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Credit conditions already tightening prior to market turmoil The Q3 credit conditions survey doesn’t capture the impact of the market turmoil of recent weeks, with the deadline for responses falling a week before the “mini-budget”. Nonetheless, it shows …
13th October 2022
Core inflation to remain uncomfortably high The reversal of temporary measures to reduce travel costs played a big role in the surge in German inflation in September. But underlying price pressures remain strong and broad based. We continue to expect that …
Growing acceptance price falls are in the pipeline While optimists can still point to limited supply, a fifth consecutive drop in new buyer enquiries in the RICS survey in September has convinced a majority of surveyors that house prices are heading for a …
On the cusp of recession The 1.5% m/m increase in industrial production in August was partly due to an out-sized rise in Ireland and was not enough to reverse the fall in July. All the evidence suggests that euro-zone industry is heading for a …
12th October 2022
Halifax confirms that house prices have stalled The 0.1% monthly fall in the Halifax house price index in September echoed the message from Nationwide earlier this week that house prices have now stalled. Given the sharp rise in mortgage rates over the …
7th October 2022
Improving supply chains temporarily boost construction activity The surprise increase in the construction PMI reflected an improvement on the supply side, as easing demand cut delivery times and improved contractor availability. But a slowing economy …
6th October 2022
Retail sales sliding The 2% year-on-year decline in euro-zone retail sales in August will probably look mild by the end of the year. Measures of consumer confidence point to sales falling much further, which seems quite plausible given that nominal wage …
Jump in approvals likely a rush to beat soaring rates The surprise jump in mortgage approvals in August probably reflected a rush to lock in mortgage offers as interest rates surged. There is a possibility that could be repeated next month, but …
30th September 2022
The stall that precedes the fall The stall in house prices in September was little surprise given the growing downward pressure on demand from rising mortgage rates. We suspect that, despite the reduction in stamp duty announced last week, this marks …
Economy comes roaring back The stronger-than-expected 6.8% q/q annualised expansion in Israel GDP in Q2 confirms that the Q1 contraction was just a blip. Economic activity remains strong and alongside the red-hot inflation figures for July, the risks are …
16th August 2022
Limited supply supporting pricing for now The RICS survey showed that weaker demand has not yet fed through to falls in prices, but sales volumes are beginning to wilt. We think it is just a matter of time before prices follow activity lower. The new …
11th August 2022
Higher interest rates to weigh on construction activity in H2 The latest RICS Construction Survey showed a further rise in workloads during Q2, though sentiment for the next 12 months worsened slightly. With labour and supply shortages remaining a major …
4th August 2022
Optimism misplaced as activity slows The fourth consecutive decline in the headline construction PMI took the index below 50 for the first time since January 2021. While driven by an idiosyncratic drop in civil engineering activity, the upbeat new orders …
A disappointing end to Q2 The sharp fall in euro-zone retail sales in June means sales contracted in Q2 as a whole. With the final PMI surveys pointing to price pressures continuing to intensify and demand softening, we think household spending will …
3rd August 2022
Labour market to remain tight In June, the number of unemployed people rose in the euro-zone for the first time in 14 months. Nevertheless, we expect the labour market to remain tight even as the economy heads into recession, maintaining the upward …
1st August 2022
Re-opening boost to fade, fast The chunky increase in euro-zone GDP in Q2 was due to the re-opening of the services sector which has masked a deterioration in most other parts of the economy. We expect a triple whammy of high inflation, tighter monetary …
29th July 2022
Net lending to property ticks up, but improvement will be short-lived Lending activity in the commercial property sector surprised on the upside in June, driven by a rise in net lending to standing property investments. But looking ahead, rising interest …
Rising core inflation adds to pressure on ECB With headline and core inflation rising more than expected yet again, the case for the ECB to pursue further aggressive tightening of interest rates is unassailable. A 50bp hike in September now looks nailed …
Slip in mortgage approvals in June a sign of the slump to come Mortgage approvals slipped back to below 2019 levels in June supporting our view that higher interest rates will cause housing market activity to slump over the next two years. Indeed, further …
Weakness in Q2, contraction likely in Q3 The 0.2% q/q expansion of Czech GDP in Q2 beat the consensus expectation for a small contraction, but it was roughly in line with what we had expected, and still marked a sharp slowdown in growth from Q1. We think …
Downbeat surveys raise the spectre of recession The bigger-than-expected decline in the EC Economic Sentiment Indicator in July adds to a growing list of indicators pointing to activity slowing markedly in July. With the region’s gas supply now reduced …
28th July 2022
Heading for recession The further decline in the German Ifo Business Climate Index (BCI) in July adds to the evidence that the German economy is on the brink of a recession as high energy prices and worries about energy security take their toll on firms’ …
25th July 2022
Production to remain sluggish this year Global steel production growth slowed in June as higher power costs in advanced economies contributed to lower output there. By contrast, the decline in China’s output slowed slightly. Overall, we expect global …
22nd July 2022
Euro-zone on brink of recession July’s flash PMIs suggest that the euro-zone is teetering on the brink of recession due to slumping demand and rising costs while inflationary pressures remain intense. The ECB will have to follow up on yesterday’s historic …
Borrowing overshoot will limit next PM’s ability to help households June’s public finances figures provided more evidence that the government’s fiscal position is worse than the Office for Budget Responsibility (OBR) predicted back in March. This may …
