- 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
- German services inflation, ex-rents, is still sizzling, at just under 5%, but it will fall soon.
- Core inflation in Germany will drop further between now and the end of the year, to just over 2.5%.
- The Summer Olympics will likely lift French core inflation by 0.1pp in July, and by 0.3pp in August.
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
- EZ private-sector balance sheets are healthy; this dulls the monetary policy transmission mechanism.
- The private sector’s interest-rate-sensitivity has almost halved compared to before the GFC.
- Strong private balance sheets, fiscal activism and labour-hoarding will keep ECB policy rates elevated.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The fall in Eurozone house prices eased for the second straight quarter in Q1…
- ...and we see signs that demand is picking up sooner than we thought amid falling interest rates.
- We now think house prices will be broadly flat in 2024 after they slid by 1.2% in 2023.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Marine Le Pen’s RN fell flat on its face in the French parliamentary elections. The centre (left) holds on.
- The path to a working government in France is unclear, but OAT-Bund spreads have likely peaked.
- Germany’s trade surplus jumped in May, due mainly to a crash in imports; the July Sentix dropped.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Still consistent with a rebound in the PMI, despite falling.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Goods spending is not benefitting from the recovery in real incomes, yet.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: A nasty plunge in manufacturing, but don’t forget rising services output.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Friday’s industrial production data for Germany, France and Spain made for difficult reading.
- The recovery in EZ manufacturing was still missing in Q2, but we look for better in H2.
- The trend in retail sales remains flat, but they still likely picked up in Q2, and services spending rose.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Swiss inflation edged lower, despite an uptick in services; a further, albeit marginal, fall is likely.
- We look for two more SNB rate cuts, taking the policy rate to 0.75% by year-end; markets see fewer cuts.
- The appointment of Martin Schlegel as the new SNB Chairman points to continuity in the rates outlook.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Upward revision doesn’t change picture of cooling output growth in June.
Melanie Debono (Senior Eurozone Economist)Eurozone
