- ECB doves claimed a big victory yesterday, but we doubt this is the start of a much quicker easing cycle.
- The central bank is now more focused on downside risks to growth; all eyes on growth data in Q4.
- EZ inflation fell sharply in September, but it will rebound soon; core inflation is set to dip in Q4.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: EZ industry escaped recession in Q3; investor sentiment rises again, modestly.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We still think French GDP rose solidly in Q3, despite hard data pointing to downside risks.
- Government spending in France is set to slow sharply next year, but the hit to GDP should be minor.
- We now see GDP in France growing by 1.0% in 2025, 0.3pp below our previous forecast.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ corporate profit margins are falling rapidly, underpinning continued ECB policy easing.
- A decline in work-hours since Covid partly explains labour-hoarding in the Eurozone…
- …But fears of labour shortages when the cycle rebounds and no recession are likely bigger drivers.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We look for a third rate cut from the ECB this week, taking the deposit rate to 3.25%.
- The consensus and market-based expectations for rates next year are too low…
- …They will move higher once the ECB broaches the subject of the neutral rate.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Is the German consumer finally waking up?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Italian business surveys soured in Q3, but our Nowcast models point to a pick-up in GDP growth.
- Destatis finally published German retail sales data after a four-month hiatus…
- ...They were positive, as we suspected, so we have again removed a German recession from our call.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Solid, but likely not enough to prevent a growth hit from net exports in Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We're lowering our Q3 growth forecast for Germany; we now think the economy fell into recession…
- …But beware, Nowcast models in Germany are less reliable than usual; Q3 GDP is a true wild card.
- France won't cut public spending by €40B next year, but a deficit of 5% of GDP is doable, and then some.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The boost to GDP from rising net exports is reversing, we think.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German manufacturing came roaring back in August, but output fell again in September.
- We estimate industrial production in Germany fell by 1.4% q/q in Q3, a touch worse than in Q2.
- Look past the fall in spending on non-durables for a more optimistic story on the EZ consumer.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Comments from BdF Governor François Villeroy de Galhau all but guarantee a 25bp rate cut this month.
- EZ rate expectations and bond yields are too low relative to the medium-term outlook for inflation.
- We’ve lowered our bond yield forecasts, but still see bear-steepening of the yield curve next year.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Depressed by large orders; upside risks for industrial production in August.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Eurozone house price growth rebounded strongly in Q2, and we think further increases are likely.
- We see signs that housing demand is picking up healthily amid falling interest rates.
- We now think house prices will rise by 1.5% in 2024 after they slid by 1.2% in 2023.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: An October cut is now fully priced, and for good reason.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- French and Spanish inflation data lend support to ECB doves pushing for an October cut...
- ...But beware of whiplash in market pricing, if the German and Italian data don’t play ball.
- French consumer spending isn’t going anywhere in Q2; German jobless claims are still rising.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Decent, but where is the spending growth?
Claus Vistesen (Chief Eurozone Economist)Eurozone
