- 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
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
