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Plunge in inflation in December likely to reverse in January The sharp fall in German inflation in December was due to one-off energy subsidies so it will probably reverse in January. Headline inflation is still likely to decline rapidly in March, but we …
3rd January 2023
Falls in house prices will continue throughout 2023 The slowdown in house price falls in December is little comfort when leading indicators point to further sharp declines. Despite mortgage rates edging lower in recent weeks, we continue to think that …
30th December 2022
Fiscal stimulus pushes borrowing to a record November high November’s public finances figures showed that government borrowing is rising fast. And with pressures from the weakening economy and most of the costs from the government’s energy price support …
21st December 2022
Tight labour market suggests that wage growth will stay strong Euro-zone wage growth has accelerated this year and we expect it to stay strong. In turn, this will contribute to core inflation remaining above 2% in 2023. Data released this morning showed …
19th December 2022
Sentiment recovers further, but recession still coming The further increase in the Ifo Business Climate Index in December and the general improvement in the surveys over the past two months suggests the outlook for the German economy has improved. But …
Improvement, but surveys still point to recession The flash PMIs for December provide more evidence that businesses in some parts of the euro-zone have become a bit less gloomy about their current situation. But they still point to a contraction in the …
16th December 2022
October’s fall in output sets the tone for a bleak Q4 Industrial production in the euro-zone declined by 2.0% m/m in October with all the largest economies showing a reduction in output. While output held up better than we had expected in Q3, this is …
14th December 2022
The Bank of England can breathe a sigh of relief knowing that CPI inflation has peaked. But with activity holding up and wage growth still strengthening, the 2.0% inflation target is still a long way from being hit. As such, the Bank will still probably …
Q3 likely to mark a peak for lending volumes The detailed mortgage lending data for Q3 show that demand was resilient to rising mortgage rates at first. Loan-to-income ratios crept up despite rising financing costs. But with interest rates on new …
13th December 2022
Recession still likely, despite improvement in sentiment The further recovery in the ZEW in December confirms that sentiment in Germany has improved a bit, but it remains at a very low level and we still think Germany is now already in a recession. The …
Accelerating wage growth won’t make the Bank of England’s task easier Coming on the back of yesterday’s larger-than-expected rise in GDP in October, today’s news that the labour market is loosening only gradually and wage growth continues to accelerate …
October’s rebound won’t prevent contraction in GDP in Q4 The 0.5% m/m rise in GDP in October was mostly due to the rebound after September’s extra bank holiday. Even so, the surprisingly strong rise could tilt the Bank of England towards another bumper …
12th December 2022
Survey shows prices and activity continuing to fall in November The RICS survey confirmed that there were widespread house price falls in November. Surveyors expect a further drop in prices and slowdown in transactions ahead, in line with our forecasts. …
8th December 2022
German industrial output resilient but still set for contraction German industrial production once again held up better than expected in October. But this resilience was driven partly by a recovery in construction which tends to be volatile. We still …
7th December 2022
Sharp drop confirms that house price correction has begun The largest monthly fall in the Halifax house price index since October 2008 confirms that the house price correction that we forecast has begun. While mortgage rates have fallen back somewhat in …
Headline index starts to fall as recession cuts demand As expected, the headline CIPS construction index retreated in November as falling demand outweighed the benefit of easing prices and an increase in the availability of contractors. As the recession …
6th December 2022
Households cutting back amid high inflation The sharp drop in euro-zone retail spending in October is consistent with our view that – notwithstanding the slight uptick in some business surveys recently – the economy is entering recession. With …
5th December 2022
Labour market to soften from here, but remain tight The record-low euro-zone unemployment rate of 6.5% in October is likely to be as good as it gets for the region’s labour market. But the rise in unemployment from here will probably be small. The …
1st December 2022
Sharp drop in prices as market adjusts to higher mortgage rates The 1.4% m/m drop in house prices in November was far larger than anyone expected, raising the risk that prices fall more rapidly and further in response to high mortgage rates than we …
Further downgrades as yields rise and rental growth falls back The latest IPF Consensus Survey showed further significant downgrades for total returns in 2022 and 2023, as higher interest rates have boosted yields and a looming recession cuts rental …
30th November 2022
Peak headline inflation won’t stop ECB hiking Euro-zone inflation may now be past its peak but with the core measure unchanged in November and set to remain well above 2% next year, we expect the ECB to hike rates by 50bp or 75bp in December. The fall …
Headline inflation close to a peak, but core may rise further November’s fall in headline inflation in Germany and Spain suggest that the euro-zone headline rate will come in lower than we had anticipated when it is published tomorrow, and is now close …
29th November 2022
Small improvement in sentiment and fall in inflation The small increase in the EC Economic Sentiment Indicator (ESI) for November suggests that prospects for the euro-zone economy may no longer be deteriorating. We still expect a recession, but it is …
Net lending sees further gains even as capital values fall Falling capital values have not yet deterred commercial property investors, with net lending to property increasing for the second month in a row in October. Bargain hunters may have given lending …
Slump in approvals points to sharper downturn in activity ahead Rocketing mortgage rates led to a sharp drop in mortgage approvals in October. While quoted mortgage rates have peaked they are unlikely to fall much below 5% next year, keeping the cost of …
