- 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
- Q2 GDP data due next week will likely show a repeat of the Q1 figures in Germany, Italy and Spain…
- ...while GDP growth in France has probably doubled, to 0.4%, as services spending rocketed.
- So, we now think EZ GDP rose by 0.4% on the quarter, after 0.3% in Q1, 0.1pp higher than previously.
Melanie Debono (Senior 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
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)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
In one line: Dragged lower by a crash in exports.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Household demand for credit rose, and the fall in firms’ demand decelerated in Q2…
- ...Banks tightened standards at a slower pace than in past quarters, supporting lending growth…
- ...The subsequent pick-up in GDP growth will be gradual, however; not something for the ECB to fear.
Melanie Debono (Senior 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: EZ industry likely came out of recession in Q2, by the skin of its teeth.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Core is settled around 2%; headline should fall further from August onwards.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Falling, and survey data point to further declines ahead.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Monthly hard data for Italy have been better than expected; our new nowcast points to faster growth…
- ...but business surveys suggest GDP growth is unlikely to budge from Q1’s 0.3%.
- Advance numbers suggest that EZ negotiated wage growth slowed in Q2, despite firmer Indeed data.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Decent, but not enough to prevent a Q2 decline.
Claus Vistesen (Chief Eurozone Economist)Eurozone