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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 …
November’s rise in German business sentiment suggests that firms are unfazed by political uncertainty. Even if voters have to return to the polls, we expect the economy to do very well in the coming quarters. … German Ifo …
November’s sharp rise in the euro-zone Composite PMI suggests that the economy is growing very strongly and we doubt that political uncertainty in Germany will change that. … Euro-zone Flash PMIs …
23rd November 2017
Italy’s banks are on the mend, but it will be a very long time before they get a clean bill of health. As long as they remain weak, the economic recovery will be vulnerable to a loss of confidence in the banks. … Italian banks are on the mend, but …
22nd November 2017
Finland’s economic prospects look brighter than they have for several years. So as the ECB gradually scales back its stimulus over the next few years, we think that Finland’s government bond yields will rise only gradually, remaining very close to those …
21st November 2017
We doubt that the German political crisis will seriously damage business or consumer confidence. And given the similarities between the major parties’ economic policies, the ultimate form of the coalition is unlikely to significantly alter our upbeat …
Data this week confirmed that the euro-zone had a very good Q3, with a 0.6% rise in quarterly GDP pushing the annual growth rate up to 2.5% – the highest since early 2011. This was stronger than the 2.3% expansion recorded in the US and significantly …
17th November 2017
House price inflation in several Nordic economies is slowing, and in some cases sharply. In Sweden housing inflation fell to 6.7% in October, its slowest in four years. And in Stockholm, where prices have risen much more than the national average in …
16th November 2017
The widening of the euro-zone’s goods trade surplus in September adds to the evidence that net exports boosted GDP in Q3. And despite the appreciation of the euro this year, the outlook for exports is bright. … Euro-zone Trade …
15th November 2017
Following today’s decision to keep interest rates unchanged, the Central Bank of Iceland (CBI) appears to have reached the end of its loosening cycle. We expect the Bank to keep rates on hold until the second half of 2019, when it is likely to respond to …
This year, the Italian economy looks set to record its best performance since 2010. And we doubt that uncertainty in the run-up to next year’s general election will bring the recovery to a halt. But economic growth in Italy still looks set to remain …
14th November 2017
The flash estimate of euro-zone Q3 GDP confirmed that the economy is in very good health. Admittedly, industrial production fell in September and the renewed rise in the euro exchange rate is a downside risk to exports. But we still believe the message …
As October’s drop in Swedish inflation was almost entirely due to energy, we are not convinced that it means QE will be extended in December. Meanwhile, following stronger-than-expected GDP growth in both mainland Norway and Finland, the outlook for …
Q3’s impressive 0.8% rise in German GDP suggests that growth this year and next will be slightly stronger than even our above consensus forecasts had implied. This may well increase the pressure from Germany for monetary policy to be normalised more …
The latest euro-zone data have brought signs of a slowdown in activity in the services sector compared to that in manufacturing. But we suspect that the slowdown in services will be modest. After all, the very high level of consumer confidence and a …
10th November 2017
Today’s French and Italian industrial production data, along with other national data released earlier in the week, suggest that euro-zone output fell by 0.6% in September. But forward-looking indicators imply that euro-zone industrial growth will pick …
The sharp decline in inflation over the past 15 months has largely run its course, but it is unlikely to rebound strongly. We think that core inflation will remain well below the Norges Bank’s 2.5% target over the coming years, so interest rate hikes are …
Forecasters have been wrong-footed this year by the Central Bank of Iceland’s (CBI) rate cuts. This appears to be because the CBI has started to put more emphasis on a different inflation measure, and the cuts may also have been motivated by …
9th November 2017
As today’s minutes show few signs that policymakers are concerned about the economy overheating, we have pushed back our forecast for a rate rise to September 2018. But we still expect rates to be increased at a faster pace than the Riksbank or markets …
The euro-zone’s youth unemployment rate remains worryingly high. To address this issue, this week’s Eurogroup meeting focused on plans to raise educational attainment, which is a very good place to start. But in the absence of bolder measures to address …
The monthly data suggest that consumer spending was behind the slowdown in quarterly euro-zone GDP growth in Q3. But September’s rise in retail sales provided a strong starting point for Q4. And the improving labour market should support spending. Indeed, …
8th November 2017
Recent declines in Norwegian house prices have caused some concern, but we think that the worst fears are overblown. After all, prices are falling for the “right” reasons. And we do not expect a wave of mortgage defaults that would trouble the banks or …
Although retail sales rose in September, the increase was not sufficient for the sector to match Q2’s performance in Q3. This suggests that total household spending was behind the slowdown in quarterly GDP growth in Q3. But with consumer confidence strong …
7th November 2017
The drop in German industrial production in September did not reverse August’s sharp rise. The sector performed well in Q3 as a whole and surveys point to an acceleration to come. … German Industrial Production …
Data released by the ECB today imply that a significant volume of its German Bunds will mature next year, which the Bank will re-invest in German assets. But we don’t think that re-investments will benefit Bunds more than other countries’ government …
6th November 2017
The final estimate of October’s euro-zone Composite PMI confirmed that the economy made a strong start to Q4. But there are still only tentative signs that inflationary pressures are building. … Euro-zone Final PMIs (Oct.) & Producer Prices …
October’s weak Swiss inflation data support our view that SNB interest rate hikes are a very distant prospect. Elsewhere, Swedish production data suggest that quarterly GDP growth slowed in Q3. … Swiss CPI (Oct.) & Swedish Production Index. …
The ECB’s decision last week to extend its bond-buying well into 2018 means that it will probably need to change the composition of its purchases. After all, it has already had to reduce its purchases of bonds in some countries as it is approaching its …
3rd November 2017
Recent fiscal data suggest that most of the euro-zone’s peripheral countries are continuing to improve their budgetary positions. But Italy is an exception and has come under fire for a lack of fiscal effort. … Euro-zone Fiscal Monitor …
2nd November 2017
The ECB seems set to raise interest rates even later than we had previously assumed and we are now pencilling in the first hike for September 2019. Accordingly, we have made small downward revisions to our Bund yield forecasts and now see the euro …
1st November 2017
At least four parties will be required to form a majority government following Iceland’s election, so coalition negotiations are set to take a number of months. As the left-wing parties performed worse than expected, the most likely outcome appears to be …
October’s Swiss, Swedish and Norwegian manufacturing PMIs are consistent with strong growth in industrial output. But only in Sweden do we expect this to put sustained upward pressure on inflation. … Manufacturing PMIs …
