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Policymakers have more work to do The account of April’s ECB meeting, published today, shows that the Governing Council has left the door wide open to further monetary policy support. As a reminder, at that meeting the Council made the Targeted …
22nd May 2020
Sweden faces some time out in the cold Norway, Denmark and Finland are reportedly considering keeping their borders with Sweden closed, even as and when they open them to others, because of the higher prevalence of Covid-19 infections there following its …
Yet another iteration of the Norwegian Budget The publication of a revised 2020 budget by the Norwegian government on Tuesday raised a couple of points worth noting. First, the government’s forecast of a 4% fall in mainland GDP this year is on the …
15th May 2020
This week’s data have brought further evidence of just how badly the euro-zone economy fared at the tail end of Q1. Industrial production , which had hardly been booming prior to the coronavirus pandemic, was unsurprisingly weak in March, while in the …
Limited solace from Sweden’s light-touch lockdown This week provided mixed messages on the health of the Swedish economy. On a positive note, there were welcome signs that the country has reaped some benefit from its light-touch lockdown – at least from a …
7th May 2020
German court won’t stop the ECB… yet Much ink has already been spilled this week on the German constitutional court, including by us. (See here .) So rather than go through it line by line, picking out the numerous unhelpful and at times bizarre claims …
It has been a busy week in the euro-zone with lots of data releases and the scheduled ECB monetary policy meeting yesterday. Stepping back, we have learnt three main things from the data. First, the slump in the first quarter was in line with our …
1st May 2020
KOF Barometer is feeling under the weather The unprecedented scale of the Covid-related economic carnage has seen previously reliable relationships between business surveys and output break down in many countries, and Switzerland is no exception. While …
That the euro-zone business and consumer surveys for April, published this week, would be catastrophically bad was never in doubt. Even so, they still managed to be even worse than predicted. The Composite PMI sank to a record low, below even the …
24th April 2020
Norwegian economy sideswiped by Covid-19 Statistics Norway took the award for this week’s most irrelevant data release, with the unemployment rate from way back in February, but it more than made amends with the ahead-of-schedule publication of its Q1 GDP …
The ECB is now buying assets at a record pace, but it is still struggling to keep a lid on bond yields. Last week the Bank bought over €35bn of assets, far more than the previous high of just under €25bn. Nevertheless, peripheral bond yields have begun to …
17th April 2020
Switzerland announces its exit plan In the week when Danish children under 11 returned to school, Switzerland announced yesterday that it too will start to ease its containment measures from 27 th April. Its three-phase plan foresees allowing small …
The Bank of France this week provided some more granular evidence of the extent of the slump in its economy. Based on a survey of 8,500 managers undertaken during the lockdown, it estimated the economy was running around 32% below normal levels. It also …
9th April 2020
Norwegian economic activity falls off a fjord The release of February GDP data from Norway on Tuesday showed that the mainland economy was far from a picture of health even before the ramp-up in containment measures in mid-March. Measured in 3m/3m terms, …
This week has brought yet more evidence that the containment measures in place across the euro-zone have caused economic activity to collapse. The final Composite PMI for the region for March showed that the slump in private sector activity was even …
3rd April 2020
Sweden’s services PMI is even worse than it seems In ordinary times, the 9.5-pt fall in Sweden’s services PMI in March, from 56.4 to an 76-month low of 46.9, would be enough to make you choke on your filmjölk . After all, the monthly decline was the …
This week we got an early sight of just how rapidly the euro-zone economy is collapsing. Meanwhile, the ECB has finally ditched the issuer limits on its asset purchases, freeing itself up to support the sovereign bond market whole-heartedly. But EU …
27th March 2020
Better late than never While it’s been a relatively quiet week on the monetary policy front by recent standards, there is still plenty worth recapping here. The regular weekly data-dump from the SNB early on Monday morning indicated that the Bank made its …
Norges Bank opens door to further rate cuts Harold Wilson famously said that a week is a long time in politics, and this week demonstrated that the same can be true for central banks. While policymakers everywhere have not exactly been sitting on their …
20th March 2020
It’s been a long week. Rather than recount every twist and turn, we will highlight a few points that seem particularly worth making. First, the decline in GDP looks set to be even bigger than we had assumed. We now think that economy will shrink by about …
Norges Bank and Riksbank are ruling nothing out After a bruising week for equities and the Norwegian krone, it is half-encouraging that the Nordic authorities are all singing off the same hymn sheet. Nonetheless, policymakers will not be able to prevent …
13th March 2020
