In one line: Inflation fell further, but less than we anticipated; January spending was resilient to plunge in auto sales.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ inflation fell further in February, probably to 2.5%; we think core inflation dipped by 0.3pp, to 3.0%.
- Consumers’ spending in the EZ got off to a slow start in Q1, but don’t write off the recovery just yet.
- The Swiss economy defied our expectations in Q4, boosted by strong growth in domestic demand.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Consumer inflation expectations still point to lower inflation, despite uptick in the ECB’s January survey.
- Firms’ surveyed expectations are still generally on a downtrend, and market measures have also fallen.
- We still think a downgrade in the ECB’s inflation forecasts next week will be enough for an April cut, just.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Money and credit data continue to signal a rise in savings and little in the way of new lending.
- We still think rising real income growth is now lifting spending, but the rebound will be lacklustre overall.
- Consumer confidence data remains subdued in Germany and France but should bounce back soon.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Still pointing to downside risks to growth.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Mixed, but consistent with a modest recovery in consumption growth.
Claus Vistesen (Chief Eurozone Economist)Eurozone
THE ECB IS DONE HIKING; EASING WILL BEGIN SOON
- ...WE STILL SEE A FIRST RATE CUT IN APRIL
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The inventory cycle in France likely bottomed out in Q4; total capital formation should rebound in H1...
- ...But surveys warn that growth in otherwise resilient services investment is now rolling over.
- A drop in auto sales will weigh on consumption in 2024, but rising real income growth will dominate.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Investment crashed at the end of 2023.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- A crash in investment weighed down the German economy in Q4; capex is set for a big fall in 2024.
- Consumers’ spending is now rebounding in Germany, in line with firming growth in real income.
- We now see zero growth in Germany this year, down from +0.3% previously; risks are to the downside.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Core inflation remains on track for 2% by summer, but beware Easter effects in March and April.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Weakness in Germany holds back the recovery.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Better, but rise in the PMI is at odds with the INSEE data.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ inflation will fall further in February; Easter effects will then add volatility over Spring.
- The euro area composite PMI is rebounding, but Germany’s index remains stuck in the mud.
- The February PMIs pour cold water on hopes of a Q1 rebound in EZ’s moribund manufacturing sector.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: On the up; we think it will continue.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Russia now accounts for just 15% of EZ gas imports, down from 45% before its invasion of Ukraine.
- Oil imports from Russia have slumped but are likely still entering Europe after being refined elsewhere.
- Non-energy trade has shrunk and will dissipate further this year, as the latest EU sanctions hit.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: The recovery in construction will be slow coming.
Melanie Debono (Senior Eurozone Economist)Eurozone
