In one line: Poor, but GDP growth is stronger than implied by the headlines.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The EZ composite PMI is on the verge of falling below 50; will it matter for Q3 growth? Probably not.
- Manufacturing remains the weak spot, according to the PMIs, while services are still relatively robust.
- The EZ output price PMI in services fell further in July; inflation will follow, eventually.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We’re flying half-blind on Q2 GDP data in Germany, but we’re lifting our forecasts slightly, all the same.
- Construction investment was a drag on growth in Q2, but consumers’ spending likely rebounded.
- Our forecasts for Germany for the rest of 2024 see domestic demand now rebounding.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The headline should soon fall; foreign demand for EZ assets remain strong.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- This week sees a raft of business surveys for July; we expect increases across the board.
- Political uncertainty in France is a threat, but the unclear outcome of the elections removes tail risks...
- ...German industrial surveys were too weak in June, given early signs from hard data; they will rebound.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: "September is wide open”, apparently.
Claus Vistesen (Chief Eurozone Economist)Global
In one line: "September is wide open”, apparently.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: No signal of a cut in September; we look for such a signal at the press conference.
Claus Vistesen (Chief Eurozone Economist)Global
In one line: No signal of a cut in September; we look for such a signal at the press conference.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Construction fell back in Q2, after a decent Q1.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Services is sticky as ever, and it won’t drop meaningfully anytime soon.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The September meeting is “wide open” according to Ms. Lagarde; markets see it differently.
- Easing inflation, softening wages and falling profit margins should take a September cut over the line…
- …But we are now less certain on a cut than we were before; all eyes on ECB “sources” in coming days.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Inflation in the Eurozone was little moved in June; it will probably hold steady in July.
- Upside risks from services and energy now loom for EZ inflation but we think September’s rate cut is safe.
- Our forecasts point to a Q4 rebound in core inflation; will the ECB look through this and cut in December?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The ECB will likely open the door to further easing this week, teeing up a second rate cut, in September.
- Market expectations are converging on three cuts between now and March; the ECB is fine with this.
- One week ahead of the EZ Q2 GDP data, Nowcast models are subdued; we don’t buy them.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Core is settled around 2%; headline should fall further from August onwards.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German services inflation, ex-rents, is still sizzling, at just under 5%, but it will fall soon.
- Core inflation in Germany will drop further between now and the end of the year, to just over 2.5%.
- The Summer Olympics will likely lift French core inflation by 0.1pp in July, and by 0.3pp in August.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Falling, and survey data point to further declines ahead.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Decent, but not enough to prevent a Q2 decline.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ private-sector balance sheets are healthy; this dulls the monetary policy transmission mechanism.
- The private sector’s interest-rate-sensitivity has almost halved compared to before the GFC.
- Strong private balance sheets, fiscal activism and labour-hoarding will keep ECB policy rates elevated.
Claus Vistesen (Chief Eurozone Economist)Eurozone
