- The scene is set for a hard-fought ECB meeting later this month; we still look for a 25bp cut…
- …But we’re adding a 25bp cut in January to our forecasts, as ECB doves now have the upper hand.
- Swiss GDP growth slowed a touch in Q3, but we look for a rebound in Q4; the SNB will cut in December.
Claus Vistesen (Chief Eurozone Economist)Eurozone
ECB DOVES STILL HAVE THE UPPER HAND...
- ...BUT THEY WON’T GET A 50BP CUT IN DECEMBER
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We still see EZ HICP inflation at 2.3% in November, but we’re lifting our core forecast by 0.1pp, to 2.9%.
- Our model, based on the negative skew in ESI data,still points to low recession risk in the EZ.
- The upturn in real M1 growth is a positive—andmincreasingly contrarian—signal for the EZ economy.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Politics rattle German consumers; we doubt falling sentiment will be reflected in spending figures.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Stung by political uncertainty; rising unemployment fears look ominous.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Isabel Schnabel is pushing back on a 50bp cut in December, as well as market expectations for 2025.
- The game of chicken in French politics is weighing on sentiment; will the government fall?
- Consumer confidence in France and Germany was stung by political uncertainty in November.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The EU would target manufactured goods such as machinery or aircraft if it retaliates with higher tariffs.
- In that case, Germany would be among the EZ economies facing higher inflation pressure…
- ...EZ imports likely would decline, lifting GDP growth, but the boost would be marginal overall.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Inventory accumulation supported German GDP growth in Q2 and Q3; this will reverse in Q4 and Q1.
- The trend in disposable income growth still leaves room for an acceleration in consumption growth.
- We now see EZ GDP rising by just 0.1% in Q4, reflecting softness in Germany and France.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Down like the PMI; recession risks remain.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: A plunge, defying leading indicators.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Stung by falling activity and new orders; 12-month outlook slightly improved.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Going nowhere, and Q4 won’t be much better.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Sinking EZ PMIs bring back speculation about a 50bp rate cut in December; we still see 25bp.
- Domestic political uncertainty is weighing on French activity; Germany is still stuck in the mud.
- Long-leading indicators still signal a better near term outlook for growth than the PMIs.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Up in manufacturing, down in services; GDP to flat-line in Q4 after the Olympics boost in Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Construction was back recession in Q3; it will remain there in Q4.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Germany, Italy, Spain, Ireland, Finland and Portugal are most exposed to US tariffs on Eurozone exports.
- An increase in tariffs on all products to 20% would drive a 5-to-10% fall in EZ export revenue.
- The devil is in the detail, however, and targeted tariffs could make a much bigger impact on EZ exports.
Claus Vistesen (Chief 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
