Filtered by Region: Europe Use setting Europe
The unexpectedly strong rise in unsecured borrowing in April adds to the evidence that consumer spending hasn’t collapsed, despite the plunge in consumer confidence and fall in households’ real incomes. (See Chart 1.) Chart 1: Consumer Confidence & …
1st June 2022
EU oil embargo not a disaster for Russia After weeks of intense negotiation, the EU eventually agreed to impose an embargo on seaborne imports of Russian crude and petroleum products that will likely result in a 90% fall in Russian oil exports to the EU …
One is not amused by King Harald V’s luck With the UK gripped by Jubilee fever, it is worth pointing out that Sweden, Norway, and Denmark are also constitutional monarchies whose current rulers have been on the throne for decades. It is hard to compare …
A bright spot in an otherwise gloomy landscape The euro-zone unemployment rate remained at a record low in April and the latest business surveys suggest that employment will continue to increase at a decent pace. With the labour market remaining tight, …
Weak external demand and war in Ukraine take their toll Manufacturing PMIs for May showed that weaker external demand weighed on export orders in Emerging Europe, and that spillovers from the war in Ukraine hit output. There were some signs of improvement …
More evidence that house price increases have peaked There was another slowdown in the annual rate of house price inflation in May according to the Nationwide. That was in line with our expectation of sustained slowdown through the rest of the year, …
The EU’s sixth round of sanctions on Russia marks yet another defining moment in the West’s detachment from Russia’s energy trade. The sanctions were widely telegraphed in advance, though, so for now we still forecast that crude oil prices will remain …
31st May 2022
GDP across Central Europe expanded strongly in Q1 and the latest figures for March and April suggest that activity has remained resilient since the war in Ukraine started. Russia’s economy has not (yet) fallen off a cliff as had been expected. Industry in …
Both our view and that of the IPF Consensus is that prime office rental growth will slow as hybrid working shifts take their toll. However, we also think it is likely that a quality gap will emerge, though the evidence of this is not conclusive so far. …
Consumers funding spending through borrowing, not savings The solid rise in unsecured borrowing in April suggests that households have turned to credit to support their spending as the cost of living squeeze has intensified. But consumers do not yet …
Net lending defied economic headwinds in April Net lending to property rose sharply in April, after three consecutive months of easing. But the latest jump is most likely a once-off as we expect that credit demand will be dented by rising interest rates …
Approvals drop back to pre-COVID-19 levels in April The drop in mortgage approvals in April provided early evidence that interest rate increases are starting to hurt activity. As we expect the rises in both policy and mortgage rates to continue apace over …
Further jump in inflation clinches case for prompt ECB action With headline and core inflation rising more than expected yet again, the case for exiting from negative interest rates promptly is now irrefutable. The ECB looks sure to confirm next week that …
Solid Q1 but activity will have softened in Q2 The stronger-than-expected increase in Swiss GDP in Q1 provides a solid base for year-on-year growth rates throughout 2022. But with surveys heading south, and signs of stagnation in the euro-zone in Q2, we …
Resilient Q1, but economy to struggle over rest of 2022 Turkey’s economy performed better than expected in Q1, with GDP rising by 1.2% q/q, as the boost to net trade from the lira’s collapse late last year more than offset the blow to household spending …
Surging inflation boosts case for rapid rate normalisation German and Spanish inflation data for May provide more ammunition for those who will argue at next week’s monetary policy meeting that the ECB should exit negative interest rates promptly, rather …
30th May 2022
Sentiment a mixed bag in May The EC’s Economic Sentiment Indicators for Central and Eastern Europe were a mixed bag in May, but there were some encouraging signs that industrial sentiment has started to improve and that price pressures may be nearing a …
Sentiment still depressed The EC Economic Sentiment Indicator for May was almost unchanged from April, well below its pre-Ukraine war level and consistent with economic activity stagnating in Q2. The survey also suggests that inflationary pressures remain …
Russia and default (yes, we’ve been here before!) A Russian sovereign default moved a step closer this week after the US government decided not to extend a waiver that allowed US investors to receive debt payments from Russia’s government. We looked at …
27th May 2022
Strong Q1 performance pushes 2022 forecasts higher The latest IPF Consensus Survey indicates that the outlook for this year is stronger than expected three months ago, though after 2022 forecasts were more pessimistic. Our view remains more downbeat than …
There are some question marks over quite how big the fiscal stimulus announced by the Chancellor yesterday proves to be. Much depends on whether the 25% levy on the profits of oil/gas producers lasts beyond the next year, which Sunak said would happen if …
Nordics to follow ECB (following the Fed) The change to our ECB forecast this week (see here ) has big implications for Scandinavian central banks so we are now formally changing our projections for the Riksbank, Norges Bank and Nationalbank. (See Key …
Contraction in Q2? The euro-zone PMI survey for May, published this week, suggested that the economy may fare a little better in Q2 than we had assumed. Indeed, the Composite index remained well above the 50 “no change” mark, leaving it consistent with …
The ECB’s guidance that it can use PEPP reinvestments to contain bond spreads has a few big limitations. If the forthcoming interest rate hikes cause spreads to blow out, the ECB will either need to change the rules governing its reinvestments or, more …
26th May 2022
The extra financial support for households announced by the Chancellor today will help millions of households cope better with the cost of living crisis. But it won’t relieve all the pain and may mean the Bank of England has to pull the interest rate …
