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11 January 2017 France Joins Germany in Picking up Momentum at the End of 2016 (Publication Centre)

Another day, another solid economic report in the Eurozone. Data yesterday showed that industrial production in France jumped 2.2% month-to-month in November, pushing the year-over-year rate up to +1.8%, from -1.8% in October. The 2.3% jump in manufacturing output was the key story, offsetting a 0.3% decline in construction activity. Production of food and beverages rebounded from weakness in October, and oil refining also accelerated.

16 March 2017 Structural Goods Deflation in France is a Challenge for the ECB (Publication Centre)

Inflation pressures in France eased in February, in contrast to the story in the rest of the EZ. Yesterday's report confirmed the initial estimate that inflation fell to 1.2% year-over-year in February, from 1.3% in January. The headline was hit by a crash in the core rate to a two-year low of 0.2%, from 0.7% in January.

16 June 2017 Why is France not Pulling its Weight in EZ Inflation Data? (Publication Centre)

It's hard for a central bank presiding over an ageing economy to achieve a core inflation target of close to 2%. In yesterday's Monitor, we showed that German core inflation has averaged a modest 1.3% in this business cycle, despite solid GDP growth. The picture isn't much better for the ECB if we look at France.

11 Feb. 2015 Will private investments in France ever pick up? (Publication Centre)

The French industrial sector ended last year on an upbeat note, but the underlying trend in activity is still weak. Industrial production rose 1.5% month-to-month in December, equivalent to a 0.1% fall year-over-year.

21 April 2017 Faites vos Jeux! Anything is Possible in France this Weekend (Publication Centre)

This weekend's first round of the French presidential election is too close to call. Our first chart indicates that a runoff between Marine Le Pen and Emmanuel Macron remains the best bet. But the statistical uncertainty inherent in the predictions, and the proximity of the two remaining candidates--the centre-right Mr. Fillon and far-left Mr. Melenchon-- mean that this is now effectively a four-horse race.

25 August 2017 Sizzling Business Sentiment in France Signals Firm Q3 GDP (Publication Centre)

Yesterday's barrage of French business surveys contains hundreds of indicators, but its central story is comfortably simple.

9 February 2017 Markets finally wake up to political risks in France (Publication Centre)

The twists and turns of the French presidential election campaign continue. François Fillon was tipped as favourite after he won the Republican primaries. But Mr. Fillon now is struggling to keep his campaign on track after allegations that he gave high paying "pro-forma" jobs to his wife as an assistant last year. The socialist candidate, Benoit Hamon, has been hampered by the unpopularity of his party's incumbent, François Hollande, and has lost ground to the far-left Jean-Luc Mélenchon.

28 November. 2016 Household Consumption in France Will Recover Lost Ground in Q4 (Publication Centre)

The outlook for French consumers' spending improved this month, at the margin. The headline consumer sentiment index was unchanged at 98 in November, but most forward-looking indicators rose. Consumers' spending in was flat in Q2 and Q3, following a 1.1% jump in the first quarter.

27 September 2017 A Stable and Solid Outlook for Private Investment in France (Publication Centre)

French business sentiment cooled marginally at the end of Q3. The headline manufacturing confidence index dipped to 110 in September, from 111 in August, though the overall business sentiment gauge was unchanged at 110.

14 May. 2015 Upbeat GDP Data in France Partly Offset Trade Hit in Germany (Publication Centre)

Real GDP in the Eurozone rose 0.4% quarter-on-quarter in Q1, in line with the consensus, but slightly below our expectation for a 0.5% increase. We don't get much detail from the country-specific advance estimates but all evidence indicates that the technical hit from net trade was much larger than we expected.

5 May 2017 Mr. Macron should be able to move into the Élysée on Monday (Publication Centre)

This weekend will bring closure to an extraordinary presidential election campaign in France. The polls correctly predicted the first result, and assuming they are right in the second round too, Mr. Macron will comfortably beat Ms. Le Pen.

20 Apr. 2016 EZ Credit Supply Conditions Eased in Q1, but Loan Demand Stumbled (Publication Centre)

Lending conditions in the EZ economy continued to improve in Q1, according to the ECB's bank lending survey. Business and consumer credit supply conditions eased, but mortgage lending became more difficult to come by as standards tightened sharply in Germany, France, and the Netherlands. Demand for new loans also rose, but the increase was due entirely to gains in the mortgage and consumer credit components.

9 May 2017 Two Answers and Many Questions, as President Macron Settles in (Publication Centre)

Mr. Macron's victory in France answers two questions for markets, at least in the short run. Firstly, France will stay in the Eurozone, and Mr. Macron will not call a referendum on EU membership. Mr. Macron has come to power with a mandate to strengthen economic integration and co-operation between Eurozone economies.

19 September 2016 Construction Investment Will Boost EZ GDP Growth in Q3 (Publication Centre)

Construction data in the Eurozone usually don't attract much attention, but today's July report will provide encouraging news, compared with recent poor manufacturing data. We think construction output leapt 2.1% month-to-month, pushing the year-over-year rate up to 2.3%, from 0.7% in June. This strong start to the third quarter was due mainly to a jump in non-residential building activity in France and Germany.

19 Nov. 2015 A Rebound in Construction Could Lift Investment in the Eurozone (Publication Centre)

The construction sector in the Eurozone remains moribund. Output fell 0.4% month-to-month in September, pushing the year-over-year rate up to 1.8% from a revised 1.4% fall in August. Declines were recorded in France, Germany, and Italy, with a small increase in Spain. These data could, in theory, lead to revisions in the final Q3 Eurozone GDP data released December 8th, but we very much doubt they will move the needle. Our first chart shows the relationship between construction and GDP growth has broken down since the crisis.

12 Dec. 2014 The Noose is Tightening On the Eurozone As Deflation Looms (Publication Centre)

Inflation in the Eurozone is under pressure from all angles, and data from France and Germany yesterday confirmed that the risk of outright deflation has risen significantly. In Germany, inflation fell to 0.6% yearover- year in November, and in France the CPI rose a paltry 0.3%.

20 March 2017 Construction in the EZ is Doing Fine, Despite January Plunge (Publication Centre)

The Eurozone construction sector ground to a halt at the start of 2017. Data on Friday showed that output plunged 2.3% month-to-month in January, pushing the year-over-year rate down to -6.0%, from a revised +3.0% in December. The weakness was broad-based across the major economies, but it was concentrated in France and Spain where output fell by 3.5% and 3.8%, respectively.

21 Dec. 2015 Paris Attacks Unlikely to Dent Q4 French GDP Growth Severely (Publication Centre)

Manufacturing confidence in France remained resilient in the fourth quarter. The INSEE sentiment index rose to 103 in December from 102 in November, lifted by a jump in firms' own production expectations, and a small increase in the new orders-to-inventory ratio. We think production will increase in Q4, lifted by energy output, but the recent jump in the year-over-year rate is unlikely to be sustained, even if we factor in the marginal increase in new orders this month.

29 Feb. 2016 The Eurozone is Back in Deflation, but the Relapse is Temporary (Publication Centre)

Advance inflation data on Friday added to the gloom on the Eurozone economy. Reports from Germany, France, and Spain all surprised to the downside, indicating the euro area as a whole slipped back into deflation in February. Inflation in Germany dipped to 0.0% year-over-year in February, from 0.5% in January, and France slid back into deflation as the CPI index fell 0.2%, down from a 0.2 increase last month.

27 May. 2016 French Consumers are in Good Shape, but Q2 Spending Will Slow (Publication Centre)

We think today's consumer sentiment survey in France will show that the headline index was unchanged at 94 in May. The survey's forward looking components have weakened modestly in recent months, due to declines in households' outlook for their financial situation and standard of living in the coming 12 months.

30 March 2017 How will French Consumers React to Lower Real Wage Growth? (Publication Centre)

Leading indicators for consumers' spending in France are sending conflicting signals. Survey data suggest that households are in a spendthrift mood. Data yesterday showed that the headline consumer sentiment index was unchanged in March at 100, the cycle high.

