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September’s fall in German Ifo business sentiment still leaves it pointing to very strong GDP growth. While Germany looks set for lengthy coalition negotiations following yesterdays’ federal election, we don’t expect political uncertainty to materially …
25th September 2017
The German election looks set to yield a coalition of Angela Merkel’s CDU/CSU, the FDP and the Green Party. This will mean slightly lower taxes than under the alternative of another grand coalition, which should boost growth over the next year or two. But …
In light of the disappointing performance of the Swiss economy in the first half of the year, we have revised down our 2017 GDP forecast substantially. We still expect the economic recovery to gain pace in 2018 and 2019, partly reflecting the depreciation …
22nd September 2017
The German election taking place on Sunday is not expected to have a significant impact on the economy. But the composition of the next coalition – which is likely to be either another grand coalition between the CDU and the SPD, or a tie-up between the …
September’s rise in the euro-zone Composite PMI suggests that the recovery has regained momentum after a brief summer lull. While this will embolden policymakers, as inflation is set to rise only gradually we still think that markets are overestimating …
The Norges Bank today raised its interest rate forecast, implying that it will begin tightening monetary policy mid-way through 2019. By contrast, we think that it will wait until 2020. … Interest rate hikes in Norway a very long way …
21st September 2017
Today’s Riksbank minutes suggest that at least two of the six Board members would support an extension of the Riksbank’s QE programme beyond the current December end date. But given our forecast for inflation to remain above the Riksbank’s target between …
Despite little prospect of a pick-up in public investment in Germany following Sunday’s federal election, conditions are ripe for sharp rises in both general business investment and construction investment. … German investment set for strong …
20th September 2017
September’s larger-than-expected rise in German investor sentiment may partly reflect reduced fears about the strength of the euro and suggests that the economy will continue to perform well. Indeed, we forecast German GDP to grow by a healthy 2.3% this …
19th September 2017
Portugal’s economic recovery is strengthening, while it has also made progress with recapitalising its banks and strengthening its fiscal position. This is reflected in the decline in government bond yields this year. While the ECB’s taper in 2018 is a …
We think that corporate bond yields will rise only gradually as the ECB tapers its asset purchases next year. After all, the economy looks set to continue performing well. And the Bank is likely to keep enough flexibility in the programme to increase …
18th September 2017
European Commission President Jean-Claude Juncker this week gave his support to the creation of a European Monetary Fund and a euro-zone “budget line”. Eventually, these would result in slightly quicker and more coherent decision-making in providing …
15th September 2017
After falling in Q1, Ireland’s GDP only partially rebounded in Q2. That said, the data are notoriously unreliable as a measure of domestic activity. Other more reliable indicators suggest that the economy is performing well. … Ireland GDP …
Today’s euro-zone labour costs data reinforce our view that the ECB will set out in October its plans to taper its asset purchases to zero in the first nine months of 2018. Meanwhile, July’s fall in the euro-zone trade surplus adds to the evidence that …
The Norges Bank is likely to leave the key policy rate at 0.50% next week, and we think that it will also leave its interest rate forecast unchanged, showing no change in rates until 2019. Although the economy is performing well, interest rate hikes look …
14th September 2017
The Swiss National Bank today acknowledged the depreciation of the franc over recent months but stressed that it was still necessary to keep interest rates at rock-bottom levels and maintain the option of currency intervention to reduce any upward …
The Q2 GDP data for the Nordic and Swiss economies were a mixed bag, but more timely indicators point to a strong second half of the year. … Q2 GDP data a mixed bag, but timelier data look …
13th September 2017
Given upward pressure on the single currency, we now see the ECB tapering its asset purchases over nine months instead of six next year. We still expect it to announce the full programme in advance, which is arguably more hawkish than the step-by-step …
Despite July’s small rise in euro-zone industrial production, growth in the sector will probably slow in Q3. But with more timely survey indicators still strong, any slowdown should be modest. … Euro-zone Industrial Production (Jul.) & Employment …
A unilateral declaration of independence after October’s referendum could severely destabilise the economies of Catalonia and Spain. But given this, and the political and legal barriers to secession, it is most likely that a compromise will be reached …
Inflation was above both the Riksbank’s forecast and its target in August. With the strengthening economy suggesting that inflationary pressure is building, we think that the Riksbank will soon start forecasting interest rate rises in the first half of …
12th September 2017
In August, inflation in Norway fell further below the Norges Bank’s target. While inflation should stop falling by the end of the year, it will rebound only slowly. So interest rate hikes are a very long way off. … Norwegian Consumer Prices …
11th September 2017
The ECB’s new forecasts show that it expects inflation of just 1.2% next year and 1.5% in 2018. As the economy is performing well and core inflation has picked up recently, the Bank should still feel confident enough to taper its asset purchases to zero …
8th September 2017
Iceland’s second consecutive quarterly fall in GDP was down to the volatility of trade. While the trade balance appears to be declining a bit faster than we expected as a result of the strong króna, the outlook for Icelandic GDP growth is still positive. …
July’s data on German trade, as well as French and Spanish industrial production, provide some early hints that euro-zone GDP growth might slow a touch in Q3. But the continued strength of activity surveys suggest that any slowdown will be small. … German …
