Filtered by Region: Europe Use setting Europe
Limited supply supporting pricing for now The RICS survey showed that weaker demand has not yet fed through to falls in prices, but sales volumes are beginning to wilt. We think it is just a matter of time before prices follow activity lower. The new …
11th August 2022
EU funds will provide a key boost to economies in Central and Eastern Europe (CEE) in the coming years as the region navigates a challenging macro environment and slowing global growth. Disputes with the European Commission over the rule of law in Hungary …
10th August 2022
Comparatively strong demand from flexible offices has helped the CEE occupier recovery from the pandemic. But a more limited flex pipeline this year means it is not likely to provide much offset to the weakening employment prospects in the region. A …
9th August 2022
An end to Russian gas exports to Europe would prompt us to forecast a deeper recession in the euro-zone this winter than we currently anticipate. The hit would come partly through higher inflation, which would further squeeze real incomes, and partly …
While DM central banks are currently raising interest rates in earnest, the past week has brought signs that tightening cycles are now nearing an end in parts of the emerging world. Indeed, with interest rates now well above neutral in much of Emerging …
8th August 2022
Activity turning downwards The data published this week add to the evidence that a recession is just around the corner. Retail sales fell sharply in June and are on a clear downward trajectory. Admittedly, that might partly be because households are …
5th August 2022
According to Google it’s “kanariefugl i kulminen” Against the backdrop of heightened tensions between China and Taiwan, and ongoing question marks over whether the US economy is in recession or not, it’s fair to say that the precipitous plunge in the …
Euro-zone GDP increased by more than we had expected in Q2 as reopening effects boosted the services sector, particularly in the southern countries. But things have already taken a turn for the worse. Business surveys are pointing to a big drop in …
4th August 2022
Higher interest rates to weigh on construction activity in H2 The latest RICS Construction Survey showed a further rise in workloads during Q2, though sentiment for the next 12 months worsened slightly. With labour and supply shortages remaining a major …
Optimism misplaced as activity slows The fourth consecutive decline in the headline construction PMI took the index below 50 for the first time since January 2021. While driven by an idiosyncratic drop in civil engineering activity, the upbeat new orders …
A disappointing end to Q2 The sharp fall in euro-zone retail sales in June means sales contracted in Q2 as a whole. With the final PMI surveys pointing to price pressures continuing to intensify and demand softening, we think household spending will …
3rd August 2022
While encouraging for the property risk premium, better transparency across Europe is unlikely to provide much support for property yields given the deterioration in the economic and interest rate environment. This is even the case for Emerging European …
2nd August 2022
As the cost-of-living crisis bites consumers will be forced to cut back on discretionary spending, with the leisure sector set to suffer as a result. At the same time, operators are facing shortages of labour and rising costs. We have therefore cut our …
Labour market to remain tight In June, the number of unemployed people rose in the euro-zone for the first time in 14 months. Nevertheless, we expect the labour market to remain tight even as the economy heads into recession, maintaining the upward …
1st August 2022
After a strong start to the year, European investment weakened in Q2. And we expect only lacklustre activity over the second half of the year as rises in the cost of debt, tightening credit conditions and concerns about a recession in Europe weigh heavily …
29th July 2022
A tournament to forgot for Nordic football fans Of course, Sweden measures up well against the UK in many ways, including on the economic and political fronts. After all, the estimated 1.4% q/q rise in Swedish GDP in Q2 (data released on Thursday) is in a …
Re-opening boost to fade, fast The chunky increase in euro-zone GDP in Q2 was due to the re-opening of the services sector which has masked a deterioration in most other parts of the economy. We expect a triple whammy of high inflation, tighter monetary …
Net lending to property ticks up, but improvement will be short-lived Lending activity in the commercial property sector surprised on the upside in June, driven by a rise in net lending to standing property investments. But looking ahead, rising interest …
Rising core inflation adds to pressure on ECB With headline and core inflation rising more than expected yet again, the case for the ECB to pursue further aggressive tightening of interest rates is unassailable. A 50bp hike in September now looks nailed …
Slip in mortgage approvals in June a sign of the slump to come Mortgage approvals slipped back to below 2019 levels in June supporting our view that higher interest rates will cause housing market activity to slump over the next two years. Indeed, further …
Weakness in Q2, contraction likely in Q3 The 0.2% q/q expansion of Czech GDP in Q2 beat the consensus expectation for a small contraction, but it was roughly in line with what we had expected, and still marked a sharp slowdown in growth from Q1. We think …
The economic outlook has deteriorated across the region. Inflation is soaring and monetary conditions are tightening, which is weighing on households’ real incomes and spending power. The latest surveys show consumer confidence tanking and economic …
28th July 2022
Household consumption has been weaker in Spain than in other big euro-zone economies, reflecting the slow rebound in tourism, more limited fiscal support and higher inflation. The latter is set to persist, while rising interest rates are a new headwind. …
Downbeat surveys raise the spectre of recession The bigger-than-expected decline in the EC Economic Sentiment Indicator in July adds to a growing list of indicators pointing to activity slowing markedly in July. With the region’s gas supply now reduced …
Global economic and market analysis from Capital Economics We expect the Fed to hike the fed funds rate by 75bp, to 2.25-2.50%(19.00 BST) We think the US economy expanded by just above 1% q/q annualised last quarter (13.30 BST) Register for our Drop-In on …