21st July 2022
Strength of inflation will push ECB into aggressive tightening Final inflation data for June confirm that price pressures are very strong. Whether or not the ECB hikes by 50bp on Thursday, we think it will be the beginning of an aggressive 12 months of …
19th July 2022
Lenders to tighten credit standards even as demand softens The Q2 credit conditions survey shows that lenders will not loosen credit conditions to keep the house price boom going like they did in 2004-2007. Indeed, despite the fact demand is expected to …
14th July 2022
Stronger-than-expected inflation strengthens case for front loading hikes The stronger-than-expected increase in Swedish inflation in June will only strengthen the resolve of policymakers to squeeze inflation out of the system and raises the chance that …
Outlook for manufacturing weak, despite increase in production May’s 0.8% monthly increase in euro-zone industrial production was largely due to a huge rise in Ireland’s output. Excluding Ireland, production decreased slightly in May. Moreover, …
13th July 2022
Inflation continues to drop back The further decline in Russia’s headline inflation rate to 15.9% y/y in June confirms that inflation has already passed its peak and we expect price pressures to ease further over the coming months. This is likely to …
8th July 2022
German industry probably contracted in Q2 May’s small rise in industrial production in Germany was not big enough to change our view that output in the sector is likely to have declined in the second quarter. And with the timelier surveys softening in …
7th July 2022
Slowdown in construction activity intensifies in June The third consecutive monthly fall in the construction PMI suggests that that growth in development activity is slowing. The near-term outlook has also deteriorated, with growth in new orders easing …
6th July 2022
Retail sales becoming a drag on growth The small increase in euro-zone retail sales in May, after a steep fall in April, suggests that high inflation remains a drag on consumption. Although re-opening effects may have boosted consumption in Q2, the …
Activity slowing, prices rising June’s final Composite PMIs confirmed the message from the flash release that activity is softening and that firms expect weaker conditions ahead. And price pressures remain intense throughout the euro-zone. The final …
5th July 2022
No comfort for the SNB Although Swiss inflation remains enviably low compared to many advanced economies, the further increase in the core rate will only strengthen the SNB’s resolve to squeeze price rises out of the system. A return to positive nominal …
4th July 2022
Inflation surprises on the upside yet again The further big increase in the euro-zone inflation rate came despite a substantial fall in Germany that was driven by regulatory changes, and shows that underlying price pressures remain exceptionally strong. …
1st July 2022
Households exercising more caution The more muted rise in unsecured borrowing in May suggests the cost of living crisis and recent plunge in consumer confidence are prompting households to exercise a bit more caution. That adds to reasons to think …
Net lending cools in line with weaker investment activity Lending activity in the commercial property sector cooled in May, consistent with the weaker investment data seen in recent months. Looking ahead, we expect rising interest rates and high property …
Weak approvals point to subdued lending demand ahead Mortgage approvals remained relatively weak in May supporting our view that higher interest rates are now starting to curb activity. As mortgage rates are set to rise further over the next year, this …
Further signs of manufacturing weakness Manufacturing PMIs for June showed further weakness across the region with the exception of Russia, which seems to have benefitted from a shift from imports toward domestic production. There were some encouraging …
Another record low The fall in the euro-zone unemployment rate in May to a new record low reaffirms the strength of the region’s labour market despite the apparent softening of activity. That will underpin an acceleration in wage growth this year, adding …
30th June 2022
More evidence of easing house price growth Monthly house price inflation slowed in June to its lowest since last September according to the Nationwide, while the annual rate continued to edge lower. That is consistent with our view of steady deceleration …
Households have a slightly smaller savings buffer The final Q1 GDP data leave households looking a bit more vulnerable to the big fall in real incomes that’s going to hit in Q2 and Q3. Although GDP and consumer spending won’t fall as far as real incomes, …
Clearer signs that the economy has stabilised The latest Russian data for May suggest that activity, having declined sharply after Western sanctions were imposed in March, has started to stabilise. Some sectors of manufacturing have benefited from a shift …
29th June 2022
Price pressures still not easing The fall in inflation in Germany and the increase in Spain in June largely reflect temporary factors and will not alter the consensus view at the ECB that interest rates need to be increased quite rapidly. The decline in …
Sharp fall in sentiment as recovery starts to slow The EC’s Economic Sentiment Indicators for Central and Eastern Europe showed broad-based declines in sentiment across the region and across sectors in June to levels not seen in a year. Economic activity …
Activity holding up better than expected The decline in EC Economic Sentiment Indicator in June was not as bad as we had feared and paints a more upbeat picture than the PMIs published last week. Nevertheless, the survey also pointed to inflationary …
Ending Q2 on a weak note The renewed decline in the German Ifo Business Climate Index (BCI) for June provides further evidence that weaker demand is starting to affect manufacturing output. With inflation set to remain high and the country’s gas supply …
24th June 2022
Cost of living crisis bites harder The fall in retail sales in May suggests that the decline in households’ real incomes from surging inflation is starting to hit consumer spending a bit harder. Even so, consumer spending appears to be softening rather …
Activity holding up better than expected The fact that the composite PMI didn’t fall in June means the economy could be holding up a little better than we and the Bank of England had feared. Beneath the headline numbers, the survey also suggests strong …
23rd June 2022
