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Poor end to a disappointing year The flash PMIs for December will disappoint those looking forward to a happier New Year. Indeed, they point to euro-zone GDP being almost flat in Q4 and a continued industrial recession. Looking beyond the holiday season, …
16th December 2019
Lagarde not just Draghi 2.0 In her opening press conference, Christine Lagarde seemed to be just as dovish as her predecessor. Her claim to be an owl, rather than a dove or a hawk, was more of a political gesture than view on policy. And her suggestion …
13th December 2019
Overview – A weaker outlook for bond yields in Scandinavia and Switzerland means that falls in office and industrial yields are likely to extend into 2021. However, with rental prospects weak and yields rising, retail property is expected to underperform. …
While Ms Lagarde’s assessment of the outlook in today’s press conference was slightly less gloomy than Mr Draghi’s in October, this does not change our view that the ECB will loosen policy again during 2020. After all, policy would need to be eased even …
12th December 2019
Today’s decision by the Swiss National Bank to leave its policy stance unchanged came as a surprise to nobody. Five years on since the Bank first cut interest rates into negative territory, there is every chance that it will keep them below zero over the …
Industrial production hasn’t bottomed out yet October’s sharp fall in euro-zone industrial production adds to the evidence that the sector’s troubles are far from over. We expect the sector to remain in recession at the start of next year. The 0.5% m/m …
Pick-up in inflation makes Riksbank hike next week a done deal The pick-up in Swedish inflation in November means that a rate hike by the Riksbank next week is all but guaranteed. But with surveys continuing to show that the economy is struggling, and …
11th December 2019
After cutting rates by 150bps since April, the Central Bank of Iceland kept its deposit rate at its current record low of 3.00% today. We suspect that in the absence of a sharp and sustained fall in inflation expectations, the Bank will keep rates …
Hopes that the euro-zone is turning a corner look premature. The latest activity data have been disappointing, with retail sales falling in October and national data pointing to another decline in industrial output. Business surveys paint a bleak picture …
10th December 2019
There is little evidence that negative interest rates have succeeded in boosting economic growth or inflation expectations. But equally, they do not seem to have done much harm either – many of the criticisms levelled at them have been wide of the mark. …
9th December 2019
Set against other asset classes, European commercial property looks fairly valued. Our returns forecasts for 2020-23 of around 5% p.a. on an MSCI all-property basis will look relatively attractive in a multi-asset context. However, comparative total …
Still no light at the end of the tunnel If Christine Lagarde had been hoping that the economy would perk up this year, taking the heat out of the disputes between hawks and doves on the Governing Council, this week’s data will have been a disappointment. …
6th December 2019
Manufacturing recession takes a turn for the worse The sharp drop in production in October was driven by a slump in auto production and suggests that, far from bottoming out, Germany’s industrial contraction may even be getting worse. The economy narrowly …
Three months after the September policy package, no change is likely next week. The spotlight on Thursday will be on Ms Lagarde herself, and her policy review. Further ahead, we still expect more ECB easing, prompted by low inflation. With little chance …
5th December 2019
Overview – We expect a further slowdown in euro-zone economic growth in 2020 to weigh on rental growth. However, with interest rates set to be cut next year and remain at this low level, there isn’t likely to be much upward pressure on bond yields over …
House price inflation in Spain is now slowing but we do not envisage a slump in property prices that would derail GDP growth. After all, economic and financial conditions are supportive and there is little evidence that valuations are particularly …
Our economic forecasts for Italy are based on the assumption that the coalition government holds together, at least for the next two years. But in our view, the economic impact would be small if it fell apart. Bond yields would probably rise, but not as …
3rd December 2019
Stuck in a rut The falls in the Swiss and Swedish manufacturing PMIs in November dash any hopes that the manufacturing sectors have gathered momentum in Q4. With the manufacturing recession in Germany set to rumble on, industrial output in Switzerland and …
2nd December 2019
Below, but close to, 2 degrees centigrade Reports that Christine Lagarde wants climate change to feature in the ECB’s forthcoming review of its monetary policy strategy suggest that the Bank will be even more political under her leadership than it was …
29th November 2019
Sentiment still pointing to weak GDP growth Despite November’s small increase in the euro-zone Economic Sentiment Indicator (ESI), the index suggests that the economy is unlikely to have gained pace in Q4. The slight rise in the ESI, from 100.8 in October …
28th November 2019
Positive surprise but economy is not out of the woods, yet The stronger-than-expected rise in quarterly Swiss GDP growth in Q3 was a bit of a relief and poses upside risks to our near-term forecast. But the outcome was skewed by weather-related effects …
In its first five months in office Greece’s new government has implemented a range of tax cuts that should support the economy and has made a start with some structural reforms. But we are sceptical that it will execute the deeper reforms needed to raise …
26th November 2019
Germany is not out of the woods yet November’s Ifo Business Climate Index suggests that Q3’s small increase in German GDP was not the beginning of a recovery. We think that the economy will contract in the coming quarters. On the face of it, the increase …
25th November 2019
Big pharma, big statistical distortions Perhaps the most eye-catching data release of the week was on Thursday when the Federal Statistical Office in Switzerland reported that Swiss industrial production jumped by 8% in Q3 from the same period a year ago. …
22nd November 2019
What would St Francis do? “Start by doing what’s necessary; then do what’s possible; and suddenly you are doing the impossible”. This quote from St Francis of Assisi is how Christine Lagarde ended her first speech as ECB president on Friday morning. We’re …
