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March’s rise in German HICP inflation will add to hopes that recent price declines were a temporary phenomenon that will have positive effects on the economy. But with core inflation still very low even in Germany, there remains a risk of a more damaging …
31st March 2015
March’s EC business and consumer sentiment indicators supported the evidence from other surveys that euro-zone economic activity picked up slightly in the first quarter. But growth still looks likely to be too slow to reduce substantially the spare …
Buoyed by falling unemployment, rising equity prices and a boost to their spending power from a lower oil price, euro-zone consumers have become increasingly confident, with the EC’s measure of consumer sentiment rising in March to its highest level since …
27th March 2015
February’s euro-zone monetary data add to the evidence from activity surveys that economic growth in the euro-zone will pick up in the coming months. But troubles in the Greek banking sector remain a major downside risk to the outlook. … Euro-zone …
26th March 2015
March’s rise in the German Ifo index provided further evidence that the recovery in the euro-zone’s largest economy continued in Q1 as firms shrugged off fears over Greece and the weaker euro started to have an effect. … German Ifo Survey …
25th March 2015
While lower inflation and the drop in the euro might boost growth in the euro-zone relative to that in the US, structural constraints, respective policy conditions and the effects of the Greek crisis are likely to limit the extent of any convergence. … …
24th March 2015
Euro-zone consumer confidence is at its highest level since 2007. While the long-term consumption outlook remains challenging, elevated sentiment should nevertheless help support retail rental value growth in 2015. The biggest winners look set to be the …
Today’s disappointing PMI readings from China could have a silver lining for commodities: the data are not bad enough to justify market fears of an imminent “hard landing”, but they may prompt additional policy easing just in case. Meanwhile, the …
March’s further rise in the euro-zone composite PMI adds to the signs that the region’s economic recovery may have picked up a bit of pace in Q1. But growth remains pretty sluggish and France is still performing particularly poorly. … Euro-zone Flash …
A continued economic recovery and the Government’s early repayment of IMF loans have allowed Portugal to distance itself further from beleaguered Greece. But with debt still worryingly high and the recovery unlikely to gain much momentum, market concerns …
23rd March 2015
While there have been few firm developments in the ongoing Greek crisis in recent weeks, the general news on the progress towards plugging the country’s short-term financing hole and finding a lasting solution to its debt burden has supported our view …
20th March 2015
The ECB’s QE programme will be a modest boon for some financial firms. And it should help to sustain the recent rise in financial sector confidence. In turn, that should feed through into occupier demand in Frankfurt. As such, we suspect rents will rise …
19th March 2015
The Norges Bank unexpectedly left its policy rate on hold at 1.25% today but with the economic situation set to deteriorate, we think that the Norges Bank will be forced to cut rates at its next meeting in May. … Norway’s central bank holds rates, but …
The Swiss National Bank’s decision to leave its deposit rate at -0.75% presumably reflects the slight softening of the franc over recent weeks. But we expect renewed upward pressure on the currency to lead it to cut rates and intervene in foreign exchange …
The vast amount of spare capacity in the Greek economy means that the underlying state of the public finances is rather better than the headline numbers suggest. But it would be wrong to conclude that the closing of Greece’s output gap will solve its debt …
18th March 2015
The Swedish Riksbank unexpectedly loosened monetary policy further today, citing the deflationary risks from the stronger krona , and said it was prepared to do more if needed. With the ECB’s QE likely to push the krona up against the euro even …
January’s euro-zone trade data suggested that the region’s exports are still not benefitting substantially from the weakness of the euro. … Euro-zone Trade & Construction …
Iceland’s central bank left its main interest rates on hold today as it waits to judge the outcome of the ongoing wage negotiations. But with labour market tensions growing and the Sedlabanki raising its 2015 GDP forecasts, we think that the next move in …
The Swedish Riksbank unexpectedly loosened monetary policy further today, citing the deflationary risks from the stronger krona, and said it was prepared to do more if needed. With the ECB’s QE likely to push the krona up against the euro even further, we …
Concerns about the possible negative side effects for the rest of the world from QE by the ECB look overdone. Admittedly, the appreciation of other currencies against the euro will be a headwind for exporters elsewhere, but this effect should be small and …
17th March 2015
A gradual recovery in Dutch house prices will support retail sales growth in the Netherlands. This will drive a rise in prime retail rents in 2015 in both Amsterdam and Rotterdam. However, the slow deleveraging process is likely to prevent rapid rates of …
March’s modest rise in the ZEW investor sentiment index suggests that hopes for the German economy have been tempered by worries over the effects of the Greek crisis. … German ZEW (Mar.) & Euro-zone Employment …
Some indicators suggest that the euro-zone economy may grow faster than the US in Q1. But this is largely because unusually severe weather has hit US activity. While the euro-zone economy has gained some momentum, growth will almost certainly remain …
16th March 2015
