Filtered by Region: Europe Use setting Europe
We were not surprised that European Commission (EC) President Ursula von der Leyen announced in her State of the Union address this week that the EC will launch an anti-subsidy investigation into electric vehicle (EV) imports from China. Indeed, we had …
15th September 2023
Russia seeking closer friendship with North Korea The strengthening relationship between President Putin and North Korean leader Kim Jong Un was on show this week but we doubt the discussions will yield any meaningful benefits for Russia’s economy or …
Note: We’ll be discussing September’s Fed, ECB and Bank of England policy decisions in a Drop-In at 3pm BST on Thursday 21st September. (Register here .) We’ve been surprised by the resilience of the labour market over the past year. More recently, …
It’s no surprise that the reverberations from the revisions to GDP announced by the Office for National Statistics (ONS) last week continued into this week because the upward revisions were so big. As we noted at the time, we estimate that the level of …
8th September 2023
Christine Lagarde and her colleagues will have some new and gloomy data releases to contemplate when they gather in Frankfurt next week. First, revised data published on Wednesday show that the euro-zone eked out only a 0.1% increase in GDP in Q2 as …
The decision by the National Bank of Poland (NBP) to kick off its easing cycle this week with a much larger-than-expected 75bp interest rate cut has been heavily criticised, and suggests to us that policymakers are underestimating the challenge of …
Rising gas prices doesn’t mean energy crisis is back Wholesale European natural gas prices jumped more than 20% in the early part of this week and have been highly volatile recently, but this doesn’t mean the energy crisis in the region is coming back to …
1st September 2023
This week the Bank of England’s Chief Economist, Huw Pill, indicated that while the Bank still had to “see the job through” and remain vigilant with “stubbornly high inflation”, he didn’t think interest rates need to rise much further from 5.25% now. But …
Core inflation heading down August’s inflation data, published this week, increase our confidence that the core rate has passed its peak. Core goods inflation is clearly on a downward trend and has much further to fall as lower energy prices and improved …
CBRT policy shift now firmly back on track There’s a lot of confusion about what drove Turkey’s central bank to deliver an unexpected 750bp rate hike this week and doubts remain about the policy U-turn. But at this point we’re minded to focus on the …
25th August 2023
Worries that Germany is becoming the “sick man of Europe” again have resurfaced over the past few weeks. The term was first used in relation to Germany in 1999, at a time when it had been growing much more slowly than countries such as France and Spain …
This week’s bigger fall in UK rate expectations, bond yields and the exchange rate compared to elsewhere is largely due to the markets deciding that a weaker economy will trim inflation, meaning the Bank of England has less work to do. Market pricing is …
The Bank of England has more work to do The Fed’s work may be done, but as this week’s UK inflation and labour market releases made clear, this doesn’t mean the Bank of England can relax. First came figures released on Tuesday showing that the 3myy rate …
18th August 2023
Long road ahead for Spanish politics Yesterday’s election of the Socialist (PSOE) candidate as President of the Congress of Deputies suggests that the PSOE has the momentum as Spain’s politicians try to form a new government. But it remains unclear …
Where the US leads, the UK often follows. So the evidence of broad-based, rapid disinflation in the US offers some hope for the UK. Indeed, at 7.9%, the UK is still lumbered with a CPI inflation more than twice the US rate (3.2%). At least July’s UK CPI …
11th August 2023
Further CEE disinflation keeps rate cuts on track The July inflation data out of Central and Eastern Europe (CEE) this week suggests that our forecasts for interest rate cuts to arrive across the region over the rest of this year, and in early 2024, …
It is not surprising that Italian bank shares slumped this week after the government announced that it is imposing a windfall tax on the banks. The decision seemed to come out of the blue and to have been cobbled together at the last minute with several …
Peak does not mean pivot Whether you took this week’s 25 basis point (bps) rise in interest rates, from 5.00% to 5.25%, and the Bank of England’s accompanying communications as hawkish or dovish largely depends on your prior expectations. We thought it …
4th August 2023
Our new GDP forecasts There was something for both the bulls and bears in the euro-zone’s Q2 GDP data. For the bulls, the data were better than expected and show that the economy continued to dodge a recession. For the bears, some one-off factors meant …
GDP data released this week suggest that the euro-zone economy held up better than we expected in Q2. Output rose in France and Spain and stagnated in Germany . Together, the national data point to euro-zone GDP rising by 0.4% in Q2 rather than falling …
28th July 2023
One consequence of higher interest rates is an increase in the losses that the Bank of England will make via the bonds it bought during its quantitative easing (QE) programme. This week, the Bank published an estimate that it could make a huge £150bn …
Despite the fall in CPI inflation from 8.7% in May to 7.9% in June (see here ), the UK is still lumbered with an inflation rate that is 1.4 percentage points (ppts) higher than in the euro-zone. And at 4.8ppt, the gap between UK and US CPI inflation …
21st July 2023
Russian FinMin throwing in the towel? A raft of comments from senior policymakers at the Russian Ministry of Finance this week highlight the pressures that the public finances are under and how policymakers are likely to tighten fiscal policy in response …
In a relatively quiet week for euro-zone economists, the most important release was the final inflation data for June. Unusually, these were revised slightly from the flash release as core HICP inflation is now estimated to have edged up to 5.5% rather …
Paying particular attention to pay growth Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19th July. Register here to join that 20-minute online briefing. We know that the evolution of wage …