24 May. 2016 EZ PMI Data Suggest that GDP Growth is Slowing Marginally (Publication Centre)

Eurozone PMI data yesterday presented investors with a confusing message. The composite index fell marginally to 52.9 in May, from 53.0 in April, despite separate data that showed that the composite PMIs rose in both Germany and France. Markit said that weakness outside the core was the key driver, but we have to wait for the final data to see the full story.

22 Sept. 2015 Moody's Fires a Shot Across the Bow on French Sovereign Debt (Publication Centre)

Mr. Draghi's pledge in 2012 to do "whatever it takes to preserve the euro," and QE have stymied sovereign debt risk in the euro area. At the same time, the EU's relaxed position over debt sustainability was highlighted earlier this year by the Commission's decision to give France two more years to get its deficit below 3% of GDP. But Moody's downgrade of the French government bond rating last week to Aa2 from Aa1 serves as a gentle reminder to investors of the underlying fundamentals.

23 July. 2015 Slow, but Steady, Recovery in French Manufacturing This Year (Publication Centre)

The manufacturing industry in France is recovering slowly, but surely. The headline INSEE index rose to 102 in July from 101 in June, close to a post-crisis high, pointing to steady improvement for manufacturers. Our first chart shows the main leading components of the survey, indicating a modest, but positive, trend in output. The increase in sentiment in July was driven by firming new orders--especially in the export sector--pushing the new orders-to-inventory ratio to an 18-month high.

18 July. 2016 EZ Car Registrations Continue to Grow Briskly, But Will Slow Soon (Publication Centre)

Growth in new EZ car registrations slowed last month, but the data continue to tell a story of strong consumer demand for new cars. New registrations in the euro area rose 6.9% y/y in June, down from a 16.9% jump in May, mainly due to slowing growth in France. New registrations in the euro area's second largest economy rose a mere 0.8% year-over-year, after a 22% surge in May.

11 Mar. 2015 Eurozone GDP growth on track for strong Q1 (Publication Centre)

The latest evidence of firming economic momentum comes from France, where industrial production rose 0.4% month-to-month in January, equivalent to a 0.6% increase year-over-year. Combined with strong consumer spending data in January, this points to a solid first quarter for the French economy.

15 December 2016 EZ Manufacturing will Recover Quickly from its Poor Start to Q4 (Publication Centre)

Eurozone manufacturers had an underwhelming start to Q4. Data yesterday showed that production fell 0.1% month-to-month in October, pushing the year-over-year rate down to 0.6%, from a revised 1.3% in September. Output was constrained mostly by weakness in France and a big month-to-month fall in Ireland, which offset marginal gains in Germany and Spain.

15 Jan. 2015 Inflation Data Confirm Investment Malaise in the French Economy (Publication Centre)

France just about avoided slipping into deflation in December, with the CPI rising 0.1% year-over-year, down from 0.3% in November. The 4.4% drop in the energy component should have pushed inflation below zero, but a seasonal increase in tourism services was enough to offset the drag from oil prices.

11 Dec. 2014 French Economy Stumbles, as Market Looks Towards 2nd TLTRO (Publication Centre)

An upbeat third quarter for GDP growth in France and slightly better sentiment data have offered at least some hope that the economy could stage a comeback into year-end. But yesterday's disappointing industrial production data poured cold water on that idea.

10 Sept. 2015 Wage Cuts Pay off as Periphery Leads EZ Employment Higher (Publication Centre)

Workers in the euro area remain scarred by the zone's repeated crises, but the strengthening cyclical recovery is slowly starting to spread to the labour market. The unemployment rate fell to a three-year low of 10.9% in July, and employment has edged higher after hitting a low in the middle of 2013. Germany's outperformance is a key story, with employment increasing uninterruptedly since 2009, and the unemployment rate declining to an all-time low of 6.4%. Among the other major economies, the unemployment rate in Spain and Italy remains higher than in France. But employment in Spain has outperformed in the cyclical recovery since 2013.

12 Nov. 2015 German Inflation Will Rise Faster than the ECB and Market Expect (Publication Centre)

CPI data today in France and Germany will confirm that current inflation rates remain very low in the euro area. Inflation in Germany likely rose to 0.3% year-over-year from 0.0% in September, in line with the consensus and initial estimate. State data indicate that the rise was driven by surging fresh food prices and slightly higher services inflation, principally due to a jump in the volatile recreation and culture sector. Looking ahead, food prices will drop back, but energy inflation will rise rapidly as last year's plunge drops out of the year-over-year comparison, while upward core pressure is now emerging too.

13 September 2017 The French Labour Market is on the Up. Will Reforms Follow? (Publication Centre)

In theory, the headline labour market data in France should be a source of comfort and support for the new government.

15 Sept. 2015 Subdued EZ Manufacturing is in Line with the Rest of the OECD (Publication Centre)

Industrial production data yesterday indicate manufacturers in the Eurozone enjoyed a decent start to Q3, thanks to strength in Germany, Italy and Spain, which offset weakness in France. Production ex-construction rose 0.6% month-to-month in July, boosted in part by a 3% jump in energy output. If production is unchanged in August and September, output will rise 0.3% quarter-on-quarter in Q3, but this estimate is uncertain, and we look for an increase of about 0.4%-to-0.5%.

16 Feb. 2015 Solid GDP data, but investment needs to pick up to sustain the momentum (Publication Centre)

Normal service was resumed in the euro area with Friday's GDP reports pointing to solid growth in Germany amid weakness in Italy and France. Real GDP in the Eurozone grew 0.3% quarter-on-quarter in the final three months of last year, up from 0.2% in Q3.

17 January 2017 Will Brexit and Mr. Trump Dent EZ Exports to the U.S. and the U.K? (Publication Centre)

Net exports in the euro area likely rebounded in Q4. The headline EZ trade surplus rose to €22.7B in November from €19.7B in October. Exports jumped 3.3% month-to-month, primarily as a result of strong data in Germany and France, offsetting a 1.8% rise in imports. Over Q4 as a whole, we are confident that net exports gave a slight boost to eurozone GDP growth, adding 0.1 percentage points to quarter-on-quarter growth.

17 June. 2016 Surging Growth in Eurozone Car Registrations Won't Last (Publication Centre)

The market for new cars in the Eurozone remained red-hot last month. New registrations surged 18.4% year-over-year in May, up from a 9.4% rise in April, and pushing the 12-month average level of registrations to a post-crisis high of 843K units. Accelerating growth in Italy and France was the key driver.

17 February 2017 EZ consumers' demand for new cars will slow in 2017 (Publication Centre)

EZ households' demand for new cars was off to a strong start in 2017. Car registrations in the euro area jumped 10.9% year-over-year in January, accelerating from a 2.1% rise in December. We have to discount the headline level of sales by about a fifth to account for dealers' own registrations. Even with this provision, though, the January report was solid. Growth rebounded in France and Germany, and a 27.1% surge in Dutch car registrations also lifted the headline. We think car registrations will rise about 1.5% quarter-onquarter in Q1, rebounding from a weak Q4. But this does not change the story of downside risks to private spending.

16 May 2017 Eurozone Reforms Likely are Coming, but Patience is Needed (Publication Centre)

Mr. Macron will be in Berlin today with the message that France wants a strong Eurozone and a tight relationship with Germany. Friendly overtures between Paris and Berlin are good news for investors; they reduce political uncertainty while increasing the chance that the economic recovery will continue. But it is too early to get excited about closer fiscal coordination, let alone a common EZ fiscal policy and bond issuance.

12 June. 2015 Industrial Output is on Track for a New Post-Crisis High This Year (Publication Centre)

Eurozone manufacturing probably stalled at the start of the second quarter. We think industrial production rose a mere 0.1% month-to-month in April, lower than the 0.4% consensus forecast, and equivalent to a 0.8% increase year-over-year. Output ex-construction was up 0.8% in Germany, but this is likely to be offset by declines in France and Italy, and a hefty 3.2% fall in Greece.

11 Dec. 2015 Upturn in French Industrial Output is Misleading and Won't Last (Publication Centre)

October industrial production data in France surprised to the upside yesterday, with headline output rising 0.5% month-to-month, well above the consensus estimate and our own forecast for a monthly fall. Production was lifted by a 5.1% month-to-month jump in energy output, due to unusually cold weather, offsetting a 0.5% decline in manufacturing output, the fifth drop in the past six months.

