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January’s rise in German industrial production reversed December’s fall and provided a solid start to Q1. But so far, hard data on Germany and elsewhere in the euro-zone suggest that growth will not be as strong as the surveys have implied. … German & …
8th March 2017
Switzerland’s consumer prices data for February revealed that prices are finally rising again. But with the franc likely to strengthen this year, underlying price pressures are set to remain subdued. … Swiss Consumer Prices …
Survey data for February suggest that euro-zone GDP growth accelerated in Q1 following two healthy quarterly gains of 0.4% in the second half of last year. After February’s rise, the PMI pointed to an expansion of about 0.6%. That said, there was evidence …
7th March 2017
The final estimate of euro-zone GDP in Q4 showed that growth was driven mainly by household spending. But with rising energy inflation now weighing on households’ real income growth, we expect the consumer recovery to slow. … Euro-zone GDP Expenditure …
This month see the first of a number of key elections in the euro-zone this year. Investors are likely to become increasingly worried about the potential for anti-euro parties to enter government and the implications that that might have for the future of …
6th March 2017
The European Commission recently released new forecasts agreeing with our view that the peripheral economies will miss their fiscal deficit targets again this year. While bond yields dropped back in February, they remain vulnerable to an increase in …
Q4’s sharper-than-anticipated drop in Greek GDP is clearly very bad news. While Prime Minister Tsipras claims that the economy is now poised to recover, the business surveys suggest otherwise. This will add to the IMF’s scepticism about Greece’s ability …
If Italy left the euro-zone, we think that its new currency would depreciate by about 30% against the euro. In the year or so following its exit, the economy would probably contract sharply, but we suspect that Italy’s medium-term prospects would be …
3rd March 2017
The recent strength of activity surveys, as well as increases in headline inflation and inflation expectations, are all good news for the ECB. But for now, we doubt that this will be enough to sway the Bank from its plan to continue purchasing assets …
Retail sales fell again in January and quarterly growth is likely to be weak in Q1. While Italy’s economy slowed in Q4, the PMI points to a pick-up this quarter. … Italy GDP (Q4), Euro-zone Retail Sales (Jan.) & Final PMIs …
Both industrial production and services output in Sweden rose at a decent pace in January. And with surveys pointing to further gains, the Swedish economy is set for another strong quarter in Q1 and inflationary pressures should continue to build. … …
The recent run of positive data may lead the ECB to judge that downside risks to the economic outlook have receded when it meets next week. But core inflation has remained low despite the rise in the headline rate. And with political risks still a cause …
2nd March 2017
February’s rise in euro-zone inflation to the ECB’s 2% price stability ceiling reflected temporary energy and food effects. With core inflation set to remain subdued, we think that the ECB’s plans to buy assets throughout this year are justified. … …
None of the three frontrunners in this spring’s French presidential election looks likely to be able to depend on majority support in Parliament should they be elected. This will weaken their capacity to implement their proposals and could paralyse …
The lacklustre expansion of Swiss GDP in Q4 suggests that the negative effects of deflation and the strong franc are still lingering. And with political risks in the euro-zone set to keep the franc strong, exporters are likely to remain under pressure. … …
There is a significant chance of populist, eurosceptic parties entering government in Italy. While populists’ chances in Germany, France and the Netherlands are more limited, they may nevertheless take enough seats in their respective parliaments to gain …
1st March 2017
February’s rise in German consumer price inflation to 2.2% reflected food and energy effects. Core inflation remained subdued, implying that rising price pressures in the euro-zone’s largest economy need not deter the ECB from its planned asset purchases. …
The minutes of the Riksbank’s February meeting were fairly dovish. With board members concerned about the krona’s appreciation and political risks in the euro-zone, we think that the Bank will wait until July before dropping talk of the repo rate being …
Activity surveys suggest that Q4’s slowdown in Finland will be short-lived. And February’s PMIs point to faster manufacturing growth in Switzerland, Sweden and Norway. They also imply that price pressures are building in Sweden. … Finnish GDP (Q4) & …
The Icelandic króna has appreciated significantly over the past month, as the central bank reiterated its desire to reduce its foreign exchange intervention. More generally, bond yields have fallen across the Nordic and Swiss economies, while Norwegian …
28th February 2017
Swedish growth picked up sharply in Q4, driven mainly by external demand. In Denmark, GDP growth was slower and is set to remain fairly subdued. … Swedish & Danish GDP (Q4) & Swedish Retail Sales …
We doubt that Prime Minister Enda Kenny’s apparently imminent resignation will have a major macroeconomic effect. More generally, the economy looks well placed to continue growing strongly. … Irish economy will continue to …
27th February 2017
February’s EC business and consumer survey suggests that political uncertainty has yet to damage euro-zone growth, which appears to have accelerated at the start of the year. … EC Business & Consumer Survey …
January’s euro-zone money and credit data point to steady economic growth. But they still suggest that core inflation will remain very weak. … Euro-zone Monetary Indicators Monitor …
French presidential candidate Emmanuel Macron last night confirmed that he intends to cut overall government spending, boost public investment and overhaul the labour market. These are all long overdue and would help to revive France’s economic prospects. …
24th February 2017
