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Big pharma, big statistical distortions Perhaps the most eye-catching data release of the week was on Thursday when the Federal Statistical Office in Switzerland reported that Swiss industrial production jumped by 8% in Q3 from the same period a year ago. …
22nd November 2019
What would St Francis do? “Start by doing what’s necessary; then do what’s possible; and suddenly you are doing the impossible”. This quote from St Francis of Assisi is how Christine Lagarde ended her first speech as ECB president on Friday morning. We’re …
Views from the ground in Stockholm One of the issues that came up a lot in our client meetings in Stockholm this week (see here ) was the appropriate mix between fiscal and monetary policy in Sweden. In a speech on Wednesday, Martin Flodén added to the …
15th November 2019
Q3’s 0.2% quarterly expansion in the euro-zone economy, which was confirmed this week in Eurostat’s second estimate of GDP , was almost certainly driven entirely by domestic demand. We will not have a Q3 GDP breakdown for the euro-zone by either …
Musical chairs at the Riksbank The announcement this morning by the Riksbank that Anna Breman will fill the vacant seat on the Executive Board ends the period of uncertainty since the news of Kerstin af Jochnick’s departure was made public in July. It was …
8th November 2019
Spanish poll unlikely to break deadlock All the signs are that Spain’s fourth election in as many years, which takes place this Sunday, will result in another hung parliament, and that Prime Minister Pedro Sánchez will continue to struggle to cobble …
Deflation rears its head again in Switzerland… Perhaps fittingly in the week of Halloween, data released this morning showed that deflation came back to haunt the SNB in October. (See here .) With the KOF Economic Barometer confirming that the economy …
1st November 2019
It seems fitting that “Count Draghila” ended his term at the ECB on Halloween. And as Christine Lagarde takes over, the euro-zone’s immediate prospects are not nearly as frightening as they were when Mr Draghi took the helm in 2011. In fact, some of the …
Weak October data bode ill for Q4 This week saw the release of a raft of data which suggested that the euro-zone economy remained very weak at the start of Q4 after a probable stagnation in Q3. Although the Composite PMI edged up in October, this came as …
25th October 2019
Riksbank gunning for zero at all costs As expected, the Norges Bank and the Riksbank both left their policy interest rates on hold on Thursday, at 1.50% and -0.25% respectively. (See here .) Nonetheless, the strong hint by the Riksbank that it will “most …
Statistics Sweden sound a health warning The news that the Swedish unemployment (UP) rate was unchanged at its highest level since June 2015 in September (7.4%) initially caused the krona to fall against the euro on Thursday morning. However, the currency …
18th October 2019
Draft budgets not quite what they appear At first glance the budget proposals submitted to the European Commission (EC) this week might raise hopes for a big fiscal stimulus next year. But we think they should be taken with a pinch of salt. Admittedly, …
Swedish activity data flatter to deceive On the face of it, the stronger than expected activity data from Sweden for August released this week lend support to the Riksbank’s forecast that it will hike rates over the next six months or so. Production in …
11th October 2019
Still scope for agreement on more ECB stimulus The account of September’s ECB meeting supports our view that when the Bank is eventually forced to loosen policy again, it will opt to cut interest rates and increase its corporate bond buying. The divisions …
What’s Swedish for ‘disastrous’? The plunge in Sweden’s manufacturing PMI in September, from 51.8 to just 46.3, was bad enough on its own. (See here .) But taken together with the sharp fall in the services PMI (data released yesterday), the overall …
4th October 2019
The trade war takes to the skies The WTO’s decision this week to grant the US permission to raise tariffs on the EU over Airbus subsidies increases the risk that the bloc is drawn into Mr Trump’s trade war. Tariffs of 10% on large civil aircraft, and 25% …
No signs of green shoots in the Swedish economy Another week, and yet more evidence that the Swedish economy is stuck in first gear. The Economic Tendency Indicator fell for the fifth month in a row in September (data released on Thursday), driven by a …
27th September 2019
ECB divisions increasingly in the open The resignation of Sabine Lautenschläger this week, and continued media coverage of September’s Governing Council decisions, have once more put the spotlight on divisions within the ECB. We think these may get worse …
Lots of chatter from the Riksbank If a week is a long time in politics, two weeks is an eternity in Swedish economics! The clear deterioration in the economic data since the September policy meeting just a couple of weeks ago – not least the further rise …
20th September 2019
Dutch policymakers heed ECB’s call for action … The ECB’s appeal last week for fiscal policy to become the “main instrument” supporting the euro-zone economy appears not to have fallen entirely on deaf ears. The Dutch government this week announced a …
Over to you, SNB! The recent pick-up in investor risk appetite has given the SNB a little breathing space ahead of its policy meeting next Thursday. Weekly data indicate that the Bank paused its FX interventions to weaken the franc at the end of August …
13th September 2019
ECB has more tools, but they’re blunt The ECB’s new forecasts imply that it is not very confident about hitting its inflation target. Indeed, its new projections show headline and core inflation at just 1.5% in 2021, which President Draghi described as …
