Filtered by Subscriptions: Europe Economics Use setting Europe Economics
Ukraine war hitting hard The slump in output in March shows that the war in Ukraine is hitting manufacturers hard even before a ban on Russian energy imports has taken effect and before the ECB has raised interest rates. We think this is the start of a …
6th May 2022
Chances of a contraction in Q2 growing The decrease in euro-zone retail sales in March is the first indication from official data that the war in Ukraine is weighing on consumption. With the final PMI surveys pointing to price pressures intensifying and …
4th May 2022
Labour market looks tight The euro-zone unemployment rate fell to a new record low in March, and the latest business surveys suggest that employment will continue to increase at a decent pace. With the surveys also showing that the labour market is …
3rd May 2022
Stagflation risks building The small increase in euro-zone GDP in Q1 means that the region will avoid a technical recession in the first half of the year. But rising inflation and the fallout from the Ukraine war mean that GDP is likely to contract in Q2, …
29th April 2022
Small fall in energy inflation will not put ECB off rate hikes The further rise in headline inflation in Germany, and increase in the underlying rate in Spain, suggest that euro-zone inflation will come in around 7.4% in April. This will do nothing to …
28th April 2022
Slight recovery in April but Q2 contraction still likely The Ifo survey for April was a little stronger than we had expected and suggests that the services sector in particular is growing rapidly. But the index is still well below its pre-Ukraine war …
25th April 2022
Services sector propping up activity, but for how long? The rise in the euro-zone Composite PMI in April suggests that the services sector rebound from the Covid restrictions earlier in the year is offsetting weakness in the manufacturing sector. But with …
22nd April 2022
Consumption to be a significant drag on growth The rise in consumer confidence in April was slightly better than expected. Nevertheless, confidence is still very low and points to household spending falling in April. That’s consistent with our assumption …
21st April 2022
Inflation hasn’t peaked yet Headline inflation rose to 7.4% in March and further increases are likely. This will put a big dent in consumer spending, so we think that 2022 will be a year of stagflation for the euro-zone. Data released this morning showed …
Inflation at a 31-year high The stronger-than-expected increase in Swedish inflation in March is likely to give more ammunition to the hawks in the Riksbank, and lends support to our view that the Bank will start to raise the repo rate and press ahead …
14th April 2022
Mounting signs of stagflation Final inflation data for Germany in March and the first survey of economic sentiment for April underline the acute problems which the German economy now faces. Energy inflation and underlying price pressures are rising even …
12th April 2022
Lower-than-expected inflation won’t stop Norges Bank hiking Although headline and core inflation came in below expectations in March, underlying price pressures are likely to push both measures up a bit in the coming months. Meanwhile, the Norges Bank is …
11th April 2022
Modest growth before the war in Ukraine The small increases in euro-zone retail sales and German industrial production suggest that economic activity was growing at a modest pace in February. With much higher energy prices now weighing on manufacturing …
7th April 2022
Output expectations hardest hit in Germany March’s final euro-zone PMI surveys confirmed that output expectations fell sharply, with Germany experiencing the biggest drop. Meanwhile, price pressures remain intense across the currency union. The small …
5th April 2022
Inflation overshoot will soon prompt ECB into action With euro-zone inflation rising even further above the ECB’s forecast, and likely to remain very high for the rest of the year, we think it won’t be long before the Bank starts raising interest rates. …
1st April 2022
Swiss inflation to remain above 2% for much of this year Swiss inflation rose further above the SNB’s definition of price stability in March, and higher commodity prices and continued supply problems will keep it there for most of this year. Given the …
Labour market very tight prior to Ukraine war The euro-zone unemployment rate edged down yet again in February, to a record low of 6.8%. There is little sign yet that this is feeding through to higher wages. But labour market conditions are set to remain …
31st March 2022
Ouch! German inflation hits 40-year high After a further huge jump in March, German inflation is likely to average at least 7% this year, and there are plenty of upside risks, not least the threat of power shortages. With price pressures remaining very …
30th March 2022
Chances of a manufacturing recession increasing The European Commission business and consumer survey for March is consistent with our view that economic growth will be slower than most anticipate this year while inflation will overshoot expectations. The …
Manufacturing contraction looming March’s Ifo business survey provides further evidence that Germany is heading for a sharp slowdown as the war in Ukraine and sky-high energy prices cause manufacturing output to contract. However, we still think a …
25th March 2022
Slower growth, higher inflation March’s euro-zone PMI survey is consistent with our view that the economy will grow more slowly than most anticipate this year, while inflation will overshoot expectations. The small fall in the Composite PMI, from 55.5 in …
24th March 2022
Outlook for consumption darkened by war in Ukraine The huge fall in consumer confidence in March suggests that consumption may have contracted as the war in Ukraine and higher energy prices reduced households’ willingness and ability to spend. In turn, …
23rd March 2022
Slower wage growth despite shortages The latest data show that euro-zone wage growth remained subdued at the end of last year, despite reports of widespread labour shortages. The tightening in the labour market that we expect is likely to put upward …
18th March 2022
Headline inflation to stay around 6% until Q4 With the war in Ukraine pushing up energy and food prices and potentially exacerbating supply problems, we think euro-zone inflation will remain around 6% until Q4 and average well above 2% next year. …
17th March 2022
Another blow to the notion of Swedish inflation exceptionalism The stronger-than-expected increase in Swedish inflation in February is surely the final nail in the coffin for the Riksbank’s thus-far dovish stance, and lends support to our view that the …
