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This page has been updated with additional analysis since first publication. Services inflation still sticky The increase in German HICP inflation from 2.5% in June to 2.6% in July left it a little higher than expected and means that the aggregate …
30th July 2024
Further signs of recovery losing momentum The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally fell in July, and our regional-weighted measure hit a five-month low, providing additional evidence that the …
This page has been updated with additional analysis since first publication. Recovery continued in Q2 but surveys weakening at start of Q3 The euro-zone’s recovery continued at a moderate pace in Q2 and it should get a small boost from the Paris Olympics …
Recovery slowing National-level data released so far suggests that euro-zone GDP growth slowed to 0.2% q/q in Q2 and the weakening of the surveys in July suggests GDP growth may have eased further this quarter. GDP figures for the euro-zone’s largest …
Recoveries stutter in Q2 The weaker-than-expected Q2 GDP data out of Czechia and Hungary show that weak external demand is still acting as a constraint on the speed of recoveries in Central Europe. While we expect growth to strengthen over the second half …
The lack of much reaction on net in markets to today’s statement by the UK’s new Chancellor suggests to us that investors remain confident in the Labour Party’s commitment to fiscal discipline. But the disputed ‘revelation’ that the country’s public …
29th July 2024
Our best judgement is that in order to fund the increase in spending of £22bn outlined by the Chancellor today, Reeves will raise an additional £10bn a year (0.3% of GDP) via higher taxes and increase borrowing by about £7bn a year (0.3% of GDP). The …
Tight monetary policy and low consumer confidence have pushed the euro-zone’s household saving rate up to unusually high levels. While interest rates are set to keep falling and confidence might improve, we think that a big decline in the saving rate is …
Italy has become quicker at spending NextGenerationEU (NGEU) funds over the past year but it is still likely to spend only around two-thirds of the total funds allocated to it unless the programme is extended. Italy is set to receive €194bn (around 10% of …
The rocket strike on the Israeli-occupied Golan Heights over the weekend has heightened fears of a full-blown conflict between Israel and Hezbollah in Lebanon. For Israel, this risks adding to pressure on its already strained public finances, and would …
Net lending to property picks up as outlook stabilises Net lending to property increased for the third month in a row in June, and the rise of £1.31bn was the largest since the end of 2021. In line with last month the gain was entirely due to a rise in …
This page has been updated with additional analysis since first publication. More evidence the drag on activity from higher interest rates is starting to fade June’s money and lending data provided a bit more evidence that the drag from higher activity is …
Economy contracted sharply in Q2, but will return to growth over coming quarters Preliminary data released this morning show that the Swedish economy contracted by 0.8% q/q in Q2, more than offsetting the 0.7% increase in Q1. The data were significantly …
Ukraine reaches a deal Ukraine’s government agreed a preliminary deal on Monday with a group of private creditors to restructure $20bn of its external debt. As part of the deal, Ukraine will receive a 37% haircut on its bonds, and the average maturity …
26th July 2024
This week’s news that higher shipping costs pushed up the manufacturing input prices balance of the PMI survey to an 18-month high in July (see here ) has reignited concerns that shipping costs will drive a rebound in core goods CPI inflation. (See Chart …
Surveys suggest recovery is petering out Data released this week suggest that the euro-zone recovery is fizzling out and leave us comfortable with our below consensus forecasts. Data released on Wednesday showed that the Composite PMI fell in July for the …
CBR delivers bumper hike, leaves door open for further tightening Russia’s central bank (CBR) stepped up to the plate with a 200bp hike to its key policy rate today, to 18.00%, in response to the overheating economy and a renewed surge in inflation. While …
Almost ready to cut But economic resilience and sticky inflation will probably mean MPC waits until September We think rates will be cut to 3.00% next year, below current market pricing of 4.00% While it will be a very close call, the economy’s recent …
25th July 2024
Our team have recorded a special podcast episode all about the big themes in commercial real estate. The 12-minute episode showcases our enhanced coverage which provides a more global, comparative view of how the key markets we forecast are performing, …
The Q2 RICS commercial survey added to the growing body of evidence that capital values at the all-property level have now bottomed out. But, in line with our forecasts, it also implied that the recovery will be modest by past standards with values only …
Net immigration to euro-zone countries will probably be higher than the UN assumes in its latest population forecasts. But we still think the working age population will decline over the coming decade and that is a key reason to expect GDP growth to be …
This page has been updated with additional analysis since first publication. German recovery petering out The large fall in the German Ifo BCI in July, which follows a similar drop in the Composite PMI published yesterday, adds to the impression that the …
While the pound has outperformed all major G10 currencies so far this year, we still expect it to depreciate against the greenback later in the year as the Bank of England (BoE) eases monetary policy more than money markets currently discount. While it …
24th July 2024
Business surveys released this morning add to evidence that the Olympics will lift activity in France slightly in Q3. However, activity is likely to drop back again in Q4 and we still think annual GDP growth will only be around 1%. Meanwhile, we don’t …
Supermarkets struggled in 2023, as falling food sales volumes hit profits and rental growth. But the future looks brighter. As food price inflation has fallen supermarket profits have recovered and the past surge in food sales values points to stronger …
