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ZEW indicator makes German recession look more likely The small rise in the ZEW measure of German investor sentiment in May left it still very low. And the current conditions index fell further, which is consistent with our view that the economy will …
10th May 2022
Inflation pick-up brings 50bp hike in June on the table The stronger-than-expected increase in core inflation in April raises the chances that the Norges Bank will step up the pace of tightening at its next rate decision, in June. The increase in CPI …
Reality bites as PMI shows signs of a slowdown in activity The construction PMI for April showed that building activity remained solid, but that the pace of growth has slowed. An easing in new orders growth also hints at a further slowdown ahead, as the …
6th May 2022
A strong April, but approaching a turning point In contrast to Nationwide’s measure of house price inflation, there was no sign of house price growth slowing in the Halifax figures for April. But with mortgage rates only just starting to climb to reflect …
Ukraine war hitting hard The slump in output in March shows that the war in Ukraine is hitting manufacturers hard even before a ban on Russian energy imports has taken effect and before the ECB has raised interest rates. We think this is the start of a …
Construction sector activity to face rising pressures in short term The latest RICS Construction Survey indicated that activity in Q1 remained solid, while sentiment about for the next 12 months remained optimistic. But it also showed that labour and …
5th May 2022
Inflation closes in on 2002 peak Turkey’s headline inflation rate recorded another sharp increase to 70.0% y/y in April and there’s a strong chance that it moves beyond its peak in the early 2000s in the coming months. Despite this inflation backdrop, a …
Chances of a contraction in Q2 growing The decrease in euro-zone retail sales in March is the first indication from official data that the war in Ukraine is weighing on consumption. With the final PMI surveys pointing to price pressures intensifying and …
4th May 2022
Subdued net lending expected to be the norm in the near term Net lending to property eased for a third consecutive month in March, but continued to show growth. We expect increasing economic headwinds and structural changes within some sectors to weigh on …
Consumer spending appears to be holding up well so far The decent increase in unsecured borrowing in March suggests that the plunge in consumer confidence and fall in real incomes have not caused consumer spending to collapse. This lends some support to …
Robust for now Unchanged mortgage approvals in March showed that the housing market remained buoyant throughout the first quarter. But the emerging trend of rising mortgage rates on new loans rising will only accelerate, which will reduce demand and …
Labour market looks tight The euro-zone unemployment rate fell to a new record low in March, and the latest business surveys suggest that employment will continue to increase at a decent pace. With the surveys also showing that the labour market is …
3rd May 2022
Stagflation risks building The small increase in euro-zone GDP in Q1 means that the region will avoid a technical recession in the first half of the year. But rising inflation and the fallout from the Ukraine war mean that GDP is likely to contract in Q2, …
29th April 2022
Slowdown in Q1, contraction likely in Q2 The 0.7% q/q expansion of Czech GDP in Q1 was slightly stronger than expected, although it still marked a slowdown in growth and, in particular, there were signs of weakness at the end of the quarter. We think that …
Small fall in energy inflation will not put ECB off rate hikes The further rise in headline inflation in Germany, and increase in the underlying rate in Spain, suggest that euro-zone inflation will come in around 7.4% in April. This will do nothing to …
28th April 2022
Office and retail occupier activity stages a comeback The latest RICS survey showed that office and retail occupier activity improved significantly in Q1 and that respondents were more positive about the prospects for property over the next 12 months. But …
Surprising resilience in March, but deeper downturn likely in Q2 The latest activity data for Russia beat expectations in March and suggest that the economy entered a softer downturn than had been expected. We have reservations about the accuracy of the …
27th April 2022
Public finances won’t offer much help to the Chancellor in 2022/23 Total borrowing for the 2021/22 fiscal year overshot the Office for Budget Responsibility’s (OBR) March 2022 forecast by some £24bn, rounding out the third-worst year for the public …
26th April 2022
Slight recovery in April but Q2 contraction still likely The Ifo survey for April was a little stronger than we had expected and suggests that the services sector in particular is growing rapidly. But the index is still well below its pre-Ukraine war …
25th April 2022
PMIs point to continued easing in economic growth The fall in the composite PMI in April suggests GDP growth has continued to slow as the cost of living crisis has intensified. But economic activity doesn’t appear to be collapsing. And, beneath the …
22nd April 2022
Services sector propping up activity, but for how long? The rise in the euro-zone Composite PMI in April suggests that the services sector rebound from the Covid restrictions earlier in the year is offsetting weakness in the manufacturing sector. But with …
Solid expansion in Q1, but growth to soften this quarter Industrial production and retail sales figures in Poland remained incredibly strong in March and point to a solid expansion in Q1. A lot of this strength is unlikely to last as the effects of the …
Gloomy signs of spending crunch The hefty fall in retail sales in March marks the second consecutive month of decline and adds to signs that the real wage squeeze is hitting consumer spending. With CPI inflation already at a 30-year high and set to keep …
Consumption to be a significant drag on growth The rise in consumer confidence in April was slightly better than expected. Nevertheless, confidence is still very low and points to household spending falling in April. That’s consistent with our assumption …
21st April 2022
Inflation hasn’t peaked yet Headline inflation rose to 7.4% in March and further increases are likely. This will put a big dent in consumer spending, so we think that 2022 will be a year of stagflation for the euro-zone. Data released this morning showed …