Small improvement in business climate won’t prevent recession The increase in the Ifo Business Climate Index in November does not change the big picture that the German economy is likely to contract in Q4. November’s uptick in the Business Climate Index …
24th November 2022
Contraction in Q4 very likely, inflation nearing a peak The flash PMIs for November add to the evidence that the economy will contract in Q4. The price indices suggest that inflation will soon peak, but they remain extremely high by past standards. The …
23rd November 2022
Little sign of goods price pressures easing Final inflation data for October confirm that price pressures strengthened and became more broad-based. Unlike in the US and UK, there is little sign that goods inflation has passed its peak. While headline …
17th November 2022
The eve of recession Euro-zone GDP growth slowed to just 0.2% q/q in Q3 and with all of the timelier surveys pointing downwards, the economy looks set to fall into recession in Q4. Nevertheless, surveys of firms’ hiring intentions suggest that the …
15th November 2022
Resilience won’t last much longer The unexpected strength of euro-zone industrial production in September was largely due to the rebound in vehicles production and distortions affecting Ireland’s data. While vehicle output may continue to recover in the …
14th November 2022
Underlying price pressures to remain very strong The rise in core inflation in Germany in October confirms that underlying price pressure in the country are still building. We expect the core rate to remain well above 2% throughout next year. Final HICP …
11th November 2022
Rise in retail sales not a sign of things to come September’s increase in euro-zone retail sales is unlikely to be sustained. Falling real incomes and rock bottom consumer confidence suggest that household spending will fall sharply over the winter. …
8th November 2022
German industry still set for a tough winter German industrial production rose significantly in September but we doubt this is a sign of things to come. With industry facing headwinds from high energy costs, rising interest rates and cooling demand, we …
7th November 2022
Improvement in headline index will not last long As was the case last month, an improvement in delivery times and subcontractor availability drove a surprise rise on the headline construction PMI in October. But a slowing economy and higher financing …
4th November 2022
Recession looms while inflation stays exceptionally high The final euro-zone PMIs for October paint a clear picture of falling activity and sky-high inflation. We expect the ECB to prioritise the fight against inflation and press on with raising the …
Construction activity set to slow as financing constraints bite The latest RICS Construction Survey showed a rise in workloads in Q3, although the gain was small. Looking ahead, a slowing economy and higher financing costs will soon lead to a cut in …
3rd November 2022
Labour market still strong but likely to soften from here The fall in the euro-zone unemployment rate to 6.6% in September shows that the labour market remained very tight even as the economy headed towards recession. We expect unemployment to rise in …
House prices now falling as higher mortgage rates bite The jump in mortgage interest rates is now being felt in house prices, with Nationwide reporting the first month-on-month fall since July 2021. House prices are now set to stay on a sustained downward …
1st November 2022
Approvals begin to fall as rising rates take effect Mortgage approvals fell in September as buyers began to adjust to rising interest rates. With further rate rises likely in the coming months, we expect this downward trend to continue and for lending to …
31st October 2022
Households take caution as real spending power falls The increase in precautionary household saving in September and weakening demand for credit poses an extra downside risk to our forecast that the economy will contract by 2% during a recession. These …
Double-digit inflation will keep ECB hawkish The increase in euro-zone GDP in Q3 does not alter our view that the euro-zone is on the cusp of a recession. But with inflation having jumped to well over 10%, the ECB will prioritise price stability and press …
Investor caution to weigh on net lending Net lending to commercial property was positive in September but, looking through the monthly volatility, there is a clear downward trend in lending. With the economy entering a recession and property yields now …
Strong inflation prints will keep ECB in tightening mode Renewed inflation shockers in Germany, France and Italy in October pour cold water on expectations that the ECB’s softer tone on rate hikes yesterday will pave the way for a “pivot”. We continue to …
28th October 2022
Economy contracting, price pressures intense The further fall in the European Commission’s economic sentiment indicator in October adds to the evidence that the euro-zone economy is contracting. But the labour market still looks tight and firms’ price …
Recession postponed The unexpected resilience of Germany’s economy in Q3, with GDP rising 0.3% q/q, has probably only postponed the recession which we now expect to begin in the fourth quarter. Business surveys show that activity has already begun to …
Occupier demand falls as economy slows The slowing economy and cost-of-living crisis are now having a clear impact on occupier demand, with surveyors reporting the first drop since the start of 2021. That has fed through to rent and capital value …
27th October 2022
Yet more evidence of recession The Ifo Business Climate Index held up better than expected in October but was still extremely low. With other business surveys also persistently weak, we think Germany will experience the deepest recession among euro-zone …
25th October 2022
Note: We’ll be discussing key takeaways from our Outlook published earlier in the week on Tuesday, 25th October. Register here . PMIs signal recession and high inflation The flash PMIs for October provide yet more evidence that the euro-zone is sliding …
24th October 2022
Recession just around the corner September’s industrial production and retail sales figures out of Poland showed that activity continued to recover last month. Even so, it may be touch-and-go as to whether Poland’s economy was already in a technical …
21st October 2022
Weak sentiment points firmly to recession Although the headline ZEW investor sentiment indicator edged up in October it is still at a very low level, while the current conditions index – which is more closely corelated with GDP – actually fell by more …
18th October 2022