GDP growth appears to be slowing at the start of Q3 July’s composite PMI suggests some of the recent rebound in activity this year may have been due to catch-up growth following the weakness of activity last year and GDP growth is easing towards a more …
This page has been updated with additional analysis since first publication. Recovery stalling The flash PMIs for July suggest that the euro-zone’s recovery may be fizzling out at the start of Q3, while output price pressures eased but remained high in …
Donald Trump has said that he could quickly end the war in Ukraine if he is re-elected as US President. This Focus answers key questions on what the shape of any agreement might look like, what might happen to sanctions on Russia, and the possible …
23rd July 2024
Which commercial real estate markets are set to recover first, and where will recovery be strongest? The Capital Economics real estate team has been looking closely at the comparative performance of the US, European and UK markets to advise clients on …
Recent surveys of real estate lenders paint a picture of a European lending market that is still seized up, as loan terms tightened and credit demand fell in H1. Lenders are optimistic that demand for credit and origination will both pick up over the …
Easing cycle continues The Hungarian central bank (MNB) cut interest rates by 25bp again today, to 6.75%, and the post-meeting press conference suggests that, while there are some MPC members who want to pause the easing cycle, the balance is a bit more …
Without wishing to downplay the ugly fiscal picture, we think the new government is overplaying the gloom. We suspect more optimistic economic forecasts and various tweaks to the fiscal rules will save the new Chancellor from hitting the electorate with …
Rates on hold, cuts still some way off Turkey’s central bank left its key policy rate on hold today, at 50.00%, and the communications accompanying the decision suggest that interest rate cuts are still some way off. While most analysts expect a monetary …
Fiscal policy has become almost as fraught in Germany as it is in France and Italy, but rather than from a desire to run very loose fiscal policy, Germany’s woes stem from its strict “debt brake”. Some loosening of the debt brake is likely in the coming …
We doubt the independent pay review bodies’ recommendations for the government to give teachers and NHS staff a 5.5% pay rise will prevent wage growth from slowing to 3.0% by the end of next year. But if the government chooses to extend this pay rise to …
Overview – House prices will probably remain flat for the rest of 2024, but lower mortgage rates will provide scope for prices to beat expectations next year. Indeed, our forecast that Bank Rate will be lowered by more than investors anticipate suggests …
22nd July 2024
Economic recovery still on track Poland’s retail sales data released today were slightly weaker than expected, but the big picture is that the whole set of activity data for June suggest that the economic recovery has remained relatively strong. Taken …
The detailed breakdown of June inflation data, released this week, confirmed that the headline rate ticked down to 2.5% in June and that services inflation was unchanged at 4.1%. We, and ECB Chief Economist Philip Lane, had thought that services inflation …
19th July 2024
Given the UK recently got much closer to the government’s target of building 300,000 homes a year than is acknowledged, you might think that the Planning and Infrastructure Bill announced in the King’s Speech this week would be enough to get new home …
External positions in good health ... Romania aside Balance of payments data released across the region this week showed that current account positions generally deteriorated in May. Poland recorded a monthly deficit of €63m, while Czechia had an external …
After a roller-coaster ride over the past couple of years, we think euro-zone retail sales are likely to rise gradually in the coming quarters. Consumption has recovered a long way following the disruption caused by the pandemic and the energy price …
This page has been updated with additional analysis since first publication. Limited wiggle room for the new Chancellor June’s disappointing public finances figures suggest that public borrowing is on track to come in a little higher than the OBR’s …
Investors’ expectations for ECB rate cuts have not changed much over recent months and today’s meeting did little to change that. Instead, euro-zone assets have been influenced more by French politics of late; and while contagion concerns have eased, we …
18th July 2024
Today’s decisions to leave interest rates on hold and give no clear signals about the future path of interest rates were in line with expectations. The overall tone was arguably slightly dovish, making a September cut more likely. But the risks to our …
No cut, no guidance Today’s decisions to leave interest rates on hold and give no clear signals about the future path of interest rates was in line with expectations. A cut in September still seems more likely than not, but it will depend on whether …
Newfound political stability in the UK contrasts with the now more uncertain political backdrop in France. A better relative outlook for economic growth and risk-free rates had already led to a narrowing in the premium on UK over French property in recent …
The latest data out of Emerging Europe suggest that economic growth in Central Europe strengthened further in Q2, while Russia’s economy continued to overheat. In Turkey there are signs that demand may be beginning to moderate in response to policy …
This page has been updated with additional analysis since first publication. Encouraging, but interest rates may not be cut in August While the easing in wage growth in May was broadly in line with what the consensus and the Bank of England expected, it …
Yields look to have topped out in most sectors and alongside solid rental growth that means capital values are close to bottoming out. However, with no yield compression in sight the recovery will be weak by past standards, not helped by a struggling …
17th July 2024
This page has been updated with additional analysis since first publication. We’re holding a 20-minute online briefing at 9.30am BST on Thursday 18 th July to discuss how today’s CPI and tomorrow’s labour market releases influence the chances of a rate …
