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As a share of the population, Italy already has double the number of coronavirus cases as China, and the entire country is now in quarantine. (See Chart 1.) We think that this is likely to cause its economy to contract sharply in Q1 and Q2, and now …
10th March 2020
The recent market meltdown reflects concerns about the economic impact of the COVID-19 virus. This will inevitably hit commercial property, but in our view, the downside is likely to be relatively modest. The spread of the coronavirus from Asia into …
6th March 2020
Sell-off concentrating minds The market slump is galvanising policymakers into action. At the time of writing, the Euro Stoxx 50 was 15% below its mid-February peak and the ten-year Bund yield close to its all-time low. (See Chart 1.) This, of course, …
Pressure building on the SNB to cut rates While the 0.2% increase in Swiss GDP in Q4 2019 was in line with our forecast, attention has understandably moved on to the economic impact of the coronavirus and the coming policy response. There is little in the …
The response by policymakers, households and firms to the spread of the coronavirus looks set to take a heavy toll on Italy’s economy. We suspect that GDP will contract in both Q1 and Q2, and that over the year as a whole it will shrink by about 0.5%. It …
5th March 2020
The uptick in government and corporate bond yields in Q4, coupled with the continued decline in property yields, resulted in a deterioration in the relative valuation of commercial property markets in Europe. (See Chart 1.) That said, less than a third of …
Other than a lengthening of supplier delivery times in February, there is little evidence that the shutdown in the Chinese economy has had much impact on the euro-zone economy so far. Indeed, business surveys generally point to a slight pick-up in …
4th March 2020
Coronavirus hit to consumption will weigh on growth The increase in euro-zone retail sales data in January suggests that household consumption picked up at the beginning of the year, but we suspect that spending will drop in Q2 as the Covid-19 virus …
The Bank will cut its forecasts for GDP growth and inflation in light of the virus. On balance, we think it will reduce its deposit rate by 10bp next week. We also expect the Bank to tweak the terms of its longer-term financing operations. The ECB will …
3rd March 2020
Coronavirus to dampen inflation pressures further February’s fall in inflation reflected the decline in energy prices as a result of the coronavirus outbreak. But if the virus starts to sap domestic demand, then core inflation may decline slightly in the …
The stronger-than-expected increase in Swiss GDP growth in Q4 provides a higher base for annual growth rates at the start of this year than we had previously assumed. Nonetheless, following the surge in coronavirus cases, we now expect the economy to …
Following the surge in Covid-19 cases over the past week, we are cutting our forecast for euro-zone economic growth to 0.5% for the year, from 0.7% previously, due to a sharp drop in household spending in Q2. For now, we are assuming that the economy …
2nd March 2020
Broad-based improvement in February, but the story has moved on The increases in the manufacturing PMIs in February in Switzerland and the Nordics suggest that conditions in the industrial sector were improving before the surge in coronavirus cases in …
Spread of virus a potential game-changer The ten-fold increase in the number of confirmed coronavirus cases in Europe over the past week has increased the risk of a recession. So long as the virus was confined to China, the main threat to Europe was from …
28th February 2020
Covid-19 dominates proceedings in Switzerland The geographic proximity of Switzerland to Italy has understandably raised fears about the potential spread of the coronavirus. With the number of confirmed cases in Switzerland up to 15 at the time of …
Swedish economy will struggle to regain momentum The Swedish economy ended last year on the back foot, and a combination of the rising threat from the coronavirus, weak growth in the neighbouring euro-zone, and persistently below-target inflation lend …
The possibility of the Olympics and/or the European Football Championships being cancelled as a result of the coronavirus poses downside risks to headline Swiss GDP growth this year. Nonetheless, this will not trouble the SNB, whose focus will remain on …
27th February 2020
Little sign of coronavirus impact, but euro-zone still on course for weak Q1 The rise in the euro-zone Economic Sentiment Indicator (ESI) for February adds to the evidence that the coronavirus has had little impact on the economy so far. But the survey …
All-property rental growth eased across most markets in 2019, but the slowdown was concentrated in the retail sector. Admittedly, the Swiss markets remain a bright spot as prime retail rents increased in 2019. But there is no denying the retail sector in …
The outsized importance of cross-border commuters to the Swiss economy means that it is particularly vulnerable to any disruption to flows of people within Europe as a result of the coronavirus. Partly because of this, the chances of a rate cut by the SNB …
26th February 2020
Portugal’s economy has been a relative bright spot in the euro-zone in recent years and we think it will fare better than average again this year. Nonetheless, quarterly GDP growth looks set to slow from Q4’s stellar pace as investment eases and slower …
25th February 2020
Falling business investment will continue to weigh on economy After flat-lining in Q4 last year, we suspect that the German economy will not grow in the first half of this year either, even if the effects of the coronavirus are contained. With no change …
Small rise leaves Ifo at low level The small increase in the Ifo Business Climate Index in February will be a relief for those braced for a big hit from the coronavirus. However, the index is still below its level in December and remains consistent with …
24th February 2020
Contrary to what we and the consensus had expected, the euro-zone Composite PMI edged up in February, with both the services and the manufacturing output components increasing. The rise in the PMI echoed the message from other surveys this week, which …
21st February 2020
