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The European economic upturn still appears to have considerable momentum. The one piece of the jigsaw still missing is a significant pick-up in activity in the consumer sector. With growing signs that the industrial sector is losing a little steam, there …
6th August 2007
Recent moves towards granting France a little leniency around the EC’s strict fiscal rules suggest that the economy could receive a significant fiscal boost, over the next few years at least. We think that President Nicolas Sarkozy’s proposed measures …
1st August 2007
Today’s decision by the Swiss National Bank (SNB) to raise the target mid-point for 3 month interbank interest rates (Libor) by 25bps to 2.5% came as no surprise – indeed, the 3 month Libor itself had pretty much reached 2.5% already. More important were …
14th June 2007
This report is only available as a PDF. Click to download. … Immigration eases Spain's growing pains …
7th June 2007
Today’s decision by the Norges Bank to hike Norwegian interest rates by 25bps to 4.25% leaves rates comfortably in line with the Bank’s own forecast published in March’s Monetary Policy Report. However, given the strength of the latest economic data we …
30th May 2007
If US consumers have been the driving force behind the world economy over the last decade or so, then European consumers might perhaps be described as a sleeping giant. But the giant could be about to stir. … Can euro-zone consumers take the …
22nd May 2007
On the face of it, the impact of demographic change on the euro-zone economy could be pretty disastrous. But with higher immigration flows, an older retirement age, an increase in the employment rate and re-training of older workers, we think that the …
11th May 2007
Europe looks set to take over from the US as the strongest-growing region of the developed West this year, driven by the continued strength of the euro-zone and, in particular, Germany. Although the boom in the industrial sector may be past its peak, …
30th April 2007
Although the Norges Bank unexpectedly kept rates on hold at 4% today, we do not think that this represents a fundamental change in the outlook for Norwegian interest rates ahead. … Norges Bank won’t wait long to continue …
25th April 2007
There are hopes that the Presidential election will rid France of its tag as the new “sick man of Europe”. But while the leading candidate Nicholas Sarkozy has proposed measures to tackle the problems in the labour market, it seems unlikely that the …
16th April 2007
Today’s decision by the Swiss National Bank (SNB) to raise the target mid-point for the 3 month Libor by 25bps to 2.25% was fully expected – indeed, the 3 month Libor itself had already reached 2.25% earlier this week. More interestingly, though, the …
15th March 2007
The Norges Bank hiked interest rates today by 25bps to 4.0%, marking a fourth consecutive move and the ninth step in the tightening cycle which began in June 2005. This also keeps rates a step ahead of those in the euro-zone, though we expect the interest …
Data released earlier today showed Swiss GDP growth picking up only slightly in Q4, to 0.5% q/q from Q3’s disappointing 0.4%. The outturn was below the consensus forecast, which had been for arise of 0.7%, and seems to confirm that Swiss activity is now …
6th March 2007
The European economy has begun the new year in good health. Euro-zone GDP expanded at its fastest rate for six years in 2006 and most forward-looking indicators suggest that growth is set to remain solid in the coming quarters. The Scandinavian economies, …
26th February 2007
The European Central Bank’s stance that euro-zone interest rates are still “low” suggests that it might have to raise them significantly further to contain inflation. But the existence of some spare capacity in the economy and the possibility that the …
20th February 2007
Recent strong increases in euro-zone investment have been at odds with the continued weakness of consumer spending. But positive conditions in the corporate sector suggest that firms have not over-invested. Accordingly, while the investment boom is set to …
6th February 2007
Today’s surprise hike in interest rates by the Norges Bank lifts the official rate by 25bps to 3.75% andreopens a positive interest rate differential with the euro-zone for the first time in three years. This marks the eighth step in the tightening cycle …
24th January 2007
On 1st January next year, Slovenia will make history by becoming the first of new EU member states to join the euro. But while the short-term prospects for the Slovenian economy look good, slow progress on structural reforms mean that medium-term …
15th December 2006
Today’s decision by the Swiss National Bank (SNB) to raise the target mid-point for the 3 month Libor by 25bps to 2.0% came as no surprise whatsoever. After all, the press statement accompanying its last interest rate decision in September stated that a …
14th December 2006
There have been widespread fears that the imminent increase in VAT in Germany will bring the recent recovery in the euro-zone’s most important economy to a grinding halt. But an examination of previous VAT increases and the generally favourable conditions …
13th December 2006
The Norges Bank hiked interest rates by 25bps to 3.5% today. This marks the seventh step in thetightening cycle which began in June 2005 and keeps rates tidily in line with those of the euro-zone.(See Chart 1.) It would have been a major surprise if the …
The last time the headline and core rates of consumer price inflation in the euro-zone diverged as they have over the last two years, it was a sharp rise in core inflation which eventually closed the gap. But there are good reasons to think that things …
29th November 2006
Estimates of the sustainable rate of unemployment suggest that the euro-zone labour market could be about to hit capacity constraints. But we think that the labour market recovery has plenty further to go, and should provide continued support to household …
1st November 2006
The Norges Bank hiked interest rates by 25bps to 3.25% today. This marks the sixth step in the tightening cycle which began in August 2005 and keeps rates tidily in line with those of the euro-zone. (See Chart.) It would have been a major surprise if the …
If our forecasts of a major slowdown in the US economy prove to be correct, then one crucial issue for the global economy is whether other parts of the world can compensate. With the euro-zone accounting for some 15% of world GDP, whether or not the …
26th October 2006