29 Apr. 2015 Upbeat French consumers, but unemployment is a dark spot (Publication Centre)

Household sentiment in France continues to improve, consistent with tailwinds from low energy prices and accommodative monetary policy. INSEE's measure of consumer confidence rose to 94 in April, up from 93 in March, the highest since November 2010.

DAILY TELEGRAPH - Surprise comeback for France as economy grows twice as fast as UK (Media Centre)

Chief Eurozone economist Claus Vistesen comments on the latest GDP figures from France

26 June. 2015 The ECB Will Fight to Maintain "Normality" in EZ Bond Markets (Publication Centre)

The impasse between Greece and its creditors has roiled Eurozone bond markets, but the ECB is likely ready to restore calm, if necessary. We think a further widening of short-term interest rate spreads would especially worry the central bank, as it would represent a challenge to forward guidance. For now, spreads remain well below the average since the birth of the Eurozone, even after the latest increase.

26 June 2017 Equity Markets will Worry if EZ PMIs Fall Further in Q3 (Publication Centre)

The Eurozone PMIs stumbled at the end of Q2. The composite index slipped to a five-month low of 55.7 in June, from 56.8 in May, constrained by a fall in the services index. This offset a marginal rise in the manufacturing index to a new cyclical high. The dip in the headline does not alter the survey's upbeat short- term outlook for the economy.

26 Mar. 2015 Survey Data Point to a Recovery for German Investment in Q1 (Publication Centre)

The IFO survey released yesterday provides further evidence that the cyclical recovery in Germany's economy continued in the current quarter. The headline business climate index rose to 107.9 in March from 106.8 in February, lifted by increases in both the current assessments and expectations index.

26 May. 2015 All Eyes on the U.S. and the FOMC for Next Big Move in the Euro (Publication Centre)

The euro has so far defied the most bearish forecasters' predictions that it is on track for parity with the dollar. Currencies can disregard long-run parity conditions, however, for longer than most investors can hold positions.

27 April 2017 Today's ECB Meeting Will be a Snoozer for Markets (Publication Centre)

It's always dangerous when risk assets rally strongly into an ECB meeting, but we doubt that investors have much to fear from today's session in Frankfurt. We think the central bank will leave its main refinancing and deposit rates at 0.00% and -0.4% respectively.

26 October. 2016 The German Economy Fired on All Cylinders at the Start of Q4 (Publication Centre)

Yesterday's IFO survey confirmed that the private business sector in Germany was off to a flying start in Q4. The headline business climate index rose to 110.5 in October, from 109.5 in September, lifted mainly by a rise in the expectations index to a 30-month high of 106.5.

26 July 2017 National Surveys are Not Bogged Down by Disappointing PMIs (Publication Centre)

Yesterday's national business surveys provided an optimistic counterbalance to the underwhelming PMIs on Monday, although they all suggest that the euro area economy is in good form.

26 January 2017 The IFO Points to Solid GDP Growth in Germany, Despite Dip (Publication Centre)

The trend of consensus-beating EZ economic data was brought to a halt yesterday. The IFO business climate index in Germany slipped to a five-month low of 109.8 in January, from 111.0 in December, mainly due to a fall in the expectations index. But we are not alarmed. The dip in the headline comes after a run of strong data, and the IFO remains consistent with GDP growth of about 1.6% year-over-year.

25 Mar. 2015 PMIs point strengthening cyclical recovery (Publication Centre)

Evidence is mounting that the cyclical recovery in the Eurozone accelerated further in the first quarter. The Composite PMI in the euro area rose to 54.1 in March, up from 53.3 in February, taking the quarterly average to 53.3, its highest level since the second quarter of 2011. Combined with latest available retail sales and industrial production data, this is consistent with real GDP growth in the euro area accelerating to about 0.4-to-0.5% quarter-on quarter in the first quarter, from 0.3% in Q4.

25 January 2017 The EZ Economy is Performing Strongly, But Inflation is Picking Up (Publication Centre)

The Eurozone economy is in fine shape, according to the latest PMI data. The composite EZ PMI fell trivially to 54.3 in January, but remains strong. A marginal dip in the services index offset a small increase in the manufacturing PMI to a cyclical high of 55.1. These data tell a story of a strong private sector that continues to support GDP growth.

25 May 2017 Is it Time to Tell a Less Upbeat Story on the Eurozone Consumer? (Publication Centre)

Markets cheered soaring business surveys in the Eurozone earlier this week, and recent consumer sentiment data also have been cause for celebration. The advance GfK consumer confidence index in Germany rose to a record high of 10.4 in June, from 10.2 in May.

25 Nov. 2015 IFO Repeats Message from PMIs: German Economy is in Good Form (Publication Centre)

Survey data in Germany continue to tell an upbeat story on the economy. The IFO business climate index rose to 109.0 in November from 108.2 in October, lifted by gains in both the expectations and current assessment indexes. The IFO tends to be slightly over-optimistic on GDP growth, but our first chart shows that the survey points to upside risks in the fourth quarter.

26 April 2017 French Business Confidence is Solid, but Manufacturing Fell in Q1 (Publication Centre)

French manufacturing confidence soared at the start of Q2. The headline INSEE index jumped to a six-year high of 108 in April, from an upwardly revised 105 in March. The headline was flattered by a big increase in the "past activity" index, but the survey's leading indicators also improved.French manufacturing confidence soared at the start of Q2. The headline INSEE index jumped to a six-year high of 108 in April, from an upwardly revised 105 in March. The headline was flattered by a big increase in the "past activity" index, but the survey's leading indicators also improved.

25 October. 2016 Encouraging rebound in October EZ PMIs (Publication Centre)

PMI data in the Eurozone rebounded convincingly in October, as the composite index rose to a 10-month high of 53.7, from 52.6 in September. The gain fully reversed the weakness at the end of Q3.

27 August. 2015 Mr. Praet's Dovish Comments Don't Signal Easing Next Week (Publication Centre)

ECB board member Peter Praet fired the first shot across the markets' bow yesterday following this week's turmoil. Speaking to journalists in Germany, Mr. Praet noted "increased downside risk of achieving a sustainable inflation path towards 2%," and assured investors the current QE program is fully flexible, and can be readily adjusted in response to an adverse development in inflation expectations. We don't think, though, this is a pre -cursor for additional easing at next week's ECB meeting.

27 February 2017 A Big Difference Between Today's French Yield Panic and 2012 (Publication Centre)

This remains a tumultuous time for EZ bond investors. The twists and turns of the French presidential election campaign continue to shove markets around. Marine Le Pen's steady rise in thepolls has pushed French yields higher this year.

28 June. 2016 New Government in Spain Will be Given Time to Cut its Deficit (Publication Centre)

okThe weekend's election result in Spain provided relief for investors anxiously looking for another "surprise." Exit polls on Sunday showed a big majority for the anti-establishment party Podemos, but in the end Spanish voters opted for safety. The incumbent Partido Popular, PP, was the election's big winner compared with the elections six months ago, gaining 15 seats.

28 July 2017 The Eurozone is in fine form, as we start our summer break (Publication Centre)

This is the final report before your scribe disappears into the Scottish Highlands for a few weeks, and we are leaving you with a Eurozone economy in fine form. The calendar will be relatively light in our absence and will tell us what we already know; namely that the euro area economy maintained its strong momentum in Q2.

28 March 2017 EZ Money Supply Hit by Non-M1 Components in February (Publication Centre)

Momentum in the euro area's money supply slowed last month. M3 growth dipped to 4.7% year-over-year in February, from a downwardly-revised 4.8% in January. The headline was mainly constrained by the broad money components. The stock of repurchase agreements slumped 24.3% year-over-year and growth in money market fund shares also slowed sharply.

28 May. 2015 Italy Finally Exits Recession, But Will Remain an Underperformer (Publication Centre)

We will be paying special attention today to the EC sentiment survey for Italy, where the headline index has climbed steadily so far this year. It was unchanged at an eight-year high of 106.1 in April, and even if it fell slightly in May--we expect a dip to 105.0--it still points to an upturn in economic growth.