Last week’s PMI survey brought some more good news for the euro-zone economy. Accordingly, due to expectations of stronger growth in Q1, we have revised up our GDP forecast for 2017. While the survey’s forward-looking components paint a bright picture of …
Despite edging down in February, the NIER’s Economic Tendency Indicator still points to a surge in Swedish GDP growth. And with inflation expectations rising far above the Riksbank’s target, the Bank’s next move will be to tighten policy. … Swedish …
The second release confirmed that German GDP was growing at a healthy pace at the end of last year, driven mainly by consumer spending. While business surveys suggest that growth will accelerate further in the near term, March’s dip in consumer confidence …
23rd February 2017
February’s renewed rise in the German Ifo Business Climate Indicator supported the message from the PMI that growth accelerated at the start of this year. … German Ifo Survey …
22nd February 2017
December’s sharp decline in Norway’s unemployment rate was not as encouraging as it first appears. And while surveys suggest that employment growth will pick up, we suspect that wage growth will remain subdued. … Norwegian Labour Force Survey …
There are some tentative signs of improvement in the Italian banking sector, but it will be a very long time until the country’s lenders look healthy. So the banks will remain a risk to the economic outlook. … Italian banks still a major …
21st February 2017
While inflation fell in both Sweden and Norway in January, the outlook for prices in these countries differs significantly. Consumer price inflation in Sweden fell from 1.7% to 1.4% in January. But a slowdown was always likely, due to base effects. We …
A German government led by the Social Democratic Party could embark on a modest fiscal stimulus at home and show more fiscal leniency to countries such as Greece. But its policies would be unlikely to cause a meaningful rebalancing within the euro-zone or …
February’s sharp rise in the euro-zone Composite PMI to its highest point since April 2011 suggests that economic growth is picking up. But the survey’s price indices remain consistent with only weak inflationary pressures, which will keep the ECB …
In its latest economic forecasts published last week, the European Commission (EC) provided a fairly upbeat outlook for the euro-zone economy, expecting it to sustain its current pace of growth in 2017 and 2018. However, we think that the EC is being too …
17th February 2017
The dip in Swedish inflation in January was mainly due to base effects and will be reversed in February. And with pay growth set to pick up after this year’s wage negotiations, underlying inflationary pressures should continue to build. … Swedish Consumer …
The latest news on the Greek economy support the IMF’s pessimistic views about the sustainability of Greek debt. But regardless of whether a deal on the third bailout is reached or not, rising euroscepticism elsewhere in the region implies that there is …
16th February 2017
We think that a new French franc would fall sharply against the euro if Marine Le Pen became President and took France out of the single currency. While the likelihood of these events is low, it is probably higher than the relative valuation of French …
With one month to go until the Dutch general election, in this Update we answer twelve questions about the vote and the possible consequences of a victory for the anti-EU Party for Freedom (PVV). … Key questions ahead of the Dutch general …
15th February 2017
The euro-zone’s goods trade surplus widened somewhat in December, and, as a result, was virtually unchanged over Q4 as a whole. Looking ahead, while surveys suggest that export growth may pick up from its current low pace, any effect on the trade surplus …
While the Riksbank maintained a very dovish tone today, the strength of the Swedish economy and rising inflationary pressures mean that the Bank will soon have to change its stance. We expect the repo rate to be increased by the end of this year. The …
Former Prime Minister Matteo Renzi’s decision to call a Democratic Party leadership contest reduces the chance of an early general election this summer. But an election could still take place later in the year. So if anti-euro parties’ poll ratings …
14th February 2017
The second estimate of euro-zone Q4 GDP suggested that economic conditions at the end of last year were not quite as positive as previously estimated by Eurostat. And growth looks set to slow this year due to rising energy prices and political risks. … …
Following this morning’s release of German and Italian Q4 GDP data, we are sticking to our forecast that euro-zone Q4 GDP growth will be left unrevised at +0.5%. … German & Italian GDP (Q4), German Consumer Prices …
Switzerland’s consumer and producer prices data for January provided some hope that the prolonged period of falling prices may finally be over. But with the franc likely to strengthen this year, underlying price pressures are set to remain subdued. … …
Marine Le Pen’s announcement of her radical vision for France, particularly her intentions for an exit from the European Union and the euro, unnerved euro-zone financial markets last week. Her main opponent, the centrist M. Macron, would be a much more …
10th February 2017
The decline in French industrial production in December marked a weak end to 2016, echoing falls in a number of other euro-zone countries. But Italian industry put in an unexpectedly strong performance. … French & Italian Industrial Production …
In January, the Norges Bank’s favoured measure of inflation fell to a 37-month low. We think that it will fall further, prompting the Bank to cut its key policy rate by 25 basis points in the second half of the year. … Norwegian Consumer Prices …
Compared to 2012, when ECB President Draghi’s pledge to do “whatever it takes to preserve the euro” helped to bring the currency union back from the brink, the central bank’s ability to address euro-zone break-up risks has diminished. … Can the ECB still …
9th February 2017
Recent economic data support our view that the Riksbank will raise interest rates this year. But given the recent appreciation of the krona, the Riksbank is likely to maintain a very dovish tone in its communications next week. … Riksbank to maintain …
