rise in consumer confidence to a 16-year high suggests that sales growth rebounded last month. And in any case, November’s Composite PMI implies that …
Recent fiscal data suggest that most of the euro-zone’s peripheral countries have made further progress in reducing their deficits during 2017. … Euro-zone Fiscal Monitor …
4th December 2017
Q3’s small rise in Greek GDP reflected a surge in exports, while the domestic economy remained very weak. Financial markets will therefore remain wary of lending to the Government and it seems likely that it will still need significant financial support …
This week the ECB released its bi-annual Financial Stability Review in which it cited weak bank profitability, an abrupt repricing of risk premia, and debt sustainability as “medium-level” risks. We do not expect any of these risks to cause a crisis over …
1st December 2017
Concerns about the prospect of a house price correction were felt across Swedish markets in November, with the krona slumping, bond yields declining and equities falling. Most other Nordic and Swiss bond yields also declined, while currencies generally …
In Q3, Italy’s economy grew more slowly than the euro-zone as a whole for the ninth straight quarter. Timelier activity surveys suggest that growth will pick up a little in the run-up to next year’s general election. But we expect the economy to continue …
November’s rise in headline euro-zone consumer price inflation and the fall in the unemployment rate in October may offer some reassurance to the ECB as it prepares to reduce the pace of its asset purchases. But the still-low rate of core inflation …
30th November 2017
The first breakdown of Spanish GDP in Q3 showed that domestic demand growth picked up ahead of Catalonia’s independence referendum. While the Economic Sentiment Indicator painted a positive picture of activity in November, we nevertheless expect growth to …
After a weak first half of 2017, Switzerland’s economic recovery strengthened in Q3. And the latest leading indicators provide hope that GDP growth will accelerate further in the coming quarters. … Swiss & Danish GDP (Q3), Swiss KOF …
A so-called “hard border” between Ireland and the UK could hit the Irish economy pretty hard. But it would also present some opportunities, for example from UK financial firms relocating to Dublin. … What would a “hard border” mean for …
29th November 2017
November’s German and Spanish consumer prices data support expectations that euro-zone inflation reversed last month’s decline as energy inflation rose. But underlying price pressures are still responding only modestly to the strength of economic …
November’s EC Business and Consumer Survey suggests that the euro-zone’s economic upturn has gained more pace, but inflation expectations are rising only slowly. This supports the ECB’s very gradual approach to normalising monetary policy. We think that …
Despite a slowdown in consumer spending growth in Q3, Swedish GDP growth remained strong due to a sharp pick-up in investment. Meanwhile, November’s rise in the Economic Tendency Indicator suggests that annual GDP growth will accelerate further in Q4. … …
Euro-zone lending growth strengthened in October, and with the ECB set to normalise monetary policy only very slowly, we think that bank lending will continue to support the economic recovery. … Euro-zone Monetary Indicators Monitor …
28th November 2017
We think that concerns about the Swedish housing market are overblown. While house prices are likely to edge down further in the coming months, we expect them to stabilise next year. … Swedish house prices to stabilise next …
24th November 2017
Our reading of the minutes of the ECB’s October policy meeting is that the Bank has begun to prepare the ground for an end to its asset purchases. Before long, the ECB seems set to stop promising to buy assets until the inflation target has been met and …