At its meeting on 14th September, the Swiss National Bank will surely draw some comfort from the depreciation of the franc since it last met in June. But renewed geopolitical tensions and the ECB’s reluctance to commit fully to QE tapering suggest that …
7th September 2017
Despite reiterating the Governing Council’s concern about the strength of the euro exchange rate today, ECB President Draghi indicated that the Bank’s plan to taper asset purchases will be unveiled at the October meeting. He stressed, however, that …
The third release confirmed that euro-zone GDP rose by a healthy 0.6% q/q in Q2, with the region’s largest five economies expanding by between 0.4% and 1.5% on the quarter. On the face of it, the Composite PMI for July and August points to another 0.6% …
The third estimate of euro-zone GDP in Q2 confirmed that the 0.6% expansion was driven mainly by domestic demand. While GDP growth might have slowed in Q3, it is likely to remain fairly strong by past standards. … Euro-zone GDP Expenditure Breakdown …
While inflation in Sweden is higher than the Riksbank’s 2% target, the Bank’s decision to keep its forward guidance unchanged was not a major shock. The Riksbank is unlikely to shift its guidance until after the ECB signals that it is set to taper its own …
July’s weak German industrial production and French trade data add to signs that euro-zone GDP growth will slow in Q3. But we expect the slowdown to be modest, so while the ECB is unlikely to announce its QE tapering plan today, it will ultimately still …
Italy’s eurosceptic parties have recently eased up on their most anti-euro rhetoric, but it is far too early to sound the all clear. With the banking sector weak, public debt very high and the economy likely to continue to underperform, risks from …
6th September 2017
A large gain in services output offset a fall in industrial production in July and suggests that overall the Swedish economy started Q3 on a fairly strong note. While the PMI surveys point to slower growth ahead, as the economy is already operating above …
July’s fall in retail sales and the downward revision to August’s Composite PMI suggest that euro-zone GDP growth softened in Q3. But with consumer and business confidence still at very high levels, the outlook for economic growth in the euro-zone remains …
5th September 2017
Switzerland’s Q2 GDP release confirmed that the economy expanded only very slowly in the first half of the year. While survey indicators suggest that growth will pick up, subdued inflation will keep interest rates on hold for a long time yet. … Swiss GDP …
Polls suggest that the Green Party might emerge from Norway’s general election, on 11th September, as “kingmaker”. In that case, confidence in the large oil sector would probably fall. But overall, we doubt that the election will alter the economic …
4th September 2017
Euro-zone peripheral economies largely continued to improve their budget positions in July, with Ireland once again making the most progress. Portugal too is faring reasonably well. But Greece’s and Italy’s fiscal improvements remain far from assured. … …
1st September 2017
French consumers are, rather unusually, very upbeat at the moment, with measures of consumer confidence at or close to multi-year highs. In particular, they are much less worried about being made unemployed. We think that this is justified, even though …
Bond yields in most Nordic and Swiss markets fell in August, matching global trends. Currencies recorded mixed performances against the euro, with the Swiss franc depreciating while the Swedish krona rose. As Sweden’s Riksbank is likely to tighten policy …
Italy’s economy is improving steadily, but is likely to continue growing more slowly than the euro-zone as a whole. This leaves it vulnerable to losses of confidence, perhaps sparked by concerns about the banks or the forthcoming general election. … …
August’s manufacturing PMIs pointed to continued recoveries in Switzerland and Norway, but the Swedish index weakened significantly. That said, with other indicators suggesting that the Swedish economy is still performing well, we doubt that the PMI will …
The appreciation of the single currency since the ECB’s last meeting has strengthened the case to delay the formal announcement of asset purchase tapering until October. But with growth strong and inflation edging up, President Draghi is likely to hint …
31st August 2017
Economic growth and inflation have been stronger than expected since the Riksbank last met. Despite these developments, policymaker’s concerns about a sharp rise in the krona suggest that the Bank will hold off from altering its forward guidance at next …
The latest euro-zone inflation and unemployment data broadly support the case for the ECB to taper its asset purchases next year, but the Bank seems unlikely to announce its plan until its October policy meeting. … Euro-zone Flash CPI (Aug.) & …
The Danish economy notched up yet another decent quarter in Q2, with growth driven by domestic demand. We expect the economy to continue to perform well and have raised our 2017 GDP forecast to 2.5%. … Danish GDP …
August’s increases in German and Spanish HICP inflation point to an increase in eurozone inflation to about 1.5%. But the relatively subdued rates of core inflation in both economies support the ECB’s inclination to reduce its policy support only …
30th August 2017
The rise in the EC’s measure of euro-zone economic sentiment in August left the index pointing to stronger GDP growth ahead and will do little to take the pressure off the euro exchange rate. But with inflation expectations low, we suspect that interest …
Although surveys of overall economic sentiment in both Switzerland and Sweden fell in August, they still point to a healthy pace of GDP growth in both countries. But with inflation much stronger in Sweden than in Switzerland, we see the Riksbank starting …
July’s euro-zone money and credit data are consistent with limited inflationary pressure in the region. Coupled with the renewed rise in the euro to above $1.20, this strengthens the case for the ECB to take a very cautious approach to reducing its policy …
29th August 2017
Although the euro’s strength does not appear to have had an adverse impact on the euro-zone economy so far, this may not last. After all, unless the currency’s recent appreciation is reversed, it seems unlikely that euro-zone export growth will maintain …
25th August 2017