28 September 2016 Strong EZ Money Supply Data, but Lending Details Mixed (Publication Centre)

Yesterday's money supply data in the Eurozone were solid across the board. Growth in headline M3 rose to 5.1% year-over-year in August, up from a 4.9% increase in July. A rebound in narrow money growth was the key driver of the gain, with seasonally- and calendar-adjusted M1 rising 8.9% year-over-year, up from July's 8.4%.

28 Sept. 2015 ECB is on Alert, but No Warning, So Far, From the Economy (Publication Centre)

Mr. Draghi used his introductory statement at the ECON--EU Economic and Monetary Affairs Committee-- hearing last week to assure investors that the central bank is vigilant to downside risks. The president noted the governing council "would not hesitate to act" if it deems growth and inflation to be undershooting expectations. Market volatility has increased the ECB's worries, but economic data continue to tell a story of a firm business cycle upturn.

28 Jan. 2016 Italy Gets its "Bad Bank," but Implementation Looks Difficult (Publication Centre)

Reports yesterday indicated that a deal has finally been struck between the European Commission and the Italian government to start dealing with bad loans in the banking system. The initial details suggest the government will be allowed to guarantee senior tranches on non-performing loans, supposedly making them easier to sell to private investors. In order to avoid burdening government finances as part of the sales--not allowed under the new banking union rules--the idea is to price the guarantees based on the credit risk of similar loans.

28 February 2017 The Eurozone Business Cycle Upturn is Resilient and Robust (Publication Centre)

Money supply dynamics in the Eurozone continue to signal a solid outlook for the economy. Headline M3 growth eased marginally to 4.9% year-over-year in January, from 5.0% in December; the dip was due to slowing narrow money growth, falling to 8.4% from 8.8% the month before. The details of the M1 data, however, showed that the headline chiefly was hit by slowing growth in deposits by insurance and pension funds.

27 Mar. 2015 Credit Growth is Improving, But the Periphery is Being Left Behind (Publication Centre)

Money supply data continue to support the continuation of cyclical recovery in the Eurozone. M3 growth accelerated to 4.0% year-over-year in February from a revised 3.7% in January. Revisions, however, mean that momentum in the beginning of the year was not as solid as we thought.

27 Jan. 2016 The Curious Case of Missing Equity Earnings in the Eurozone (Publication Centre)

Eurozone investors continue to look to the ECB as the main reason to justify a constructive stance on the equity market. Last week, the central bank all but promised additional easing in March, but the soothing words by Mr. Draghi have, so far, given only a limited lift to equities. Easy monetary policy has partly been offset by external risks, in the form of fears over slow growth in China, and the risk of low oil prices sparking a wave of corporate defaults. But uncertainty over earnings is another story we frequently hear from disappointed equity investors. We continue to think that QE and ZIRP offer powerful support for equity valuations in the Eurozone, but weak earnings are a key missing link in the story.

27 October. 2016 Consumers' Spending in Germany will Continue to Slow, Modestly (Publication Centre)

Yesterday's consumer confidence report in Germany was soft, in contrast to surging business sentiment data earlier in the week.

28 April 2017 The ECB is Happier about the Economy, But not Inflation (Publication Centre)

Yesterday's ECB meeting painted a picture of a central bank in wait-and-see mode. The main refinancing and deposit rates were kept at 0.00% and -0.4% respectively, and the marginal lending facility rate also was unchanged at 0.25%.

28 August. 2015 Another Month, Another Bullish Money Supply Report in the EZ (Publication Centre)

Yesterday's money supply report provided further relief for investors doubtful over the cyclical recovery following the market turmoil. Broad money growth, M3, accelerated to 5.3% year-over-year in July, up from 4.9% in June, and within touching distance of a new post-crisis high. Narrow money continued to surge too, rising 12.1% year-over-year, up from 11.1% in June, sending a bullish message on the Eurozone economy.

25 Feb. 2016 Fundamentals for French Consumers Remain Resilient (Publication Centre)

A downbeat French INSEE consumer sentiment report yesterday continued the run of poor survey data this week. The headline index fell to 95 in February from 97 in January, indicating downside risk f or Q1 consumers' spending. But we remain optimistic that private consumption will rebound solidly, following a 0.4% quarter-on-quarter fall in Q4.

25 Apr. 2016 Stable, but Weak, Cyclical Upturn to Continue in the EZ Economy (Publication Centre)

Last week's advance PMI data suggest that economic activity in the Eurozone was stable at the beginning of Q2. The composite EZ PMI fell trivially to 53.0 in April, from 53.1 in March, because a dip in manufacturing offset a small rise in the services index.

22 February 2017 PMI Data in the Eurozone Signal a Strengthening Economy (Publication Centre)

Our view that EZ survey data would take a step back in February was severely challenged by yesterday's PMI reports. The composite index in the Eurozone rose to 56.0 in February, from 54.4 in January, lifted by a jump in the services index and a small rise in the manufacturing index.

28 September 2017 All Systems Go for Solid Eurozone GDP Growth in Q3 and Q4 (Publication Centre)

Money supply growth in the Eurozone firmed last month. Broad money--M3--rose 5.0% year-overyear in August, after a tepid 4.5% rise in July.

22 Apr. 2016 The ECB is Worried About Elevated Financial Market Volatility (Publication Centre)

The ECB held fire yesterday and kept its main refinancing and deposit rates unchanged at 0.0% and -0.4%, respectively. The central bank also left the pace of monthly asset purchases unchanged at €80B. The introductory statement overall confirmed the central bank's dovish stance.

22 Feb. 2016 Survey Data Will Weaken in Q1, But Won't Signal a Major Downturn (Publication Centre)

Economic survey data this week will give the first clear evidence on whether recent market volatility has dented Eurozone confidence. The key business and consumer surveys dipped in January, and we now expect further declines, starting with today's PMI data. We think the composite index fell slightly to 53.0 in February from 53.6 in January.

22 August. 2016 Acceleration in German GDP Growth Likely Won't be Sustained (Publication Centre)

While we were out, the key economic news in the Eurozone was mostly positive. The main upside surprise came from the advance Q2 German GDP report, which showed that real GDP rose 0.4% quarter-on-quarter, slowing from the 0.7% jump in the first quarter.

22 Dec. 2014 Rising Risks in Greece, but Sovereign QE Can Save the Day (Publication Centre)

The political drama in Greece will continue to attract attention this week despite the advent of the holiday season. Prime Minister Samaras will try again tomorrow to secure a majority for his candidate for president, requiring a super majority of 200 votes. If it fails, the last attempt will be on December 29th, where the hurdle for the Prime Minister drops to 180 votes.

22 Jan. 2016 Mr. Draghi Won't Give Up On Low Inflation, Promising More Easing (Publication Centre)

Yesterday's ECB meeting provided no immediate relief to nervous investors. The central bank kept its main interest rates unchanged, and maintained the pace of QE purchases at €60B per month. Mr. Draghi compensated for the lack of action, however, by hinting heavily at further easing at its next meeting. The president emphasized that the ECB's policies will be "reviewed and reconsidered" in light of the March update to the staff projections. Mr. Draghi also admitted that inflation has been "weaker than expected" since the last meeting, and that downside risks have increased further. The central bank does not pre-commit, but we think it is a good bet that the ECB will do more in March.

22 July. 2016 The ECB Tells Investors to go on Holiday and Come Back in Q3 (Publication Centre)

As widely expected, the ECB held fire yesterday. The central bank left its main refi rate unchanged at zero, and also kept the pace of QE unchanged at €80B a month. The deposit and marginal lending facility rates were also left unchanged at -0.4% and 0.25% respectively. The formal end-date of QE is still Q1 2017, but the press release repeated the message that QE can continue "beyond [Q1 2017], if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim."

23 Feb. 2016 PMIs Suggest Risks to Q1 EZ GDP Growth are Tilted to the Downside (Publication Centre)

Advance PMI data yesterday supported our suspicion that Q1 economic survey data will paint a picture of slowing growth in the Eurozone economy. The composite PMI in the Eurozone fell to a 13-month low of 52.7 in February from 53.6 in January, driven by declines in both the French and German advance data.

23 August. 2016 EZ PMIs to Signal Stable GDP Growth in the Third Quarter (Publication Centre)

Today's market attention will be focused on the advance August PMI data in the major EZ economies. We think the composite PMI in the euro area was unchanged at 53.2 in August, consistent with stable GDP growth of 0.3%-to-0.4% quarter-on-quarter in Q3. The signal of "stability" in the Eurozone business cycle has been consistently relayed by the PMI since the beginning of the year.

