In one line: Still on track to hand the ECB a 25bp rate cut in September.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Headline and core inflation remain on track to support a 25bp ECB rate cut by September.
- The key difference between our and the ECB’s latest forecast is that we see inflation rebounding in Q4.
- The outlook for the ECB is bi-modal; the Bank will stay at 2.0% in 2026 if it holds fire in September.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The EZ goods trade surplus rose in May, but only because imports fell further than exports.
- Our Nowcast model points to upside risks to our forecast for Q2 growth, but it excludes net trade.
- We will update our Q2 growth forecasts on Friday with the EZ construction data for May.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Industrial production in the Eurozone slowed in Q2 after a breakneck Q1; what awaits in Q3?
- Leading indicators for manufacturing are mixed; the output PMI has been the best so far this year.
- A reversal of tariff front-running will weigh on output in H2, regardless of what tariffs the EU ends up with.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Solid rebound, even factoring-in jump in Ireland.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Isabel Schnabel draws another line in the sand for the ECB’s policy rate to stay at 2.0%…
- …but we still think she and other hawks will lose out as dovish data tee up a 25bp cut in September.
- Fair value models point to Bund yields at 2.5%, but fiscal policy and Dutch pension selling say otherwise.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: At target, and risks tilted to the downside over the summer.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Net trade in goods was a drag on growth in Q2.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Net exports warn of a downside surprise in German Q2 GDP; we look for zero growth.
- Manufacturing and services are upside risks to Q2 growth in Germany; construction was a drag.
- The upturn in real M1 growth points to accelerating German GDP growth from early 2026 onwards.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Still improving, and surveys point to a strong finish to Q2.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Q2 was a quarter to forget in French manufacturing; Spain is looking better.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Poor, but falling turnover at odds with the surveys.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Tariffs will likely dominate this week; will Mr. Trump stick or twist in the negotiations with the EU?
- The near-term outlook for German manufacturing is better than what is implied by factory orders in May.
- EZ industrial production likely fell in May, reversing the jump in late Q1, ahead of US tariffs.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- A glass-half-full perspective indicates that the stars are aligned for a “beautiful releveraging” in the EZ.
- The EZ economy is completing a soft landing, an important prerequisite for a beautiful releveraging.
- Germany leading from the front is a key condition for a growth-supporting leverage cycle in the Eurozone.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Falling oil prices and a strong euro are playing into the hands of ECB doves, for now.
- Services inflation is a key upside risk in the June HICP, but we still see core inflation at 2% by August.
- Fiscal details and a US-EU trade deal could swing the September meeting in favour of ECB hawks.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Stuck in the mud, but also underestimating growth.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- A firm commitment from Germany to spend 5% of GDP on defence would be a rug-pull for Bunds.
- Rising investor sentiment and calmness on the trade front point to decent June survey data this week.
- Early-Q2 data indicate upside risk to GDP growth in France, but we still look for just 0.1% q/q.
Claus Vistesen (Chief Eurozone Economist)Eurozone