27th July 2022
The decision by Gazprom to cut natural gas supplies to Europe to 20% of capacity has caused gas prices to surge and raised the risk of energy shortages during the winter. A full gas cut-off would result in self-inflicted pain for Russia. For the rest of …
Bank lending growth accelerated further in June, but lenders expect the demand for loans to slow sharply in the coming months, adding to the reasons to expect the economy to fall into recession. Meanwhile, banks in the periphery are tightening the Ts and …
A rebound in tourism will cushion some of the blow to Spanish prime retail demand caused by falling real incomes this year. But once inflation eventually eases, we expect rent growth to outperform other European markets, supported by a rebound in consumer …
25th July 2022
Heading for recession The further decline in the German Ifo Business Climate Index (BCI) in July adds to the evidence that the German economy is on the brink of a recession as high energy prices and worries about energy security take their toll on firms’ …
Almost exactly ten years on from Mario Draghi’s “whatever it takes” speech, the ECB this week had another attempt at keeping a lid on peripheral bond spreads as it kicked off its first tightening cycle in more than a decade with a bigger-than-expected …
22nd July 2022
Production to remain sluggish this year Global steel production growth slowed in June as higher power costs in advanced economies contributed to lower output there. By contrast, the decline in China’s output slowed slightly. Overall, we expect global …
Danish policymakers won’t be rushed Given that Denmark’s Nationalbank operates an exchange rate peg with the euro, it was no surprise to see it mirror the 50bp rate hike by the ECB on Thursday afternoon. If anything, the only surprise was that it took …
Despite their recent rebound, we still think that “high-beta” developed market (DM) currencies will weaken further against the US dollar for the remainder of the year. DM currencies have risen against the greenback over the past week or so, reversing some …
Euro-zone on brink of recession July’s flash PMIs suggest that the euro-zone is teetering on the brink of recession due to slumping demand and rising costs while inflationary pressures remain intense. The ECB will have to follow up on yesterday’s historic …
Headline CPI inflation probably eased in Japan in June (00.30 BST) Rising prices probably weighed on June retail sales volumes in the UK (07.00 BST) We expect July’s flash PMIs to show that activity weakened in the euro-zone & the UK Key Market Themes …
21st July 2022
The ECB’s 50bp rate hike today is likely to be the first move in a sustained interest rate hiking cycle which we think will bring the deposit rate to around 2% next year. We also think the Bank will at some point have to use its new asset purchase …
Romania’s current account deficit is likely to rise to almost 9% of GDP this year. While a weaker currency would help to reduce this shortfall, structural reforms are needed to boost competitiveness in the long term. Until then, Romania’s deteriorating …
The near-term economic outlook has deteriorated in recent months and Switzerland, Sweden, and Denmark are set for mild recessions in late 2022 and early 2023. This is partly a function of external weakness; as highly open economies, the recession in the …
Borrowing overshoot will limit next PM’s ability to help households June’s public finances figures provided more evidence that the government’s fiscal position is worse than the Office for Budget Responsibility (OBR) predicted back in March. This may …
It looks like Italy is heading for an early general election. While that won’t necessarily cause an economic and financial crisis, bond spreads are likely to widen regardless of what the ECB announces later today. After the Lega, Five Star Movement and …
Overview – Economies in Emerging Europe were resilient in the first half of this year, but the outlook has deteriorated markedly as headwinds have strengthened. Inflation is likely to continue rising and we think that GDP will do little more than stagnate …
20th July 2022
The Q2 ECB bank lending survey showed a tightening in credit standards for commercial property lending in the first half of the year, with expectations for a further squeeze in H2. With the cost of debt also higher, more restrictive credit will weigh on …
Strength of inflation will push ECB into aggressive tightening Final inflation data for June confirm that price pressures are very strong. Whether or not the ECB hikes by 50bp on Thursday, we think it will be the beginning of an aggressive 12 months of …
19th July 2022
Europe’s heightened demand for LNG will be enough to keep prices high this year and into 2023, particularly as LNG supply growth will be fairly limited . The Asia-based spot price for LNG, together with its European counterpart (TTF), soared in the wake …
18th July 2022
Despite the Q1 surge in investment activity, we think a weak rental outlook and stretched valuations will deter a sustained increase in investment, limiting the scope for further falls in prime industrial yields. There was strong investor demand for prime …
The apparent race to the bottom on taxes slowed this week with the candidates that had pledged to loosen fiscal policy the most if they became Prime Minister either withdrawing from the contest or being eliminated in the first two rounds of voting by MPs. …
15th July 2022
Monday went from bad to worse in Norway Monday proved a day to forget for Norwegian economists and football fans, with another increase in core inflation in the morning compounded by an 8-nil drubbing by England in the evening. Admittedly, the increase in …
Energy rationing now a growing downside risk Governments ramped up efforts this week to prevent possible shortages of energy during the winter. But with the threat of lower Russian gas flows increasing, there is a growing risk of energy rationing that …
New forecasts We published our quarterly European Economic Outlook this week, which contains all of our latest forecasts for the euro-zone, its member states and the ECB. In this Weekly , we will highlight three of our key calls on the economic outlook. …
ECB will raise its rates by 25bp and signal 50bp likely in September. Deposit rate will rise to +1.25% by year-end and +2.0% next year. Policymakers may not agree anti-fragmentation tool next week. ECB policymakers are likely to follow through on their …
14th July 2022