22 September 2016 Yield Curve Control Will be Tricky to Implement in the Eurozone (Publication Centre)

We tend to keep a close eye on monetary policy initiatives in Japan, as the BOJ's fight to spur inflation in a rapidly ageing economy resembles the challenge faced by the ECB.

23 June 2017 Will French Domestic Demand in Rebound in Q2? (Publication Centre)

The June batch of the French statistical office's business surveys continues to signal a firming cyclical recovery. The aggregate business index rose to cyclical high of 106 in June from a revised 105 in May, continuing an uptrend that began in the middle of 2016.

23 March 2017 The Eurozone's Primary Income Surplus is Climbing Steadily (Publication Centre)

The Eurozone's total external surplus hit the skids at the start of the year. Yesterday's report showed that the seasonally adjusted current account surplus plunged to a two-year low of €24.1B in January, from a revised €30.8B in December.

22 May. 2015 Solid EZ PMI, but Weak German Manufacturing is Worrying (Publication Centre)

The composite PMI in the Eurozone continues to edge slightly lower, falling to 53.4 in May from 53.9 in April. A fall in the services index to 53.3, from 54.1 last month offset a modest increase in manufacturing to 52.3 from 52.0 in April.

23 May 2017 How to Lift French GDP Growth to Above 1.5% Year-over-year (Publication Centre)

The recovery in the French economy since the sovereign debt crisis has been lukewarm. Growth in domestic demand, excluding inventories, has averaged 0.4% quarter-on-quarter since 2012. This comp ares with 0.8%-to-1.1% in the two major business cycle upturns in the 1990s and from 2000s before the crisis.

23 Oct. 2015 Dovish Mr. Draghi All But Promises More QE in December (Publication Centre)

Mr. Draghi gave one of his most dovish performances to date yesterday. The central bank kept its main interest rates and the pace of QE unchanged, but reiterated that risks to growth and inflation are tilted to the downside. The president noted further that the existing policies will be "reexamined" in December in light of updated staff projections. It is difficult to see how the downbeat assessment on the economy will change materially from now until December, indicating that further stimulus is likely.

24 June. 2015 Another Upbeat PMI Report Adds to the Cyclical Optimism in the EZ (Publication Centre)

The PMI survey yesterday painted a more upbeat picture on the Eurozone economy than we expected. The composite index rose to 54.1 in June from 53.6 in May, taking the quarterly average to its highest level since Q2 2011.

24 July. 2015 Retail Sales on Track for New High, Despite Dip in Sentiment (Publication Centre)

Advance Eurozone consumer sentiment fell disappointingly to -7.1 in July, from -5.6 in June, but it is consistent with a solid trend in retail sales growth. Household consumption in the zone has surged in the last four quarters, and a modest loss of momentum in Q3 and Q4 is a reasonable bet. But we see little risk of a sharp slowdown in the shor t run, and the trend in spending growth should stabilize at an annualised 1.5% this year.

24 Mar. 2016 EZ Consumers' Spending Is Slowing, but Won't Collapse (Publication Centre)

All the evidence indicates that growth in Eurozone consumers' spending is slowing. We think data today will show that the advance GfK consumer sentiment index in Germany was unchanged at 9.5 in April, but the headline index does not correlate well with spending. The "business expectations" index is better, and while it likely will increase slightly, our first chart shows that it continues to signal a slowdown in consumers' spending growth.

24 March 2017 TLTROs Finish with a Bang, but it Probably does not Mean Much (Publication Centre)

Robust demand in the ECB's final TLTRO auction was the main story in EZ financial markets yesterday. Euro area banks--474 in total-- took up €233.5B in the March TLTRO, well above the consensus forecast €110B. To us, this strong demand is a sign that EZ banks are taking advantage of the TLTROs' incredibly generous conditions.

24 Sept. 2015 PMIs Point to Stable and Strong Eurozone GDP Growth in Q3 (Publication Centre)

PMI data yesterday provided some relief to anxious investors, despite a modest drop in the headline. The composite PMI in the Eurozone fell to 53.9 in September from 54.3 in August, driven by slight falls in both manufacturing and services. Assuming no major changes to the advance September reading--usually a fair bet--the PMI rose marginally in Q3, pointing to a continuation of the cyclical recovery.

24 November. 2016 EZ PMIs Rise Further in November- The Outlook is Good for Q4 GDP (Publication Centre)

The PMIs are telling an increasingly upbeat story for the EZ economy in Q4. The composite PMI in the euro area rose to an 11-month high of 54.1 in November, from 53.3 in October. The uptick was driven by strong new business growth across all private sectors, and employment also increased in response to higher work backlogs.

24 Feb. 2016 Distress Signal from IFO Confirm Downside Risks are Increasing (Publication Centre)

Yesterday's IFO survey sent a clear signal that the German economy's engine is stuttering. The business climate index fell to a 14-month low of 105.7 in February from 107.3 in January, and the expectations index slumped to 98.8 from 102.3. The weakness was driven by weaker sentiment in manufacturing, which plunged at its fastest rate since November 2008.

24 Feb. 2015 Germany is Growing, But Not as Fast as Implied by the Surge in Q4 (Publication Centre)

Sentiment in Germany has improved slightly this month with the IFO business climate index rising to 106.8 from 106.7 in January, pushed higher by a small increase in the expectations index.

24 Apr. 2015 Cyclical recovery remains on track in the Eurozone Economy (Publication Centre)

The preliminary April PMIs point to a continuation of the cyclical bounce, despite falling slightly from last month. The composite PMI in the Eurozone fell to 53.5 in April, down from 54.0 in March.

23 September 2016 French Manufacturing Confidence Rebounds Solidly in September (Publication Centre)

French manufacturers recovered their optimism towards the end of Q3. The headline INSEE manufacturing sentiment index rose to 103 in September, from 101 in August, and the composite business confidence gauge also increased. A rebound in transport equipment firms' own production expectations was the key driver of the recovery.

24 April 2017 It Looks Like Mr. Macron Against Mrs. Le Pen in the Second Round (Publication Centre)

The initial "official estimate" of the French presidential election--released 20.00 CET--suggest that the runoff will be between the centre-right Emmanuel Macron and Front National's Marine Le Pen. This is consistent with opinion polls. The average of five early estimates also suggests that Mr. Macron won the vote with 23.1% of the vote against Mrs. Le Pen's 22.5%.

24 August 2017 Markets Will Look in Vain for QE Clues from Mr. Draghi this Week (Publication Centre)

Eurozone investors are fixed on Mr. Draghi's speaking schedule this week, looking for hints of the ECB's future policy path.

24 August. 2016 "Breaking News": EZ PMIs Signal Unchanged GDP Growth in Q3 (Publication Centre)

Yesterday's advance EZ PMI data were virtually unchanged from previous months, yet again. The composite PMI rose trivially to 53.3 in August from 53.2 in July; this means that the index has been almost stable since February. The headline was lifted by a small increase in services, which offset a slight decline in manufacturing.

23 Apr. 2015 Cyclical recovery in the Eurozone will likely moderate in Q2, slightly (Publication Centre)

The preliminary April PMIs due today will provide the first economic sentiment data for Q2, and likely will point to a continuation of the cyclical recovery. We think the composite PMI was unchanged at 54.0 in April, driven by a small gain in manufacturing offset by a slight decline in services.

30 Nov. 2015 Bullish Economic Data Will Not Deter the ECB this Week (Publication Centre)

Bullish money supply data last week added to the evidence that the Eurozone's business cycle is strengthening. Broad money growth--M3--rose to 5.3% year-over-year in October from 4.9% in September. Most of the increase came from a surge in short-term debt issuance, rising 8.4% year-over-year, following an inexplicable 1.4% fall in September.

6 Nov. 2015 Woeful German Manufacturing Data Curbs Optimism for Q4 (Publication Centre)

German manufacturing data continues to offer a sobering counterbalance to strong services and consumers' spending data. New orders plunged 1.7% month-to-month in September, well below the consensus, pushing the year-over-year rate down to a 1.0% fall from a revised 1.7% increase in August. These data are very volatile, and revisions probably will lift the final number slightly next month, but the evidence points to clear risks of a further decline in the underlying trend of production.

