Filtered by Region: Europe Use setting Europe
The sharp tightening of monetary policy in the region will strengthen the preference for savings, dampen lending growth and raise debt servicing costs next year. It is plausible to think that higher interest rates could trim 0.5-0.8%-pts off GDP growth …
9th November 2021
Economic growth has slowed sharply as output approaches its pre-pandemic level. We think that GDP will probably increase by only around 0.5% q/q in the final quarter, down from 2.2% in Q3. Manufacturing firms in Germany are struggling more than most and a …
8th November 2021
Overview – We think it will take longer than most others expect for rising interest rates to bring down the curtain on the COVID-19 house price boom. A large stock of household savings, the ongoing adjustment to home working and very limited stock on the …
There is growing evidence that global goods shortages are weighing on euro-zone activity. We expect this to contribute to a marked slowdown in growth in Q4, and the outlook for early 2022 is no better. What’s more, it looks likely that the shortage-driven …
5th November 2021
The COVID-19 situation in many EMs has improved markedly over the past month or so as new infections have fallen sharply and vaccine rollouts have gathered pace. That said, the recent surge in virus cases in Emerging Europe serves as reminder that the …
You’re not dreaming: Israel passed a budget For the first time in more than three years, Israel’s government has brought some stability to the public finances by passing the 2021 and 2022 budgets. These are not game changers as far as fiscal policy is …
Yesterday’s 1.5% weakening in the pound against the US dollar to $1.35 and the 20 basis point decline in 2-year gilt yields to 0.43% show that the markets are reassessing the Bank of England’s inflation fighting credentials. And who can blame them. At the …
After failing to push back convincingly against financial markets’ expectations for rate hikes in last week’s press conference, ECB policymakers were out in force this week insisting that the Bank will not raise rates next year. Christine Lagarde said the …
Familiar foe of flying franc occupying minds at SNB Unlike the Norges Bank , the SNB did not have a policy meeting to keep itself busy this week. That said, while the meeting in Oslo was a snooze-fest, as anticipated, the recent surge in the value of the …
Low inventory levels pushing up retail prices Retail sales have levelled off since June as consumer spending on other services has increased. The latest survey evidence suggests that low inventory levels might also be limiting sales and are set to push up …
Auto producers in Central and Eastern Europe (CEE) have experienced intermittent factory closures in the second half of this year and things may get worse before they get better. Motor vehicles production will remain stop-start until shortages of …
No respite for German industry The 1.1% m/m fall in industrial production in September was worse than the consensus and our own expectation. Business surveys suggest that shortages of components, particularly in the auto sector, will keep manufacturing …
The indication from the Bank of England that Bank Rate of 1.25% would be too high for the economy suggests that the forthcoming rise in interest rates won’t be anywhere near large enough to topple the housing market. Rather, we expect house prices to rise …
The Czech National Bank (CNB) shocked everyone with a 125bp interest rate hike at today’s meeting and while this was clearly intended to front-load tightening, the hawkish communications suggest that the tightening cycle still has some way to go. We …
4th November 2021
By leaving interest rates at 0.10% and continuing its QE asset purchases, the Monetary Policy Committee (MPC) didn’t set off any early fireworks today. But it did throw on the bonfire the markets’ expectations that interest rates will rise to 1.0% by the …
Shortages continue to threaten recovery The latest RICS survey indicated that construction activity remained robust in Q3, while the outlook for the near term is favourable. Although we agree, we expect that building material and labour shortages, along …
While the latest virus outbreak has clouded the near-term outlook, a tight supply picture and steady employment growth mean that prime Moscow office rents should return to growth in 2022. Preliminary data revealed that, following a collapse in occupier …
A modest improvement, but supply issues continue to bite Construction firms reported that activity strengthened in October despite higher costs and continued difficulty sourcing materials. The big picture is that until those constraints ease construction …
Spain is a long way behind its euro-zone neighbours in recovering from the pandemic. That is partly because its important tourism sector has been hamstrung by travel restrictions but it also reflects domestic weakness. Some of the shortfall will be …
Following yesterday’s taper announcement by the Fed, and ahead of the knife-edge decision by the Bank of England later today (we forecast a 15bp rate hike), this morning’s announcement from the Norges Bank was less eventful. Norwegian policymakers …
Supply problems, price pressures weigh on activity The PMIs suggest the euro-zone’s economic recovery will slow markedly in Q4 as supply shortages intensified throughout the region, especially for manufacturers. They also show that price pressures are …
The National Bank of Poland’s (NBP) decision to raise its policy rate by a larger-than-expected 75bp to 1.25% alongside the upwards revision to its inflation forecast suggests to us that the NBP is taking the fight against inflation much more seriously …
3rd November 2021
Inflation jump to prompt further 75bp hike The further rise in Russian inflation to 8.1% y/y last month paves the way for the central bank to hike the one-week repo rate by another 75bp (to 8.25%) when it meets in December. The outturn was up from 7.4% …
The Chancellor’s new fiscal rules could help to convince voters and investors of the Conservative Party’s fiscal discipline. But with eleven rules having come and gone in the past seven years and with no less than nine new fiscal indicators unveiled in …
The recent surge in energy prices and worsening supply chain disruption will keep Germany’s inflation rate higher next year than we had anticipated. However, we still think inflation will fall from a peak of around 5% to 2% or so by end-2022 and beyond …
