Filtered by Subscriptions: Europe Economics Use setting Europe Economics
Over the past few years France has been an exception to the pattern in many other countries of falling labour supply and declining labour force participation. And there is no sign that this improvement is running out of steam. Total employment in France …
12th May 2023
The fragility of Sweden’s property sector hit the headlines again this week as commercial real estate firm SBB suffered a downgrade of its credit rating to “junk” status and cancelled its dividend. We covered the implications for property elsewhere but …
Hard data released this week paint a more downbeat picture of the euro-zone economy than the latest surveys. Three points are worth highlighting. First, the data confirm that the 0.1% q/q rise in euro-zone GDP in Q1 masks a greater weakness in domestic …
5th May 2023
Business surveys released this week suggest that Sweden’s economy started Q2 on the back foot. The Manufacturing PMI for April was unchanged at a very low level (45.5), consistent with output falling. And although the Services PMI rose, it was still close …
Recession risk receding? Data released today showed that the euro-zone economy grew by 0.1% q/q in Q1. Excluding Ireland, where the data are notoriously volatile, GDP expanded by a slightly stronger 0.2%. But after contracting in Q4, the euro-zone did …
28th April 2023
Credit Suisse’s Q1 results, released this week, revealed the scale of the crisis that led to its demise. The two key pieces of data we learnt were that the bank saw deposit outflows of CHF67bn in the quarter and that, at its peak, it borrowed CHF168bn …
Our latest forecasts for the Scandinavian currencies, are for the Swedish and Norwegian currencies to appreciate by 5% and 11% respectively against the euro by year-end, to SEK 10.75 and NOK 10.25. While we think both currencies will strengthen, the …
21st April 2023
More signs of economic resilience… GDP data due next week are likely to confirm that, after stagnating in Q4, the euro-zone economy returned to growth in Q1. We have pencilled in a 0.2% q/q expansion in the region as a whole, with positive outturns in …
Data point to positive growth in Q1 The latest official activity data suggest that the euro-zone economy posted a small expansion in Q1. Admittedly, retail sales fell in February, continuing the downward trend they have been on for over a year. But lower …
14th April 2023
This week, Swiss legislators voiced their concerns about the collapse of Credit Suisse and its takeover by UBS. While the vote to reject the Credit Suisse rescue package will not affect the takeover itself, or the government guarantees provided, it has …
Commercial real estate (CRE) has become an area of particular concern against a backdrop of higher interest rates and a pandemic-induced reduction in demand for office space. Sweden’s economy looks particularly vulnerable to a downturn in the sector for …
6th April 2023
Expansion in Q1 likely… After stagnating in Q4, euro-zone GDP probably rose in the first quarter. The final Composite PMI , released this week, confirmed that economic conditions improved further in March (though a bit less than implied by the flash …
This time last week the markets and financial media were worrying about the future of Deutsche Bank. German Chancellor Olaf Scholz publicly stated that the bank was “very profitable” and President Macron declared that the European banking sector as a …
31st March 2023
Less than two weeks have passed since the demise of Credit Suisse so it is too early to draw many lessons about the implications (if any) for the global banking sector. But the speed of the collapse of a bank which had passed the key financial health …
A few key points on Europe’s banks We discussed the recent turmoil in the banking sector in a Drop-in this week. (See here , or you can listen to a shorter version on our podcast here .) The big picture is that there are reasons to be cautiously …
24th March 2023
Norges Bank and SNB raise rates Undeterred by global banking turmoil, the Norges Bank and SNB focused on inflation this week and – in line with decisions by the ECB, Bank of England and the Fed – raised interest rates. The Norges Bank lifted its policy …
As we commented here , Credit Suisse’s problems are in principle a bigger threat to the global economy than those of the regional US banks that failed last week. Its balance sheet is more than twice as large as that of Silicon Valley Bank, for example, …
17th March 2023
Euro-zone bank equities have come under severe pressure this week after troubles at some US regional banks and at Credit Suisse raised concerns about the health of banking systems more generally. At the time of writing, the Eurostoxx bank index is down …
GDP shrank in Q4 (to two decimal places) The third estimate of euro-zone GDP in Q4, released earlier this week, strengthened our conviction that the economy will underperform most forecasters’ expectations. The 0.1% q/q expansion in GDP in the fourth …
10th March 2023
A closer look at Swiss inflation We learnt this week that Swiss headline inflation rose from 3.3% in January to 3.4% in February, driven by core inflation which increased by 0.2%-pts. (See here .) But the growth in underlying prices pressures appears to …
Another inflation surprise… The focus this week was on yet another higher-than-expected inflation print. The headline inflation rate edged down in February, but only to 8.5%, whereas a much bigger fall had been anticipated. And the core measure rose …
3rd March 2023
Sweden in recession This week brought yet more bad news about Sweden’s economy. Before the first release of Q4 GDP on 30 th January, the available monthly data pointed to an increase of around 0.5% q/q in the quarter as a whole. But those data were then …
After the US and the UK, it was the euro-zone’s turn to release better-than-expected activity data this week. Admittedly, we learned that German GDP fell by 0.4% q/q rather than 0.2% in Q4. This means the euro-zone economy probably stagnated in Q4 …
24th February 2023
As we noted here , the Riksbank has made a big policy shift in the few weeks since Erik Thedéen took over as Governor. The most concrete changes were to raise its forecast for policy rates and announce the start of outright asset sales, but the Bank has …
The ECB’s doves have been pretty quiet for the past few months, but Fabio Panetta – who is probably the most influential one these days – gave a moderately dovish speech this week. Among other things, he suggested that inflation may already have peaked. …