6 March 2017 PMIs Signal Stronger EZ Growth, but Will the Hard Data Follow? (Publication Centre)

Survey data continue to suggest that GDP growth will accelerate in Q1. The final PMI reports on Friday showed that the headline EZ composite index rose to 56.0 in February, from 54.4 in January, in line with the first estimate.

6 September 2017 EZ Consumers' Spending Likely will Slow in Q3, but don't Panic (Publication Centre)

EZ consumers' spending slowed at the start of Q3. Retail sales slipped 0.3% month-to-month in July, pushing the year-over-year rate down to 2.6% from an upwardly revised 3.3% in June.

6 September. 2016 German Services PMI Taints an Otherwise Strong Day for EZ Data (Publication Centre)

Yesterday's EZ PMI data surprised to the downside. The composite PMI in the euro area dipped to 52.9 in August, from 53.2 in July, below the initial estimate 53.3. The headline was marred by weakness in the German services PMI, which crashed to a 40-month low of 51.7, from 54.4 in July.

7 December. 2016 Steady as She Goes for the EZ Economy, Despite Political Turmoil (Publication Centre)

Yesterday's detailed EZ GDP report showed that real output rose 0.3% quarter-on-quarter in Q3, the same pace as in Q2. The year-over-over rate rose marginally to 1.7% from 1.6%, trivially higher than the first estimate, 1.6%. The details showed that consumers' spending and public consumption were the key drivers of growth in Q3, offsetting a slowdown in net trade.

7 April 2017 Brace for Disappointing Industrial Production Data Today (Publication Centre)

Manufacturing orders in Germany recovered some ground in the middle of Q1, following the plunge at the beginning of the year. Factory orders rose 3.4% in February, pushing the year-over-year rate up to +4.6% from a revised 0.0% in January.

6 March 2017 Can Gilt Yields Remain Low While the World Reflates? (Publication Centre)

If 2017 really is the year of "reflation", somebody forgot to tell the gilt market. Among the G7 group, 10-year yields have fallen only in the U.K. during the last three months, as our first chart shows.

6 July. 2016 The EZ Economy is at the Mercy of Rising Political Uncertainty (Publication Centre)

Yesterday's economic data point to a sea of calm in the Eurozone economy. The composite PMI was unchanged at 53.1 in June, a slight upward revision from the initial estimate, 52.8. The index suggests real GDP growth was stable at 1.5%-to-1.6% year-overyear in Q2, though the quarter-on-quarter rate likely slowed markedly, following the jump in Q1.

5 October 2017 Consumers' Spending in the Eurozone Slowed in Q3 (Publication Centre)

Yesterday's economic reports in the Eurozone will rekindle the debate on hard versus soft data. The final composite PMI rose to 56.7 in September, from 55.7 in August, in line with the first estimate.

5 May. 2016 Growth in Eurozone Consumers' Spending is Slowing (Publication Centre)

Evidence of slowing growth in Eurozone consumers' spending continues to mount. Retail sales in the euro area fell 0.5% month-to-month in March, pushing the year-over-rate down to 2.1% from a revised 2.7% in February. The headline likely was depressed by the early Easter. March had one trading day less than February, which was not picked up the seasonals.

6 Apr. 2016 Is Non-Manufacturing Activity Past Its Cyclical Peak in the Eurozone? (Publication Centre)

The final Eurozone PMIs indicate that the cyclical recovery continued in Q1, but downside risks are rising. The composite index rose marginally to 53.0 in March, from 53.1 in February, below the initial estimate 53.7. Over the quarter as a whole, though, the index fell to 53.2 from 54.1 in Q4, indicating that economic momentum moderated in the first quarter.

6 February 2017 EZ Households are in Good Shape, But Spending Will Slow in 2017 (Publication Centre)

Consumers' spending in the euro area weakened at the end of Q4, but we think households will continue to boost GDP growth in the first quarter. Data on Friday showed that retail sales fell 0.3% month-to-month in December, pushing the year-over-year rate down to 1.1%, from a revised 2.8% in November.

6 July 2017 Monte dei Paschi Finally is Restructured. Will it Work? (Publication Centre)

It's probably happening a decade too late, but the EU is now moving in leaps and bounds to restructure the continent's weakest banks. Yesterday, the Monte dei Paschi saga reached an interim conclusion when the Commission agreed to allow the Italian government to take a 70% stake in the ailing lender.

6 January 2017 Will the ECB's Doves Be Overrun by Higher Inflation in 2017? (Publication Centre)

Inflation in the Eurozone is on the rise but, as we explained in yesterday's Monitor it is unlikely to prompt the ECB further to reduce the pace of QE in the short run. The central bank has signalled a shift in focus towards core inflation, at a still-low 0.9% well below the 2% target. But the core rate also is a lagging indicator, and we think it will creep higher in 2017.

7 November. 2016 EZ Growth is Stable, but Inflation is Rising (Publication Centre)

The two major EZ economic reports released while we were away conformed to the consensus. Advance data suggest that real GDP in the euro area rose 0.3% quarter-on-quarter in Q3, the same pace as in Q2, and the year-over-year rate was similarly unchanged at 1.6%.

8 Apr. 2015 Slowly does it for upturn in the German manufacturing sector (Publication Centre)

German factory orders probably bounced a modest 0.3% month-to-month in February, equivalent to a 0.5% decline year-over-year. We expect private investment growth to have picked up in the first quarter, but leading indicators for the industrial sector in Germany are sending conflicting signals.

9 January 2017 The Eurozone Economy Likely Finished 2016 With a Bang (Publication Centre)

The slew of EZ economic data on Friday supports our view that the economy ended 2016. The Commission's economic sentiment index jumped to 107.8 in December from a revised 106.6 in November. The headline strength was due to a big increase in "business climate indicator" and higher consumer sentiment. In individual countries, solid numbers for German construction and French services sentiment were the stand-out details.

9 Dec. 2015 Services will Push up Core Inflation in the EZ Next Year (Publication Centre)

Core inflation--a long lagging indicator in the euro area-- will rise next year, in response to surging consumers' spending. Our first chart shows that services inflation likely will be a key theme in this story. Even allowing for a structural drag on inflation due to high unemployment outside Germany, cyclical risks to services inflation are tilted firmly to the upside.

9 June. 2015 A flying start to Q2 for German Industrial sector and exports (Publication Centre)

Economic reports released yesterday indicate that the German economy was off to a solid start early in the second quarter. Industrial production rose 0.9% month-to-month in April, equivalent to a 1.4% increase year-over-year, up from a revised tiny 0.2% gain in March. This is the biggest annual jump in production since July last year, but the underlying trend is turning up only slowly, in line with the moderate improvement in survey data this year.

9 June. 2016 Eurozone Credit Markets Cheer as ECB Private QE Begins (Publication Centre)

The ECB's corporate bond purchase program began yesterday with purchases concentrated in utilities and telecoms, according to media sources. This is consistent with the structure of the market, and the fact that bond issues by firms in these sectors are the largest and most liquid. But debt issued by consumer staples firms likely also featured prominently.

9 Sept. 2015 Cyclical Recovery in the Eurozone Goes from Strength to Strength (Publication Centre)

Final Q2 GDP data yesterday indicate the euro area economy was stronger than initially estimated in the first half of the year. Real GDP rose 0.4% quarter-on-quarter in Q2, slightly higher than the initial estimate of 0.3, following an upwardly revised 0.5% increase in Q1. Upward revisions to GDP in Italy were the key driver of the more upbeat growth picture. The revisions mean that annualised Eurozone growth is now estimated at 1.8% in the first six months of the year, up from the previous 1.4%, consistent with the bullish message from real M1 growth and the composite PMI.

9 Nov. 2015 Investors Should Brace for a Poor German Q3 GDP Report (Publication Centre)

Friday's industrial production data capped another dreadful week for German manufacturing. Output fell 1.1% month-to-month in September, pushing the year-over-year rate lower to 0.2%, from a revised 2.9% in August. The 0.6% upward revision of the previous month's data makes the data slightly less awful than the headline, but the details showed weakness across all core sectors. The underlying trend in production is stable at about 1.2% year-over-year, but downbeat new orders suggest it will weaken in the fourth quarter.