14th July 2023
More signs of economic weakness Activity data released this week brought further evidence that euro-zone GDP contracted in Q2. While industrial production edged up by 0.2% m/m in May, it is still set to have fallen in Q2 as a whole, barring an increase of …
Market-implied interest rate expectations have continued to rise this week as investors have concluded that in order to squeeze high inflation out of the system, the Bank of England will have to raise interest rates further, from 5.00% now to a peak of …
7th July 2023
Russian ruble depreciation gathering pace The depreciation of the Russian ruble gathered pace this week amid a continued squeeze on Russia’s trade surplus and growing capital outflows. A weaker currency will support the fiscal position, but at the same …
Weak activity data The latest data support our view that euro-zone GDP contracted in Q2, in contrast to the consensus view that it rose. In May, euro-zone retail sales were weak and industrial output in Germany edged down, while in June the euro-zone …
It’s been another tough week for the Bank of England. The week began with the Bank’s Chief Economist, Huw Pill, defending its inflation models in a letter to the UK Parliament’s Treasury Committee and ended with Monetary Policy Committee (MPC) member, …
30th June 2023
We are nudging up our peak ECB rate forecast in light of communications from ECB officials at Sintra and the latest economic data. We now see 25bp rate hikes in both July and September, taking the deposit rate to 4%. As a reminder, we were forecasting …
It’s been an extremely tough week for the Bank of England and its Governor, Andrew Bailey. Wednesday’s CPI release revealed the second shocking surge in core inflation in a row and appeared to confirm our view that the inflation problem is bigger in the …
23rd June 2023
A cut, a hold .... and an underwhelming hike The three central bank meetings that took place across the region this week all produced different outcomes, and policymakers’ communications suggest interest rates in these countries will continue to move in …
This week, we published our latest Europe Economic Outlook . Three key points are worth highlighting. First, the euro-zone economy is likely to remain in recession for the rest of 2023. Admittedly, this year’s fall in gas prices will support demand and …
PiS adding further fuel to the inflation fire The Polish government set out plans this week to increase the national minimum wage by around 20% again next year. With the labour market still very tight and further pre-election fiscal stimulus likely to be …
16th June 2023
Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST . Register now . The title of last week’s UK Economics Weekly was “Why …
More ground to cover The message from the ECB yesterday was decidedly hawkish. The Bank raised rates and more or less promised another hike in July, while the substantial upward revision to its inflation forecasts implied that further tightening could …
Turkey embraces orthodoxy, but for how long? Optimism about a shift towards orthodox economic policymaking was at the heart of developments in Turkey this week amid the appointments of a new cabinet and central bank governor and a sharp fall in the lira. …
9th June 2023
Central Bank Drop-In (15th June): We’ll be discussing the Fed and ECB June decisions and previewing the Bank of England’s upcoming meeting in a 20-minute online briefing at 10:00 EDT/15:00 BST on Thursday . Register Now. We learnt this week that the …
Central Bank Drop-In (15 th June): We’ll be discussing the Fed and ECB June decisions and previewing the Bank of England’s upcoming meeting in a 20-minute online briefing at 10:00 EDT/15:00 BST on Thursday . Register Now. The OECD joined the ranks of the …
Core inflation on its way down? Data published this week showed that euro-zone core inflation fell for the second consecutive month in May. (You can read our response to the data here or watch our Drop-in on the outlook for inflation, ECB policy and …
2nd June 2023
Optimism building about policy shift in Turkey All the attention in Turkey this week has been on whether President Erdogan will moderate his economic policies now that he has secured another five-year term. The latest signs of an improvement in …
After last week’s surprise rebound in core CPI inflation, this week’s data showed that higher interest rates are starting to percolate more meaningfully throughout the economy. That will have given the Bank of England more encouragement on its mission to …
The big news this week was the downward revision to Germany’s estimate of Q1 GDP, which is now thought to have contracted by 0.3% q/q rather than stagnating. That pushed the economy into a technical recession as it had contracted by 0.5% in Q4 last year, …
26th May 2023
Attention focusing on financial stability in Turkey With the second round vote of Turkey’s presidential election taking centre stage on Sunday, the day of reckoning for Turkey’s economy and financial markets may now just be around the corner. The …
The title of the UK Economic Outlook we published in March was “Recession needed to solve the inflation problem”. (See here .) The argument was that the drags from high inflation and a rise in interest rates to 4.50% would weaken activity and domestic …
Erdogan in pole position for the presidency Sunday’s presidential election result in Turkey was all about Erdogan. He gained more than 49% of the vote share after some of the more reliable polls last week had opposition candidate Kemel Kilicdaroglu at …
19th May 2023
The UK economy’s underperformance and higher and longer lasting inflation problem has earned it the unenviable title of “stagflation nation”. (See here and our podcast : “What’s wrong with the UK economy and what will it take to fix it”?) And speculation …
Sweden inflation surprise As of this week, coverage of Switzerland and the Nordic economies will be incorporated, along with the euro-zone, in our expanded Europe Economics service. We will continue to analyse the economic data from the Nordics and …
Czech government tightens the purse strings The Czech government’s long-awaited fiscal consolidation package this week will include fiscal tightening of around 1.5% of GDP over 2024/25 which will come at the cost of weaker growth. But this appears to be a …
12th May 2023