The Irish economy looks likely to be one of the heaviest sufferers from the upward trend in eurozone interest rates. As such, the consensus view that Irish economic growth will barely slow over the next year looks likely to prove too optimistic. … How …
18th September 2006
It came as no surprise at all that the Swiss National Bank (SNB) today raised rates by a further 25bps (bringing the mid-point of its target range for the three month Libor to 1.75%). After all, the SNB had signalled a further tightening following its …
14th September 2006
Spain has enjoyed one of the fastest rates of expansion in the euro-zone in recent years, thanks largely to rapid growth in domestic demand and, in particular, household spending. But several factors suggest that the growth of spending could now be set to …
17th August 2006
We expect the Netherlands, Ireland and Finland to feel the strongest impact on GDP growth from the euro’s appreciation. In France too, it seems possible that movements in the euro could stop the economic recovery in its tracks, while the impact on German …
31st July 2006
The recent appreciation of the euro exchange rate has led to suggestions that the European Central Bank can afford to take its finger off the interest rate trigger. After all, conventional indicators suggest that policy conditions are now as restrictive …
13th July 2006
Today’s decision by the Swiss National Bank (SNB) to raise the target mid-point for the 3 month Libor by 25bps to 1.5% came as very little surprise. Like the latest rise in ECB rates, today’s hike followed similar moves in December and March and is …
15th June 2006
Recent signs of higher inflation in many advanced economies have prompted the question of whether inflation is back from the dead. Our answer is a qualified “no”. The shift to an era of low inflation does not mean that there cannot be periods when …
30th May 2006
In less than three weeks’ time, the 2006 football World Cup kicks off in Germany. Our analysis suggests that, while the overall effects of the tournament on the German economy are unlikely to be very large, it could have a noticeable effect on both the …
23rd May 2006
While expectations of the performance of the German economy this year have become significantly more optimistic as the various forward-looking indicators have strengthened, most forecasters still anticipate a sharp slowdown in growth next year as this …
8th May 2006
Commodity prices are now unsustainably high. We expect supply to continue to rise rapidly, since rising prices have greatly increased producers’ profitability. Mineral reserves are more than adequate, and investment in new capacity has already risen …
5th May 2006
Italian voters are facing a choice between two pre-determined coalitions in the general election on 9th-10th April - the centre-left Union coalition under Romano Prodi, currently leading by 3-5% in the opinion polls, and the centre-right House of Freedoms …
5th April 2006
For the first time in a number of years, the conditions are in place for a significant acceleration in the growth of consumer spending in the euro-zone. This should ensure that both GDP growth and interest rates surprise on the upside in 2006. … Euro-zone …
29th March 2006
The increase in protectionist pressures in the US is likely to come to a head in April, when Chinese President Hu Jintao visits Washington. In a worst case this could result in a trade war with far reaching ramifications for the world economy and …
21st March 2006
In this Focus we argue that monetary tightening in Japan is a potential trigger for a sharp correction in bond markets and other asset prices in the West. The Bank of Japan (BoJ) is likely to start to reverse its ultra-accommodative policy shortly, …
16th February 2006
Our analysis suggests that US bonds are currently overvalued, with ten year bond yields around 0.5- 1.0% below long-term sustainable levels. There are two key factors underpinning this conclusion. … Are US Bonds …
31st January 2006
The rebound in the dollar is looking increasingly over-extended. Shifting interest rate differentials are still the most common explanation of recent dollar moves against the euro. But these cannot explain why the dollar remains well above the levels seen …
23rd November 2005
ECB President Jean-Claude Trichet said little new in his testimony to the European parliament today. But whether the ECB begins to raise rates in December (as now seems likely) or early in 2006, there is no doubt that a hike is coming soon. The bigger …
21st November 2005
A number of commentators have argued that the ECB is inadvertently keeping euro-zone government bond yield spreads artificially low because of the way it provides liquidity to the banking system. In this Focus we assess the validity of this argument and …
19th October 2005
The fact that Italy’s economic under-performance is linked to the weakness of its external sector prompts the question of whether Italy should leave EMU to allow its currency to depreciate and regain competitiveness. This Focus presents a number of …
20th September 2005
Rising business confidence, modest falls in unemployment and the prospect of early elections have led many commentators to call the turnaround for the German economy. We have long been positive on the prospects for Germany because of the pace of reform …
16th August 2005
Italy’s second recession in two years is largely due to the loss of competitiveness in manufacturing, reflecting low productivity growth rather than rapid growth in wage costs. This has been compounded by Italy’s specialisation in areas of production …
30th June 2005
The case for a cut in euro-zone interest rates is straightforward: the economic recovery has lost momentum and monetary policy is one of the few remaining levers available to stimulate growth. Indeed, the drop in the manufacturing PMI below 50 in April …
26th May 2005
Recent opinion polls suggest that the French referendum on 29th May is likely to be extremely close, whilst the Dutch referendum (1st June) seems more likely to reject the constitution. In this Focus we consider the immediate market impact that we are …
25th May 2005
Recent opinion polls suggest that the French referendum on 29th May could reject the EU constitution, although the chances are good that ratification could be obtained by repeating the referendum at a later date. By contrast, the UK referendum scheduled …
31st March 2005
The changes agreed this week clearly water down the EU stability and growth pact (SGP) and allow far greater scope for countries to run budget deficits above the 3% limit. Thus it may seem odd that euro-zone bond markets were unaffected. In this Focus we …
24th March 2005