The economic and political backdrop in Turkey is eerily similar to that which preceded the currency crisis in 2018, although one key difference now is that the lira doesn’t appear to be fundamentally misaligned. The upshot is that, even if the lira were …
Labour market recovery is likely to continue While the fall in euro-zone unemployment in September brings the jobless rate back to its pre-pandemic level, employment has not fully recovered. But the economy is growing strongly and the vast majority of …
House prices maintain their momentum Yet another upside surprise in house prices last month confirmed that the end of the stamp duty holiday in September did little to cool the market. We expect house prices to continue to beat expectations in the near …
October’s PMIs suggest that manufacturing sectors in Southeast Asia are recovering from recent Covid waves, but supply constraints are taking their toll on industry in China, Brazil and parts of Emerging Europe. With supply shortages set to persist for …
2nd November 2021
Europeans are returning to cities, though the return to offices has been much slower and this has had negative effects on city retail. Looking ahead, weaker demand for office and retail will weigh on performance in cities with large concentrations of …
Swiss inflation close to its peak at 1.2% Inflation did surprise on the upside in Switzerland in October, but only by a trivial amount, leaving the headline rate at just over 1%. The market is pricing in an increase in policy rates to zero by end-2023 but …
Supply constraints take a greater toll on industry The manufacturing PMIs in October showed that supply disruptions took a greater toll at the start of Q4, with industrial production growth in Turkey slowing and Czech industry likely to have contracted …
1st November 2021
A strong end to Q3, but virus outbreak dampens outlook Russia’s economy enjoyed a strong end to Q3, but the country’s severe COVID-19 outbreak has clouded the outlook more recently and is likely to cause growth to soften in Q4. Russia’s industrial sector …
29th October 2021
Two key points from the Budget Budget day produces a flurry of analysis but the most interesting reflections tend to come once the dust has settled and everyone has had time to digest the documents. Two points stand out to us. The first relates to the …
The ECB stuck to its script this week, with Christine Lagarde claiming that, after some “soul searching”, the Bank was comfortable with its view that the recent surge in inflation will prove to be transitory. Also, she didn’t sound too worried that other …
Lira see-saws but CBRT more tolerant A diplomatic spat between Turkey and its Western allies this week was quickly resolved, but it highlighted how vulnerable the lira is to geopolitical developments. And comments from Turkey’s central bank governor …
Strong rebound in Sweden Data released this week showed that Sweden’s economy grew by a stronger-than-expected 1.8% q/q in Q3, but the data weren’t as encouraging as they first appeared. The upside surprise in the third quarter was largely due to a …
Growth will slow sharply after nearly full recovery The solid increase in euro-zone GDP in the third quarter means that the recovery phase is now almost complete in most of the euro-zone. Growth will be much slower in Q4 because the boost from reopening …
Further signs of stagnating spending growth The tepid rise in consumer credit lends support to our view that economic growth slowed to little more than a crawl in September. Against the backdrop of rising COVID-19 cases and higher inflation, we expect …
Risks to inflation next year lie firmly to the upside Euro-zone inflation looks set to rise further before year-end as higher input costs continue to feed through. We agree with the ECB that the forces pushing inflation up should fade next year, and our …
Rising repayments weigh on net lending Net lending to UK commercial property was negative for the fourth month in a row in September, probably due to a rise in repayments. We expect further repayments, caution when seeking development opportunities and …
Housing market shrugs off the end of the stamp duty holiday Unsurprisingly, mortgage lending spiked in September as buyers rushed to complete before the stamp duty taper period ended. More notable is the resilience of mortgage approvals, suggesting that …
Further rise in Polish inflation to prompt another rate hike The rise in Poland’s headline inflation rate to 6.8% y/y in October opens the door for the central bank to deliver a 25bp at next week’s MPC meeting. Elsewhere, Czechia’s economy performed a …
A strong start to Q4 While many economies in Europe are facing the twin headwinds of supply constraints and high gas prices, the KOF Economic Barometer in October suggests that the Swiss economy continued to grow strongly at the start of Q4. The slight …
Almost fully recovered The stronger-than-expected increase in French GDP in Q3 took the economy back to within a whisker of its pre-virus size as the full lifting of restrictions caused activity to rebound strongly. Supply chain disruptions and rising …
Data published this week provide more evidence that the supply of labour has held up fairly well in the euro-zone and that those who have left the labour market have probably not done so permanently. This should help to keep a lid on wage growth at a time …
28th October 2021
The surge in COVID-19 cases and deaths in Eastern Europe has prompted the re-imposition of restrictions and it looks like measures will be stepped up, weighing on recoveries in Q4. Tight restrictions may not remain in place for long across Central Europe, …
The ECB stuck to its script today, arguing that although the increase in inflation now underway will be larger and last longer than previously anticipated, it is still temporary. Meanwhile, confirmation that the PEPP will end in March tells us nothing …
Table of Key Forecasts Overview – The EM recovery is now entering a more difficult phase as the boost from economic re-opening fades, supply shortages bite, growth in China weakens and the terms of trade worsen for major commodity producers. Lower vaccine …
The Q3 investment data indicate that activity could be slightly stronger this year than we had expected. However, with the economic recovery topping out and structural headwinds limiting investment in the office and retail sectors, we think commercial …