While France has been given an extra two years to meet its new budget targets set by Brussels, we think that it will still struggle to achieve the necessary fiscal consolidation given France’s prevailing political and economic backdrop. … France will …
The drop in the euro to a 12-year low against the US dollar should clearly provide some support to both activity and inflation in the euro-zone. But it would be wrong to think that its effects are mechanical or that a weaker currency can solve all of the …
13th March 2015
Low inflation and historically low interest rates in the Nordic region will support real wage growth and rising house prices in every market bar Finland. With consumer spending growth set to benefit, particularly in Sweden, we envisage solid rates of …
Q4’s modest rise in Irish GDP appeared to confirm that growth is slowing from the very rapid rates experienced earlier this year, perhaps as statistical distortions have faded. Nonetheless, business surveys point to a continued strong recovery ahead. … …
12th March 2015
The combination of Greece’s renewed problems and the onset of deflation is a very toxic one for the euro-zone. At best, it is likely to keep economic growth in the region fairly subdued. At worst, it could fully re-ignite the crisis and blow the currency …
January’s euro-zone industrial production data suggested that industry had a poor start to 2015, with little evidence of a boost from the weaker euro or lower oil prices. … Euro-zone Industrial Production …
Historically, all-property yields in Madrid have tended to be higher than those in Milan. Yet over the past year, that spread has reversed. Given Spain’s stronger economic prospects and the outlook for decent rental growth in Madrid, over the coming years …
11th March 2015
Rising expectations for US interest rates and an escalation of the Greek crisis could push the euro down to parity against the US dollar and beyond. But we expect it to stage a partial recovery in 2016. … How low will the euro …
The latest data on German wage growth suggest that pay is finally beginning to respond to the long labour market recovery. With deflation offering a further boost to real wage growth, we expect the German consumer recovery to gain pace this year. … Is …
Sweden’s headline inflation rate turned positive in February for the first time in eight months. But deflationary pressures have not disappeared altogether and we continue to think that the Riksbank will need to take additional action in April. … …
Sweden’s headline inflation rate turned positive in February for the first time in eight months. But deflationary pressures have not disappeared altogether and we continue to think that the Riksbank will need to take additional action in April. … Swedish …
The ECB started its quantitative easing programme this week and the US Fed is likely to begin tightening policy in June. Nonetheless, we expect real interest rates to remain higher in the euro-zone than in the US or even Japan, at least for the next year …
10th March 2015
Concerns that the ECB will struggle to find enough willing sellers of assets to implement its quantitative easing programme may be wide of the mark. But limits set by the Bank itself imply little scope for the programme to be expanded beyond its current …
Iceland’s economy continued to expand in Q4, suggesting that the country remains well on the road to recovery. … Iceland GDP (Q4) …
January’s French industrial data support the message from the German and Spanish releases that activity was expanding slowly at the start of the year. But the fall in Italian production suggests that the three-year recession there has continued. … French …
Iceland’s economy continued to expand in Q4, suggesting that the country remains well on the road to recovery. … Iceland GDP (Q4 14) …
The yield spreads of 10-year Spanish and Italian government bonds over German Bunds recently fell below 100bp for the first time since 2010. Given their grind lower since the summer of 2012, it is tempting to think that these spreads will continue to …
9th March 2015
As the ECB’s quantitative easing programme starts today, it already seems to be having a more positive impact than we had envisaged. But here we explain why we maintain our view that the policy will neither mark the start of a strong recovery nor …
With monetary policy being loosened across Europe, we expect bond yields to hover close to their current levels. This will continue to drive investors into higher-yielding asset classes, such as real estate, where the yield premium over bonds is close to …
6th March 2015
President Draghi was sounding rather smug last week as he announced the start of the Bank’s quantitative easing programme and forecast that inflation would rise back to target in the medium term. But we doubt very much that the new policy will prompt a …
The Swiss franc has depreciated against the euro in the past month, despite the fact that the euro itself has weakened on a trade-weighted basis. This appears to be partly a correction following the sharp appreciation of the franc in the aftermath of the …
The second estimate and breakdown of euro-zone GDP in Q4 confirmed that the region’s recovery remained very weak at the end of last year but provided some tentative signs that it is becoming better balanced. … Euro-zone GDP Breakdown …
January’s industrial production data suggest that Germany and Spain made a reasonable start to 2015, although there are few signs that the drop in the euro exchange rate is prompting a strong recovery. … German & Spanish Industrial Production …
While ECB President Mario Draghi struck a cautiously optimistic tone today, we doubt that the Bank’s quantitative easing programme will prompt a meaningful economic recovery or eradicate the threat of deflation. Meanwhile, his comments on Greece did …
5th March 2015
Although headline consumer price inflation rose from -0.6% to -0.3% in February, this was driven entirely by a rise in energy prices as oil prices reversed some of their recent falls. Core inflation remained steady at a series low of 0.6% and looks set to …
4th March 2015