14th March 2022
Outlook for retail sales darkened by war in Ukraine The small rise in retail sales in January, after a steep fall in December, suggests that Omicron remained a drag on consumption. Although spending will have rebounded in February, higher energy prices …
4th March 2022
Inflation to breach 6% in the coming months After February’s surprisingly strong inflation outturn and with energy prices surging, euro-zone inflation is very likely to rise above 6% in the coming months. It then looks set to remain well above the ECB’s …
2nd March 2022
Inflation rising, but ECB will pledge not to tighten prematurely The increase in inflation in Germany and much bigger jumps elsewhere mean that euro-zone inflation for February will come in well above expectations. However, the ECB has bigger concerns at …
1st March 2022
Sentiment high before escalation in Russia-Ukraine conflict February’s increase in the EC Economic Sentiment Indicator showed that confidence was high before the recent news about the conflict in Ukraine. It also showed that supply shortages remained …
25th February 2022
Upside risks to inflation have risen Core inflation looks set to keep rising as the effects of global demand-supply imbalances persist. And the Ukraine crisis means that the risks to our above-consensus headline inflation forecasts lie to the upside. Data …
23rd February 2022
Economic conditions continue to improve The rise in the Ifo Business Climate Index (BCI) in February strengthens our view that conditions in the German economy continued to improve during Q1. While the latest escalation of Russia-Ukraine tensions will …
22nd February 2022
Activity rebounding The surge in the euro-zone flash Composite PMI in February suggests that activity is recovering well and supports our view that GDP will rise by around 0.5% q/q in Q1. There are tentative signs that supply chain problems are fading – …
21st February 2022
Hand of the hawkish triumvirate strengthened The increase in Swedish CPIF excluding energy was significantly higher than expected and pushed the core rate above the Riksbank’s 2.0% target for the first time in nearly three years. While we expect headline …
18th February 2022
Input shortages remain severe The rise in euro-zone industrial production in December took it above its pre-pandemic level and timelier evidence points to a small increase at the start of this year. But input shortages remain severe and the continued …
16th February 2022
Recovery to resume and labour market to tighten further The small increase in euro-zone GDP in Q4 confirms that the region’s economy was struggling at the end of 2021. But with Omicron under control and restrictions being eased, we expect the recovery to …
15th February 2022
Core inflation to stay well above 2% this year The upside surprise to Germany’s headline inflation rate in January was mostly due to higher energy prices rather than rising underlying inflation. Nonetheless, core inflation of 2.9% is well above the …
11th February 2022
Swiss inflation at a 13-year high but will head down from here Inflation was stronger than expected in Switzerland in January, although the upward surprise was not in the same league as that seen in the euro-zone and Swiss inflation is still consistent …
Fall in CPI-ATE unlikely to deter the Norges Bank Given the backdrop of a tightening labour market, the fall in CPI-ATE is likely to be a one-off. We think that once the latest wave dissipates, the core inflation rate will pick up again and may rise above …
10th February 2022
Disappointing end to a terrible year The small decline in production in December was not quite as bad as it looks because it was largely due to a fall in construction activity, but 2021 was still a terrible year for German manufacturers as supply chain …
7th February 2022
A disappointing end to 2021 The fall in euro-zone retail sales volumes in December means that sales growth slowed significantly in Q4 as a whole. While we expect consumer spending to recover over the coming months when restrictions are fully lifted, …
4th February 2022
Omicron hit to services activity The final Composite PMIs for January confirm that the euro-zone economy started 2022 on a weak note but the improving health situation suggests that growth will pick back up over the rest of the quarter. The PMIs also …
3rd February 2022
Inflation shock puts pressure on ECB January’s inflation data support our view that the ECB will soon forecast inflation to be at its target over the medium term. Accordingly, we think that policymakers will end net asset purchases completely this year …
2nd February 2022
Spare capacity dwindling The euro-zone unemployment rate fell yet again in December, to just 7.0%, capping off a remarkable year for the region’s labour market. Most of the spare capacity that built up during the pandemic now seems to have disappeared, …
1st February 2022
Banks supporting the recovery The Q4 ECB Bank Lending Survey suggests that banks are contributing positively to the region’s economic recovery. It also suggests that, while house prices are rising rapidly, risks to financial stability are mounting much …
Strong industrial activity to offset services softness The continued resilience of the manufacturing PMIs in Switzerland and Sweden in January indicates that industry will have supported activity through a restrictions-driven soft patch for services in …
Higher-than-expected inflation will give ECB pause for thought The smaller-than-anticipated fall in Germany’s inflation rate, and increase in core inflation in Portugal and Spain, suggest that underlying price pressures are continuing to build. Euro-zone …
31st January 2022
Weak end to 2021 but Omicron hit set to be short-lived The small increase in euro-zone GDP in Q4 came as no surprise given the country-level data published last week and shows that the euro-zone economy was struggling at the end of last year. But …
Supply-shortages continuing to bite The EC Economic Sentiment Indicator weakened in January as the Omicron wave took a toll on economic activity, particularly in the services sector. The survey also showed that supply shortages remained acute and …
28th January 2022
Weak end to last year but better start to 2022 The decline in economic activity at the end of last year left GDP well below its pre-pandemic level and much weaker than in other major advanced economies. Activity seems to have stabilised in January so …
Stronger than expected Both the French and Spanish economies ended 2021 on a strong note, but for different reasons. In France, domestic demand pushed output above its pre-virus level, a boon for President Macron ahead of April’s election. By contrast, a …