8 September. 2016 The ECB Will Extend QE Today (Publication Centre)

Markets are looking for the ECB to extend QE today, and we think they will get their way. We expect the central bank to prolong the program by six months, to September 2017, and to maintain the pace of monthly purchases at €80B per month.

8 Oct. 2015 Weak, but Stable, Trend in German Manufacturing Investment in Q3 (Publication Centre)

Yesterdays' industrial production report capped a poor week for German manufacturing. Output fell 1.2% month-to-month in August, well below the consensus, +0.2%, though note that a 0.5% upward revision to the July data made the August headline look worse. Similar to the factory orders report earlier this week--see our October 6th Monitor--base effects also mean that production accelerated to 2.5% year-over-year, from a revised 0.8% gain in July.

8 July. 2016 German Economy Likely Stalled in Q2, but Don't Forget the Q1 Surge (Publication Centre)

German GDP growth jumped in the first quarter, but monthly economic data suggest the economy all but stalled in Q2. Yesterday's industrial production data are a case in point. Output slid 1.3% month-tomonth in May, pushing the year-over-year rate down to -0.4% from a revised 0.8% gain in April. Adding insult to injury, the month-to-month number for April was revised down by 0.3 percentage points

8 February 2017 German Manufacturing Data Threw a Tantrum in December (Publication Centre)

German manufacturing data are all over the place at the moment. Earlier this week, data showed that new orders jumped toward the end of 2016, but yesterday's industrial production report was a shocker. Output plunged 3.0% month-to-month in December, pushing the year-over-year rate down to -0.7% from a revised +2.3% in November.

8 June. 2015 Slowly Does it for German Manufacturing Upturn in Q2 (Publication Centre)

New orders data indicate that German manufacturing enjoyed a strong start to the second quarter. Factory orders rose 1.4% month-to-month in April, equivalent to a modest 0.4% gain yearover- year, down from a revised 2.0% in March. The numbers put new orders on track for a solid 1.8% quarter-on-quarter gain in Q2--assuming no change in May and June--but these data are volatile, making this estimate highly uncertain.

8 June. 2016 EZ Domestic Demand Rose Solidly in Q1, but Will Slow in Q2 (Publication Centre)

The third estimate of euro area growth in the first quarter provides clear evidence that measuring GDP is not an exact science. Real GDP rose 0.6% quarter-on-quarter in Q1, accelerating from 0.4% in Q4. This latest estimate is higher than the previous estimate, 0.5%, but in line with the first calculation. Eurostat and all the large Eurozone economies now provide early estimates of GDP, before data for the full quarter is available.

8 March 2017 Focus on the Trend in German Factory Orders, to Retain Sanity (Publication Centre)

A setback in German manufacturing orders was coming after the jump at the end of 2016, but yesterday's headline was worse than we expected. Factory orders crashed 7.4% month-to-month in January, more than reversing the 5.4% jump in December. The year-over-year rate fell to -0.8% from a revised +8.0%. The decline was the biggest since 2009, but the huge volatility in domestic capital goods orders means that the headline has to be taken with a large pinch of salt.

5 June 2017 The Real Story of High Youth Unemployment in the Eurozone (Publication Centre)

Youth unemployment remains a blemish on the Eurozone economy, despite an increasingly resilient cyclical recovery. The unemployment rate for young workers aged 15-to-24 years stood at 18.4% at the end of April, chiefly due to high joblessness in the periphery.

5 January 2017 The ECB won't panic over surging EZ inflation in Q1 (Publication Centre)

Yesterday's advance CPI report in the Eurozone showed that inflation pressures are rising rapidly. Inflation rose to 1.1% year-over-year in December, from 0.6% in November. Surging energy inflation was the key driver, and this component likely will continue to rise in the next few months. Core inflation, however, stayed subdued, rising only slightly to 0.9%, from 0.8% in November.

3 January 2017 The Eurozone in 2017: Higher Inflation and Slower M1 Growth? (Publication Centre)

A bullish EZ money supply report was the key highlight while we were away over the holidays. M3 growth in the euro area accelerated to 4.8% year-over-year in November from 4.4% in October.

3 February 2017 The U.S. Puts Germany's Huge Trade Surplus Under the Spotlight (Publication Centre)

In our Monitor on January 27 we speculated that the new U.S. administration would see Germany's booming trade surplus as a bone of contention. We were right. Earlier this week, Peter Navarro, the head of Mr. Trump's new National Trade Council, fired a broadside against Germany, accusing Berlin for using the weak euro to gain an unfair trade advantage visa-vis the U.S.

3 July 2017 Is the Jump in Eurozone Core Inflation Really Temporary? (Publication Centre)

Friday's euro area inflation reported capped a difficult week for EZ bondholders, although most of the damage was done beforehand by the advance German data.

3 May 2017 EZ Q1 GDP Growth Likely won't Live up to the Soaring Surveys (Publication Centre)

Survey data point to a very strong headline, 0.6%-to-0.7% quarter-on-quarter, in today's Q1 advance Eurozone GDP report. But the hard data have been less ebullient than the surveys. A GDP regression using retail sales, industrial production and construction points to a more modest 0.4% increase, implying a slowdown from the upwardly-revised 0.5% gain in Q4.

3 Nov. 2015 Inflation Will Rise Faster Than the ECB Expects Next Year (Publication Centre)

Mixed comments last week by members of the governing council raised doubts over the ECB's resolve to add further stimulus next month. But the message from senior figures and Mr. Draghi remains that the Central Bank intends to "re-assess" its monetary policy tools in December. Our main reading of last month's meeting is that Mr. Draghi effectively pre-committed to further easing. This raises downside risks in the event of no action, but the President normally doesn't disappoint the market in these instances.

3 May. 2016 Will GDP Growth in the Eurozone Accelerate This Year? (Publication Centre)

Last week's advance EZ GDP data for the first quarter suggest the economy shrugged off the volatility in financial markets. Eurostat's first estimate indicates that real GDP in the euro area rose 0.6% quarter-on-quarter in Q1, up from 0.3% in Q4, and above the consensus, 0.4%.

3 April 2017 Eurozone Consumers Likely had a Slow Start to 2017 (Publication Centre)

We fear that private spending in the EZ slowed in Q1, despite rocketing survey data. This fits our view that household consumption will slow in 2017 after sustained above-trend growth in the beginning of this business cycle.

29 Oct. 2015 EZ Consumers Remain Upbeat, but Downside Risks in Germany (Publication Centre)

Consumer sentiment data yesterday from the major economies were mixed, signalling that support to Eurozone GDP growth from surging German household consumption is waning. The key "business outlook" index--which correlates best with spending--plunged to a 30-month low in October, while the advance GfK sentiment index dipped to 9.4 in November from 9.6 in October. We see little signs in retail sales data of slowing momentum, and also think consumers' spending rebounded in Q3. But our first chart shows that the fall in the GfK index implies clear downside risks in coming quarters.

29 Jan. 2015 Inflation data will be kind to bondholders, for now (Publication Centre)

Last week's QE announcement has made Eurozone inflation prints less important for investors, but the market will still be watching for signs of a turning point in benchmark bond yields. The data are unlikely to challenge bond holders in the short run, however, as the Eurozone probably slipped deeper into deflation in January.

29 Apr. 2016 German Labour Market are Solid, but Likely Will Disappoint Soon (Publication Centre)

German labour market data continue to break records on a monthly basis. The unemployment rate was unchanged at 6.2% in A pril, with jobless claims falling 16,000, following a revised 2,000 fall in March. March employment rose 1.2% year-over-year, down slightly from 1.3% in February, but the total number of people in jobs rose to a new high of 43.4 million.

29 June 2017 The EZ Economy is in Great Shape, but Probably not Getting Better (Publication Centre)

Money supply dynamics in the Eurozone were broadly stable last month. M3 rose 5.0% year-over-year in May, accelerating slightly from a 4.9% increase in April, in line with the trend since the middle of 2015.

