In one line: Construction was back recession in Q3; it will remain there in Q4.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Eurozone negotiated wage growth jumped in Q3, boosted by one-off payments in Germany.
- The Q3 leap in wage growth won’t faze the ECB, but it helps our call for a “small” 25bp cut in December.
- The EZ construction industry remains under the weather, despite some improvement in the surveys.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Hanging on, but we still think the headline will come down soon.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Eurozone headline inflation rebounded in October, and in November it will rise again a touch, to 2.3%.
- We see little in the EZ inflation data to justify a 50bp rate cut in December; we still look for 25bp.
- The ECB will soon need to answer questions about the neutral rate and the net effect of Trump tariffs.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We think the composite EZ PMI rose in November; the employment index is the main downside risk.
- Front-running Trump tariffs is an upside risk for the Eurozone manufacturing PMIs in coming months.
- Negotiated wage growth accelerated in Q3, but we doubt that markets will take note.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Goods surplus rebounded in September; net trade was still a drag on growth in Q3.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Subdued, but both the headline and core will rise in November.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Swiss GDP slowed in Q3, in line with expectations; the report is unlikely to worry the SNB.
- Intensifying deflation pressures, however, are an issue for the Bank; more cuts are coming.
- We doubt the SNB will lower rates below zero; it has other tools, but their effectiveness is patchy.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Q3 GDP increase confirmed, despite yet another drag from industry.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EZ GDP and employment beat forecasts in Q3; we expect both to ease in Q4…
- ...But neither will slow enough to convince the ECB to ramp up the pace of easing.
- EZ industry remains in a rut and will again be a drag on growth in Q4, even if US firms front-load orders.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EZ food inflation has been edging up in recent months, mostly due to base effects.
- Factory-gate prices suggest it will continue to rise though; the 2022-to-23 shock will persist in the data.
- Higher food inflation will keep the headline elevated, supporting our call for higher ECB rates for longer.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Core firmer; upside risks to electricity tariffs?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German inflation rebounded in October, lifted by rising energy, food and services inflation.
- Energy inflation will climb further in November and December; spot electricity prices are soaring.
- Core HICP inflation should fall fractionally in November, but the national rate should be stable.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Germany could head to the polls as soon as January, if enough paper can be found to print the ballots.
- Polls point to a grand coalition between the SPD and CDU/CSU as the most likely outcome.
- We still think new elections in Germany will pave the way for a more pro-growth fiscal policy.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Still in recession; Q3 saw the sixth straight quarterly fall in output.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: No signs from these data that GDP will be revised.
Melanie Debono (Senior Eurozone Economist)Eurozone
- A raft of ECB speeches got lost amid the furore that followed the US election and Berlin’s political crisis.
- Comments support our view of slow easing from here, and fewer cuts than markets have priced in.
- National industrial data imply this week’s EZ read will be ugly; industry still escaped recession in Q3, just.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Early elections are coming in Germany; will they pave the way for looser fiscal policy in 2025? We think so.
- The addition of Germany to EZ retail sales data led to upward revisions to most months back to April…
- ...Further strength is likely in Q4, but the recession in industry rumbles on, and headwinds are mounting.
Claus Vistesen (Chief Eurozone Economist)Eurozone