Rising market rates tighten conditions Banks expect mortgage availability to fall back in Q2 as lenders push up borrowing rates to reflect increases in Bank Rate, but other lending criteria are expected to be stable or loosen. The availability of mortgage …
14th April 2022
Inflation at a 31-year high The stronger-than-expected increase in Swedish inflation in March is likely to give more ammunition to the hawks in the Riksbank, and lends support to our view that the Bank will start to raise the repo rate and press ahead …
High inflation means BoE will have to raise rates further than it expects The rise in CPI inflation in March from 6.2% to a new 30-year high of 7.0% was the sixth upside surprise in as many months and will pile more pressure on the Bank of England to …
13th April 2022
Mounting signs of stagflation Final inflation data for Germany in March and the first survey of economic sentiment for April underline the acute problems which the German economy now faces. Energy inflation and underlying price pressures are rising even …
12th April 2022
Industry and retail sales on diverging paths Turkey’s activity data for February point to a growing divergence between industry, which is being supported by a weak lira, and retail sales which continues to struggle in face of the surge in inflation. On …
Lower-than-expected inflation won’t stop Norges Bank hiking Although headline and core inflation came in below expectations in March, underlying price pressures are likely to push both measures up a bit in the coming months. Meanwhile, the Norges Bank is …
11th April 2022
Recovery slowing and at risk of stalling The news that the economy was hardly growing at all in February suggests the economy had a little less momentum in Q1 than we had previously thought, and increases the risk of a contraction in GDP in the coming …
Largest monthly increase since the late-1990s The 7.6% m/m rise in consumer prices in Russia in March was the highest monthly increase since the 1990s. It pushed the headline inflation rate up to 16.7% y/y and we think it will rise towards 23% y/y in the …
8th April 2022
Modest growth before the war in Ukraine The small increases in euro-zone retail sales and German industrial production suggest that economic activity was growing at a modest pace in February. With much higher energy prices now weighing on manufacturing …
7th April 2022
PMI results mixed, with more concern on the horizon The continued strength of the construction PMI in March suggests that activity in the sector increased despite ongoing headwinds from supply constraints and cost inflation. The rise in new orders …
6th April 2022
Output expectations hardest hit in Germany March’s final euro-zone PMI surveys confirmed that output expectations fell sharply, with Germany experiencing the biggest drop. Meanwhile, price pressures remain intense across the currency union. The small …
5th April 2022
Inflation leaps above 60% Turkey’s headline inflation rate recorded another sharp rise to reach 61.1% y/y in March and it is likely to rise a bit further over the coming months. But there is still little sign that the central bank and, crucially, …
4th April 2022
Inflation overshoot will soon prompt ECB into action With euro-zone inflation rising even further above the ECB’s forecast, and likely to remain very high for the rest of the year, we think it won’t be long before the Bank starts raising interest rates. …
1st April 2022
Swiss inflation to remain above 2% for much of this year Swiss inflation rose further above the SNB’s definition of price stability in March, and higher commodity prices and continued supply problems will keep it there for most of this year. Given the …
Labour market very tight prior to Ukraine war The euro-zone unemployment rate edged down yet again in February, to a record low of 6.8%. There is little sign yet that this is feeding through to higher wages. But labour market conditions are set to remain …
31st March 2022
Households using savings to offset the fall in real incomes The leap in inflation was behind the fall in real household disposable incomes in Q4 of last year. But it is encouraging that households appear willing to reduce their saving rate in order to …
House price growth hits 18-year high, but slowdown expected The acceleration in house price growth to an 18-year high of 14.3% will add to concerns that the pandemic housing market boom is getting out of hand. With mortgage rates rising, house price …
Ouch! German inflation hits 40-year high After a further huge jump in March, German inflation is likely to average at least 7% this year, and there are plenty of upside risks, not least the threat of power shortages. With price pressures remaining very …
30th March 2022
Chances of a manufacturing recession increasing The European Commission business and consumer survey for March is consistent with our view that economic growth will be slower than most anticipate this year while inflation will overshoot expectations. The …
War in Ukraine punctures economic sentiment The EC’s Economic Sentiment Indicators unsurprisingly fell in most countries in March amid the fallout from the war in Ukraine and there were further large increases in price pressures on the back of rising …
Modest net lending set to continue Net lending to property eased further in February, though it remained in positive territory. We expect lending trends to remain fairly subdued as both economic and sector specific challenges loom over the coming months. …
29th March 2022
Households still happy to spend The leap in credit card borrowing in February and smaller increase in household savings could suggest that the cost of living crisis is already starting to bite. But we think it is more likely that households had the …
Decline provides an early sign that demand has begun to wane Higher than usual home moving activity ensured that mortgage approvals remained substantially above pre-virus levels in February. But the decline compared to January could be an early sign that …
Manufacturing contraction looming March’s Ifo business survey provides further evidence that Germany is heading for a sharp slowdown as the war in Ukraine and sky-high energy prices cause manufacturing output to contract. However, we still think a …
25th March 2022
Small fall a sign of things to come The small fall in retail sales in February probably had more to do with the shift back towards non-retail spending and the impact of Storm Eunice than it did the cost of living crisis. But, with further rises in …