17th February 2023
The increase in Switzerland’s core inflation rate in January is likely to provoke a strong response from the SNB at its next meeting in March. We now forecast it to raise the policy rate from 1.0% to 1.5% at that meeting, followed by an additional 25bp …
First impressions are important because of the primacy effect which means they are, apparently, stored more easily in the long-term memory. That may be why Erik Thedéen used his first meeting as Riksbank Governor to spring a hawkish surprise this week, …
10th February 2023
Hawks singing the same tune At February’s ECB meeting, policymakers were unwilling to commit to raising interest rates further beyond the promised 50bp hike in March. But their comments this week show a clear intention to do so. Table 1 summarises some …
With the dust now settled after yesterday’s ECB meeting, it is clear investors have stuck with their dovish interpretation of the decision. They now expect the deposit rate to peak at around 3.4%, rather than 3.6%. (See Chart 1.) Meanwhile, 10-year …
3rd February 2023
As we argued in our latest Riksbank Watch , the fact that Sweden’s inflation rate rose more than expected in November and December is a key reason why we expect policymakers to raise rates by 50bp next week. But looking further ahead, we are …
Outlook better, but still bad There has been a marked improvement in sentiment towards the euro-zone recently as activity indicators have come in stronger than expected. Euro-zone GDP now looks likely to have flat-lined in the fourth quarter and January’s …
27th January 2023
Whither the Norwegian krone? Norway’s position as a major oil and gas exporter means that movements in its currency are typically correlated with moves in energy prices. But since the start of 2021, the krone has failed to keep pace with the rise in oil …
The Swiss franc is not immune to the shifting global landscape and we now suspect that it will be broadly stable against the euro in the coming months rather than appreciating. Looking back, the franc has been through three distinct phases since the …
20th January 2023
The improvement in recent data and brightening outlook continues to be the key talking point for euro-zone-watchers. In brief, it looks as if euro-zone GDP may not have contracted in Q4 2022 after all, and the prospects for this year have brightened …
After months of gloom, there seems to be some newfound optimism about the euro-zone’s economic prospects. Commentary about the euro-zone economy has turned more positive. And this year’s rally in euro-zone financial markets probably at least partly …
13th January 2023
Higher Swedish GDP forecast We learnt this week that Sweden’s monthly GDP Indicator declined by 0.5% m/m in November as a result of a fall in manufacturing output and “several service producing industries”, suggesting that policy tightening was …
Swiss manufacturing cruising, services snoozing The latest batch of surveys suggest that, in common with the euro-zone, prospects for the Swiss economy improved marginally at the end of last year. For a start, the KOF economic barometer for December …
6th January 2023
Inflation is on its way down Headline inflation in the euro-zone has probably passed its peak. (See here .) Admittedly, core inflation rose to a new record high in December, with both services and core goods inflation increasing in y/y terms. Core goods …
A ceiling agreed but with lots of caveats We don’t think the EU announcement of a cap on wholesale gas prices from February next year will have any practical impact. At first sight, the mechanism looks like a big deal. The ceiling of €180/MWh is much …
22nd December 2022
Jump in money supply won’t worry the SNB Swiss money supply data for November, released earlier this week, showed that M3 increased at its fastest year-on-year pace since February. (See Chart 1.) This could, at least in theory, encourage policymakers to …
Despite action, inflation will stay high It was a big week with for central banks with the Fed, BoE and ECB all raising rates by 50bp. The minnows were also in on the action with 50bp hikes for the SNB and Denmark’s Nationalbank and a 25bp hike by the …
16th December 2022
ECB a long way from pivot… Thursday’s ECB meeting has sparked significant turmoil in euro-zone financial markets. Ten-year Bund and BTP yields recorded some of their largest one-day rises in the past decade and are up ~25bp and ~50bp respectively from …
Wage growth peaking? Policymakers at the ECB will have taken some heart from the latest wage data published by Indeed. The data track pay offered in job adverts and they have shown a rapid acceleration over the past 18 months or so. But at least on …
9th December 2022
The end of the cycle is nigh… Next Thursday will see the last scheduled meetings of the year for several European central banks. The ECB and BoE will grab most of the attention, but the SNB and Norges Bank will also be in action and we expect both to …
Recession likely to be shallower We had been forecasting the Swiss economy to contract by 1% in 2023 but, with recent data suggesting that it is holding up better than we had anticipated, we now think GDP will be unchanged in 2023 compared to this year. …
2nd December 2022
Off the peak? The big event this week was the publication of flash inflation data which showed that, after rising for seventeen months in succession, headline inflation fell from 10.6% in October to 10.0% in November. (See here .) This was lower than we …
ECB officials were out in force again this week, disseminating clues about the size of the next rate hike and their plans on quantitative tightening (QT). Their comments suggest that a slowdown in the pace of tightening, from a 75bp to a 50bp hike, …
25th November 2022
Riksbank has further to go This week’s 75bp hike by the Riksbank was in line with expectations, and the Bank’s new projections took its policy rate forecast closer to ours. (See here .) The higher interest rate path – despite Stefan Ingves’s suggestion …
Norway one of Europe’s stronger performers Norway’s Q3 GDP data, published on Friday, were much stronger than expected, consistent with our view that it will be one of Europe’s best performers in the coming quarters. The 0.8% q/q increase in mainland …
18th November 2022
Official data to fall into line with surveys We doubt that the recent strength in some of the official euro-zone activity data will last. GDP posted a small expansion in Q3, whereas both we and the consensus had expected zero growth. (See here .) And …