Euro-zone underperforming ECB forecasts The latest data are consistent with our view that the euro-zone economy will remain sluggish. National accounts data published earlier today confirmed that the currency union’s GDP grew by just 0.2% in Q2. (See here …
6th September 2019
The Riksbank is in a group of one It was no surprise to see the Riksbank present substantial downward revisions to the back-end of its forecast for the repo rate at its policy meeting on Thursday. However, the fact that the Bank stuck to its forecast of a …
Dire Swedish data run goes On and On and On The fourth consecutive fall in the Swedish Economic Tendency Indicator continued the recent run of poor data releases. The indicator fell in August to its lowest level since June 2013 and the broad-based …
30th August 2019
Bond market rally complicates life for ECB More policy loosening is on the way in the euro-zone, but it will not be supported by all of the ECB Governing Council. After holding his tongue for several months, Bundesbank boss, Jens Weidmann, said this week …
Italy heading for caretaker government? The fall of another Italian government comes as no surprise, given that their average lifespan over the past few decades has been just over a year. But it is a bit surprising that Italian government bonds rallied …
23rd August 2019
NOK/EUR to fall to record low Markets are more “hawkish” than we are on rates in Norway – they expect rates to be raised by roughly 50bp by the end of this year while we expect the Bank to leave them unchanged. Meanwhile, investors appear to have priced …
SNB FX interventions are gathering pace Spare a thought for the poor FX team at the SNB: while much of Europe is away on holiday, data released on Monday showed that they recently had their busiest week of interventions since April 2017. It’s worth noting …
16th August 2019
German yield curve not a good guide to recessions With all the talk of inverted yields curves predicting a recession in the US, it is worth taking a closer look at what yield curves are telling us in the euro-zone. The most obvious place to start is …
No end in sight to the downturn in Sweden The latest data releases for June from Sweden show that the flash estimate of a contraction in the economy in Q2 was no rogue reading. We learned on Tuesday morning that private sector production fell for the …
9th August 2019
Bigger budget deficits on the way Italy now looks set for an early election. Relations between the two coalition partners have broken down, and the leader of the junior partner has called for a vote of confidence in the government. That said, even if it …
July surveys point to continued weak growth The slowdown in euro-zone GDP growth from 0.4% q/q in Q1 to 0.2% in Q2 was in line with our forecast and the ECB’s. (See here .) We don’t yet have an expenditure breakdown for the euro-zone as a whole, but the …
2nd August 2019
Swedish economy to flirt with recession… The 0.1% q/q fall in Swedish GDP in Q2 is unlikely to be the final word on the matter given that the data are almost certain to be revised in September. (See here .) Nonetheless, the release adds to signs that the …
Dovish ECB to make life difficult for the SNB Having seen the Swiss franc post multiple fresh two-year highs against the euro early in the week, the SNB will have welcomed the drop in the currency after the ECB meeting on Thursday. The fall was mirrored …
26th July 2019
At Thursday’s press conference, the ECB laid the groundwork for policy easing in September. The change to its forward guidance suggests that a rate cut is pretty much a done deal. But the Bank also “tasked the relevant committees” with looking into other …
Franc leaves exporters with a mountain to climb The widening in Switzerland’s trade surplus in June (data released on Thursday) was driven in large part by weakness in imports and masked a continued slowdown in export growth. The rise in the value of the …
19th July 2019
What are investors expecting from the ECB? Next week, we think that the ECB will alter its forward guidance in two ways. First, it is likely to say that interest rates will remain “at present or lower ” levels at least through the middle of next year. And …
The Riksbank has fallen well behind the curve The minutes of the Riksbank’s July monetary policy meeting, released this morning, offered little in the way of surprises. As was the case in the February meeting, the decision to hold the repo rate unchanged …
12th July 2019
France defies the gloom While the German and Italian economies are in the doldrums, France seems to be doing much better – for now at least. We think GDP expanded by around 0.4% q/q in Q2, following a decent 0.3% increase Q1. Industrial production rose by …
Developments this week make us more confident in our view that the ECB will change its forward guidance at its meeting on 27 th July, before cutting its deposit rate in September and announcing in October that it will re-launch QE. The first of these …
5th July 2019
Swiss market shrugs off loss of ‘equivalence’ The Swiss stock market took the expiration of the ‘equivalence’ regime with the EU in its stride this week, mirroring the buoyant performance of other equity markets. The Swiss Market Index (SMI) jumped by …
Economy lost momentum in Q2 Business surveys released this week provided more evidence that the economy slowed again in Q2. The German Ifo Business Climate Index, released on Monday, fell to a 55-month low, and was followed on Thursday by the euro-zone …
28th June 2019
Swiss-EU stock market equivalence is no more The spat between the Swiss government and the EU came to a head this week after it became clear that the EC will follow through on its threat to let the current ‘equivalence’ regime for share trading lapse from …