While the manufacturing downturn has not helped the industrial sector in Germany at a national level, growing e-commerce means that prime industrial rents will still muster some growth over the next few years. Nevertheless, Germany will lag markets like …
Economy slowing in Q4 The small decline in the euro-zone Composite PMI for November confirms that the economy is still struggling. One silver lining is that the pace at which German industrial output is contracting appears to be slowing. But the weakness …
Calls for much looser fiscal policy in the euro-zone are falling on deaf ears. While the Netherlands and Germany have set out fiscal stimuli for 2020, each has past form for running tighter policy than planned. And any loosening in these countries is …
21st November 2019
Lower government bond yields improved the relative valuation of commercial property markets for the third consecutive quarter. (See Chart 1.) Less than one fifth of markets look overvalued, with more than half of industrial markets fairly valued. Since …
Base effects mask underlying weakness The jump in annual Swiss industrial production growth in Q3 was skewed by base effects and masks weakness in those sectors most exposed to Germany. As Germany’s industrial recession looks set to drag on, we expect …
The euro-zone’s services sector has held up relatively well so far this year. However, we expect spill-overs from the industrial recession and slowing employment growth to take a toll in the coming months. The latest business surveys point to a sharp …
18th November 2019
Despite the softness in economic activity, occupier demand generally held up in Q3. And while there are signs that the cyclical slowdown in the euro-zone is starting to hit CEE markets, given their historically low vacancy rates, we think that rents could …
15th November 2019
Views from the ground in Stockholm One of the issues that came up a lot in our client meetings in Stockholm this week (see here ) was the appropriate mix between fiscal and monetary policy in Sweden. In a speech on Wednesday, Martin Flodén added to the …
Q3’s 0.2% quarterly expansion in the euro-zone economy, which was confirmed this week in Eurostat’s second estimate of GDP , was almost certainly driven entirely by domestic demand. We will not have a Q3 GDP breakdown for the euro-zone by either …
Germany avoids a technical recession, for now While the second estimate of Q3 GDP for the euro-zone was unchanged, and Germany narrowly avoided a technical recession, we think that the cyclical downturn in the region still has further to run. Our forecast …
14th November 2019
Riksbank to tighten policy despite low inflation Despite October’s increase in CPIF inflation, underlying inflation in Sweden remains below target and serves as proof that the economy is not ready for the Riksbank’s planned rate hike in December. While …
13th November 2019
The latest activity and confidence indicators point to continued near-stagnation in the Italian economy. While household consumption is likely to keep growing, prospects for investment and exports are bleak. Italy’s GDP has increased by 0.1% q/q in each …
12th November 2019
Norwegian economy to stay in a class of its own This morning’s release of Q3 GDP data from Norway confirms that the economy is faring much better than its Nordic peers. The economy looks set to lose some pace in the coming months but we do not think it …
The prospect of further political stalemate in Spain, following yesterday’s inconclusive election result, does not alter the short-term economic outlook. But it does mean that there is little chance of a fiscal stimulus, or of making progress in reforming …
11th November 2019
Musical chairs at the Riksbank The announcement this morning by the Riksbank that Anna Breman will fill the vacant seat on the Executive Board ends the period of uncertainty since the news of Kerstin af Jochnick’s departure was made public in July. It was …
8th November 2019
Spanish poll unlikely to break deadlock All the signs are that Spain’s fourth election in as many years, which takes place this Sunday, will result in another hung parliament, and that Prime Minister Pedro Sánchez will continue to struggle to cobble …
Manufacturing recession to continue The decline in industrial production in September confirms that German manufacturers are still firmly in a recession. We expect this to continue well into next year, causing the economy as a whole to contract. The 0.6% …
7th November 2019
Although the euro-zone economy grew by more than expected in Q3, helped by solid growth in France and Spain, the overall picture remains fairly gloomy. Euro-zone GDP expanded by only 0.2% q/q, and survey data, such as the Composite PMI, suggest that it …
6th November 2019
Heading towards a weak end to the year September’s euro-zone retail sales data suggest household consumption made a positive contribution to GDP growth in Q3. Meanwhile, the upward revision to October’s euro-zone Composite PMI still leaves it pointing to …
Spain’s fourth general election in as many years looks likely to result in further political stasis, but we doubt that this will have a detrimental effect on the economy. Nevertheless, weaker consumer spending and investment are likely to cause GDP growth …
5th November 2019
Office-to-residential conversions in the Nordic capitals have started to lose their appeal given the pick-up in office capital values and softening in house prices. However, we don’t think that this poses a major risk to our forecast for relatively strong …
1st November 2019
Deflation rears its head again in Switzerland… Perhaps fittingly in the week of Halloween, data released this morning showed that deflation came back to haunt the SNB in October. (See here .) With the KOF Economic Barometer confirming that the economy …
It seems fitting that “Count Draghila” ended his term at the ECB on Halloween. And as Christine Lagarde takes over, the euro-zone’s immediate prospects are not nearly as frightening as they were when Mr Draghi took the helm in 2011. In fact, some of the …
Return of deflation to ring alarm bells at the SNB The confirmation this morning that Swiss inflation fell back into negative territory in October for the first time since November 2016 will reignite deflationary fears at the SNB and strengthen its …
Italian stagnation to continue Italy’s economy eked out only a small expansion in Q3, and it looks set to continue performing very poorly over the coming years. We think that it will fail to grow at all in 2020. The 0.1% q/q increase in Italy’s GDP in Q3 …
31st October 2019