The risks of a recession in the euro-zone have risen. While we think a contraction will be narrowly avoided, this will remain a concern for property investors already facing the prospect of higher yields in the near term. Our recent European Economics …
With inflationary pressures remaining intense and policymakers keen to get the deposit rate out of negative territory, we now think the ECB is most likely to raise rates by 50bp in July and by 125bp in total this year. That said, we still think the …
The consensus among professional forecasters is that house price growth will slow but remain positive over the coming years, as a robust jobs market prevents forced sales. But even in the absence of financial distress, we think that a decline in prices is …
Despite the backdrop of inflation at 70% and the lira falling by falling by 10% against the dollar this month, Turkey’s central bank left interest rates on hold at 14.00% today. So long as President Erdogan is in power, rate hikes will remain off the …
If we are right in expecting inflationary pressure to stay strong even as the economy gets dangerously close to a recession, then the prices of gilts and UK equities will probably fall further over the next year. Our forecast that the Bank of England will …
Exports from Central and Eastern Europe (CEE) face growing headwinds, and this feeds into our below consensus view on economic growth in the region. The larger economies in CEE such as Poland and Hungary are particularly exposed to slower growth in the …
25th May 2022
We held a Drop-In today to discuss our views on the ECB and what the chances are of a further hawkish surprise in the coming weeks. (You can see an on-demand recording here .) This Update answers several of the questions that we received, some of which we …
24th May 2022
We think “risky” assets will continue to struggle over the next year or so, even if a recession is avoided in most major developed markets (DMs) . Risky assets, which had already come under significant pressure earlier this year, have continued to …
We estimate that euro-zone households’ debt interest payments will quadruple as a share of income over the next couple of years as the ECB raises its policy rate. This will put yet further strain on households which are already struggling with higher …
Activity stalling, but inflationary pressures remain acute The flash PMI survey for May suggests that economic growth has slowed to a crawl and that the risk of a recession has not gone away. Even so, weakness in the economy doesn’t seem to be filtering …
Temporary factors buoying euro-zone activity The small fall in the euro-zone Composite PMI in May suggests that activity is holding up better than we had feared. But the services rebound is likely to run out of steam amid high inflation and the drop in …
The recovery continued in the Scandinavian and Swiss economies and their property markets in Q1. It was a record first quarter for investment in Scandinavia. And annual capital value growth was robust for office and industrial, while retail values …
Changing economic winds may prevent the Chancellor from going big The economic wind that has recently been blowing the public finances to undershoot forecasts adds more pressure on the Chancellor to launch in the coming weeks a big package of measures to …
The recent tightening of export restrictions has been limiting the supply of staple agricultural commodities available to global markets and pushing up prices. In light of the ban on wheat exports from India, we’ve raised our forecast for the price of …
23rd May 2022
In this Update , we answer a number of key questions on Russia’s public finances, including the likelihood of a sovereign default, the impact of higher energy prices and the collapse of the economy on the budget position, and how the government would be …
The Bank of Israel (BOI) hiked its policy by a larger-than-expected 40bp today, to 0.75%, and the backdrop of a strong economy, tight labour market and mounting inflation pressures means that we think it will deliver further hikes at its upcoming …
Stronger than feared but economy still struggling The Ifo survey for May suggests that activity in Germany may be holding up a little better than we had feared. But the headline Business Climate Index is still consistent with GDP contracting in …
Soft start to Q2 April’s activity data for Poland suggest that the economy lost some steam at the start of Q2 and the effects of the war in Ukraine will remain a key headwind over the coming months. That said, we think Poland will avoid a contraction and …
Consumer confidence remains depressed The small increase in euro-zone consumer confidence in May left it only slightly higher than its low point at the start of the pandemic. With confidence extremely low and real incomes squeezed by high inflation, we …
20th May 2022
Overview – The worsening monetary outlook is expected to weigh on property performance. With inflation set to peak at 10% y/y that will force interest rate to 3.0% next year. This will reverse the recent momentum in the commercial property sector, as …
Hungary: policymakers seek to fight imbalances Officials in Hungary sought this week to reassure investors that they will tackle inflation and mounting macro imbalances. Tighter policy is needed, which underpins our below-consensus growth forecasts. In a …
This week’s news on the euro-zone economy has continued to be pretty gloomy. Admittedly, there was a small upward revision to Q1 GDP (to 0.3% q/q) which means the economy will not fall into a technical recession in the first half of the year. And …
Another week, another set of target-busting inflation figures, with CPI inflation shooting up from 7.0% in March to a 40-year high of 9.0% in April. (See here .) In contrast, the rise in the euro-zone was smaller, with inflation ticking up from 7.4% in …
50bp is the new 25bp? It was a quiet week on the data front, but we had plenty of comments and speeches from policymakers to pick through – notably from three of the members of the Riksbank’s Executive Board. Deputy Governors Henry Ohlsson and Martin …
History suggests that the surge in energy prices over the past year means there is a good chance that the euro-zone will suffer a recession in 2022. It also suggests that it will be tricky for the ECB to tighten monetary policy without causing a recession …