The situation in euro-zone financial markets went from awful to absolutely disastrous this week as the coronavirus spread across the region. Monday’s rout was followed by a collapse in global equity prices on Thursday. European stocks had their worst …
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, …
6th March 2020
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 …
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 …
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
Policymakers agree to disagree Having drawn criticism for its optimistic projections for interest rates in the past, the Riksbank is keen to show that it means business with its forecast to leave the repo rate unchanged over the coming years. However, …
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 …
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 …
Weak growth in Q4 not just a one-off The Q4 GDP data published this week were weaker than we or the consensus had anticipated. And the region’s poor performance was not just down to Germany and Italy, with France’s economy contracting. It’s also not clear …
31st January 2020
Manufacturing appears to have passed the worst January’s surge in the Swiss KOF was the most eye-catching data release of the week. While we suspect that the scale of the improvement from December may have been a bit of a rogue reading, the fact that the …
Sluggish growth to continue In its latest World Economic Outlook, the IMF this week nudged down its forecast for euro-zone 2020 GDP growth from 1.3% to 1.2%, reflecting slightly weaker forecasts for Germany and Spain. The IMF is not the only organisation …
24th January 2020
The show must go on If it weren’t for constitutional limits on holding snap elections, Norway would be heading to the polls this year after a rift over policy led the far-right Progress Party (PP) to pull out of the current four-party coalition government …
No easy choices for Swiss policymakers The re-inclusion of Switzerland on the US Treasury’s Monitoring List of potential currency manipulators this week did not come entirely out of the blue. Having only been taken off the list in May 2019, we predicted …
17th January 2020
Phase One deal not a game changer for Europe This week brought a mixed bag of news on global trade, but the big picture is that euro-zone export growth is likely to remain slow this year. The main event was of course the Phase One deal between the US and …
News that the headline inflation rate in the euro-zone jumped from 1.0% in November to 1.3% in December, and that the core rate (excluding energy, food, alcohol and tobacco) was unchanged, also at 1.3%, has once again raised the possibility that inflation …
10th January 2020
SNB back in the FX market If staff at the SNB had hoped to ease themselves back in gently after the Christmas break, they will have been disappointed. Data released on Monday indicate that the Bank intervened to weaken the franc last week for the first …
The latest data suggest that the euro-zone economy might have avoided a further slowdown in Q4 last year, adding to the evidence that growth is “bottoming out”. However, the economy seems to have remained sluggish and we don’t think that a recovery is on …
3rd January 2020
Swiss economy still not out of the woods The latest surveys from Switzerland support our view that the economy is likely to continue growing at a fairly sluggish pace over the first half of this year. Admittedly, data published in late December showed the …
Better than 2009 The euro-zone economy is in better shape at the end of the current decade than it was ten years ago. In December 2009, we were writing Updates with titles such as “Greece heads deeper into the mire” and “Austrian banking troubles a sign …
20th December 2019
A decade in the spotlight Despite accounting for just 1.5% of global GDP between them (at PPP exchange rates), Switzerland and the Nordic economies have found themselves at the frontier of economic policymaking over the past decade – particularly when it …
Lagarde not just Draghi 2.0 In her opening press conference, Christine Lagarde seemed to be just as dovish as her predecessor. Her claim to be an owl, rather than a dove or a hawk, was more of a political gesture than view on policy. And her suggestion …
13th December 2019
Beware of the survey! The Norwegian krone barely moved after inflation data for November were released early on Tuesday morning. However, the currency plunged just two hours later after the latest quarterly Regional Network Survey indicated that economic …
No sign of green shoots in Swedish industry Another week, and yet more data from Sweden that call into question the wisdom of the Riksbank’s probable rate hike later this month. As in Germany, conditions in the industrial sector are going from bad to …
6th December 2019
Still no light at the end of the tunnel If Christine Lagarde had been hoping that the economy would perk up this year, taking the heat out of the disputes between hawks and doves on the Governing Council, this week’s data will have been a disappointment. …
Below, but close to, 2 degrees centigrade Reports that Christine Lagarde wants climate change to feature in the ECB’s forthcoming review of its monetary policy strategy suggest that the Bank will be even more political under her leadership than it was …
29th November 2019
Setting the stage for a December repo rate hike The pick-up in GDP growth in Sweden in Q3 (see here ) was much stronger than the small contraction that we had pencilled in, and was at odds with the raft of weak survey data that we had put emphasis on. It …