Although euro-zone rental value growth slowed in 2019, further falls in property yields supported capital values. Despite the soft economic backdrop, capital value growth should hold up in coming quarters. (See Chart 1.) However, a further slowdown in …
Limited impact from coronavirus but growth still anaemic The unexpected rise in the euro-zone Composite PMI in February will have assuaged fears that the region’s economy has been adversely affected by supply-chain disruption as a result of the …
The account of the ECB’s January meeting suggests that the ECB was becoming a little more positive on the economic outlook. But weak data and the spread of the coronavirus since then will have surely added to the downside risks. We are sticking to our …
20th February 2020
While the euro has already fallen to its lowest level in nearly two years against the US dollar, we think that it will drop a bit further during the rest of 2020, pushed down by several factors including a weaker economic outlook and looser monetary …
19th February 2020
Weaker-than expected inflation to test the Riksbank’s resolve The sharper-than-expected fall in Swedish inflation in January may test the Riksbank’s resolve to keep policy unchanged. With subdued GDP growth likely to weigh on underlying inflation this …
While we suspect that the SNB has intervened to slow the rise of the franc in recent weeks, it has not prevented it from reaching a multi-year high against the euro. At the margin, an increased tolerance for a stronger currency argues against the Bank …
18th February 2020
After Italy’s economy shrank at the end of last year, it looks set to continue to struggle in 2020. In fact, there is a clear risk that it falls back into recession for the fourth time since 2008. The 0.3% q/q contraction in Italy’s economy in the final …
The recent election result in Ireland has made the prospect of reunification slightly less remote. In this Update , we answer four political questions and four economic questions about what it might mean. Although Sinn Féin won the highest share of the …
17th February 2020
Support for the current policy stance Speeches this week by members of the ECB Executive Board, Philip Lane and Isabel Schnabel, were clearly part of a concerted effort to rebuff criticism of the ECB’s ultra-loose monetary policy. Ms Schnabel’s talk was …
14th February 2020
Riksbank will need to ease policy soon It was no surprise that the Riksbank left its repo rate on hold at zero percent this week or that it continued to forecast rates staying there until 2022. However, we think that underlying growth and inflation will …
Germany to continue flirting with recession Given that the German economy stagnated in Q4 last year it will have come as a relief that GDP growth for the euro-zone as a whole was not revised down from +0.1% q/q. We think that Germany will continue to …
Softer office occupier demand is expected to weigh on German prime office rents this year. But we still think that rents can grow at a decent pace because, even though office supply is expected to increase significantly, office occupier demand will still …
The initial financial market reaction in Switzerland and the Nordics to the coronavirus followed the familiar pattern during times of uncertainty: the Swiss franc rose and Swiss bond yields tumbled on the back of safe-haven demand, while the Swedish krona …
13th February 2020
Few signs of a rebound after a dreadful Q4 The sharp fall in euro-zone industrial production in December came as no surprise after the very weak national data already published. The timelier surveys suggest that industry will continue to struggle, even if …
12th February 2020
This morning’s decision by the Riksbank to leave its repo rate on hold at zero percent was never in doubt. While policymakers appear happy to stay in wait-and-see mode for the time being, we suspect that they will come under pressure to loosen policy …
Pick-up in Norwegian inflation points to tightening bias at the Norges Bank The unexpected jump in underlying inflation in Norway lends support to our view that the Norges Bank is more likely to hike than to cut interest rates next. Meanwhile, the …
10th February 2020
Activity in Norway set to regain pace this year The release of Q4 GDP data from Norway this morning confirmed that the mainland economy lost momentum at the end of last year. The slowdown in quarterly growth, from a downwardly-revised 0.6% in Q3 to 0.2% …
7th February 2020
More disappointing data Data published this week shed a little more light on the euro-zone slowdown in Q4, and the strength of any possible rebound at the start of this year. We won’t get the output or expenditure breakdowns of fourth-quarter GDP until 14 …
Industrial recession has not yet ended The 3.5% slump in industrial production in December flies in the face of the widely-held view that Germany’s manufacturing sector was on the mend at the end of last year. And even before the coronavirus appeared, …
Hopes for a substantial boost to economic growth in the euro-zone from fiscal policy in the next year or two are likely to be disappointed. It seems likely that any fiscal stimulus will be very small. And even if governments agreed on a larger tax and …
6th February 2020
The latest data revealed that commercial property investment in the euro-zone held steady at a record high level. And with favourable relative pricing and capital readily available, we think that investment will reach a similar level this year. Following …
The euro-zone economy ended 2019 on a weak note and the outlook for early 2020 remains gloomy. Euro-zone GDP slowed from 0.3% q/q in Q3 to 0.1% q/q in Q4, with contractions in French and Italian GDP. Although the euro-zone surveys for January point to a …
5th February 2020
Growth to stay weak even if no impact from coronavirus December’s euro-zone retail sales data suggest that household consumption growth slowed sharply in Q4. Meanwhile, the upward revision to January’s euro-zone Composite PMI implies that the coronavirus …
This morning’s decision by the Central Bank of Iceland (CBI) to resume its easing cycle came as no surprise to us following the recent fall in inflation. Given the potential for the coronavirus to exacerbate the deep downturn in the tourism sector, the …
A reduction in Chinese tourism as a result of the coronavirus will lead to lower spending on prime high streets, particularly in Rome, Paris and London. If tourism reduces on a global scale, the impact on spending would be greater. But so long as the …
4th February 2020