29 June. 2016 French Households are in a Good Mood, Despite Dip in Sentiment (Publication Centre)

French consumer sentiment dipped slightly in June, but we see no major hit from ongoing labour market disputes. The headline index slipped to 97 in June, from 98 in May; this is a decent reading given the fourpoint jump last month. The headline was constrained by a big fall in consumers' "major purchasing intentions," but this partly was mean-reversion following a surge last month.

29 March 2017 Triggering Article 50 Won't End the "Phoney War" Immediately (Publication Centre)

The Prime Minister will invoke Article 50 today, marking the end of the beginning of the U.K.'s departure from the EU. The move likely will not move markets, as it has been all but certain since MPs backed the Government's European Union Bill on February 1.

29 March 2017 The Alternative Interpretation of Political Uncertainty in the EZ (Publication Centre)

The presumption in markets is that the French presidential election is the last hurdle to be overcome in the EZ economy. As long as Marine Le Pen is kept out of l'Élysée, animal spirits will be released in the economy and financial markets. We concede that a Le Pen victory would result in chaos, at least in the short run. Bond spreads would widen, equities would crash and the euro would plummet. But we also suspect that such volatility would be short-lived, similar to the convulsions after Brexit.

3 October 2017 EZ Manufacturing is Helping to Propel the Cyclical Upturn (Publication Centre)

Manufacturing in the Eurozone remained a strong driver of GDP growth in the third quarter. The headline EZ manufacturing PMI rose to 58.1 in September, from 57.4 in August, only a tenth below the initial estimate 58.2.

30 August 2017 The Eurozone's Cyclical Recovery is Stable, Not Accelerating (Publication Centre)

While we were enjoying a rare sunny bank holiday in the U.K., data showed that Eurozone money supply growth slowed at the start of Q3. Broad money growth--M3--fell to a 10-month low of 4.5% year-over- year in July, from 5.0% in August.

31 March 2017 Eurozone Inflation Data will Undershoot the Consensus Today (Publication Centre)

Yesterday's advance data from Germany and Spain suggest that today's Eurozone inflation report will undershoot the consensus. In Germany, headline inflation slipped to 1.6% in March from 2.2% in February, and in Spain the headline rate plunged to 2.3% from 3.0%.

31 August. 2016 German Core Inflation Slipped in August, but Should Rebound Soon (Publication Centre)

The upward trend in German inflation stalled temporarily in August, with an unchanged 0.4% year-over-year reading in August. A dip in core inflation likely offset a continued increase in energy price inflation. The detailed final report next month will give the full story, but state data suggest that the core rate was depressed by a dip in price increases of household appliances, restaurant services, as well as "other goods and services."

31 May. 2016 Rebound in German Inflation is the Beginning of a Sustained Pick-Up (Publication Centre)

Advance CPI data yesterday continue to indicate that inflation pressures remain depressed in the Eurozone's largest economy, for now. Inflation in Germany rose slightly in May, but only to 0.1% year-over-year, from -0.1% in April. The downward pressure on the headline from the crash in oil prices remains significant. Energy prices fell 7.9% year-over-year, slowing slightly from the 8.5% drop in the year to April.

4 January 2017 Surging EZ Inflation will Comfortably Beat the Consensus Today (Publication Centre)

German inflation surged in December, pointing to an upside surprise in today's advance EZ report. The headline inflation rate rose to a three-year high of 1.7% year-over-year in December, from 0.8% in November. This was the biggest increase in the year- over-year rate since 1993.

4 September 2017 Manufacturing Will Continue to Lift EZ GDP Growth in Q3 (Publication Centre)

Eurozone manufacturing boosted GDP growth in the first half of the year, and survey data suggest that momentum will be maintained in Q3.

4 July 2017 Why Hasn't EZ Industrial Output Responded to the PMIs? (Publication Centre)

Yesterday's PMI data confirmed that the EZ manufacturing sector is in rude health. The manufacturing PMI in the euro area rose to a cyclical high of 57.4 in June, from 57.0 in May, slightly above the first estimate. New orders and output growth are robust, pushing work backlogs higher and helping to sustain employment growth.

30 September 2016 Today's Eurozone Inflation Data Likely Will Surprise to the Upside (Publication Centre)

Today's advance CPI data will show that EZ inflation pressures rose further at the end of Q3. The headline number likely will exceed the consensus. We think inflation rose to 0.5% year-over-year in September from 0.2% in August, slightly higher than the 0.4% consensus.

30 November. 2016 EZ Inflation Data Will Disappoint Today, but it Will Rise Further (Publication Centre)

Yesterday's advance inflation data in Germany fell short of forecasts--ours and the consensus--for a further increase. Inflation was unchanged at 0.8% year-over-year in November, but we think this pause will be temporary.

30 June 2017 EZ Inflation Data are Complicating Life for the ECB and Markets (Publication Centre)

Advance country data indicate that headline EZ inflation fell slightly in June; we think the rate dipped to 1.3% year-over-year, from 1.4% in May.

30 August. 2016 Real GDP Growth in the Eurozone is About to Come Down a Notch (Publication Centre)

Money supply data in the euro point to a cyclical peak in GDP growth this year. Headline M3 growth fell to 4.8% year-over-year in July, from 5.0% in June, chiefly due to a slowdown in narrow money. M1 growth declined to 8.4%, from 8.7%, as a result of weaker momentum in overnight deposits and currency in circulation.

30 June. 2016 Political Vacuum in the U.K. Prompts the EU to Up the Pressure (Publication Centre)

Leaders of the major Eurozone economies were in no mood to give concessions as they met with outgoing U.K. Prime Minister David Cameron this week for the first time since the referendum. German Chancellor Angela Merkel said that she sees "no way back from the Brexit vote." This followed comments that the U.K. couldn't be expected to "cherry-pick" the EU rules that it would like to follow after a new deal.

30 May 2017 How Durable is the Euro's Rally Against the Dollar? (Publication Centre)

Fiscal stimulus, partly financed by a border adjustment tax, and Fed rate hikes, were supposed to be a powerful cocktail driving a stronger dollar in 2017. But so far only the Fed has delivered--we expect another rate hike next month--while Mr. Trump has disappointed in the White House.

21 November. 2016 Is Germany Exploiting the Rest of the EZ? (Publication Centre)

Data on Friday showed that the EZ current account surplus fell to €25.3B in September, from a revised €29.2B in August. The trade and services surpluses were unchanged, but the income balance slipped after rising in the previous months.

28 September. 2016 Narrow Money in the EZ points to Slower GDP Growth Next Year (Publication Centre)

Momentum in EZ money supply slipped marginally in September. Headline M3 growth slowed to 5.0%, from 5.1%, mainly due to a slowdown in narrow money. Overnight deposit growth slowed to 9.4%, from 9.9% in August, offsetting a slight rise in growth of currency in circulation.

19 December 2016 How Far Will Eurozone Headline Inflation Rise in Q1? (Publication Centre)

Inflation pressures in the Eurozone nudged higher last month. Friday's final CPI report showed that inflation rose to 0.6% year-over-year in November, from 0.5% in October, in line with the initial estimate. The food, alcohol and tobacco component was the key driver of the increase.

12 December 2016 German wage growth is accelerating (Publication Centre)

Data on Friday showed that German wage growth is firming. Nominal labour costs rose 2.5% year-overyear in Q3, accelerating from a revised 1.9% increase in Q2. The main driver was a strong rebound in gross earnings growth, which rebounded to 2.4% year-over-year from an oddly weak 1.2% in Q2.

11 September 2017 The German Trade Surplus is Falling, but Real Wages are Rising (Publication Centre)

The seasonally adjusted trade surplus in Germany slipped to €19.6B in July, from €21.2B in June, its lowest since April, and we are confident that it has peaked for this cycle.

12 Feb. 2016 Poor EZ Q4 GDP Data Likely Already Priced-in by Markets (Publication Centre)

Today's Q4 GDP report in the Eurozone likely will show that growth slowed again at the end of last year. We think GDP growth dipped to 0.2% quarter-on-quarter in Q4, down from 0.3% in Q3, and risks to our forecast are firmly tilted to the downside. The initial release does not contain details, but we think a slowdown in consumers' spending and a drag from net exports were the main drivers of the softening.

12 Oct. 2015 French Manufacturing Output Likely Fell in Q3 - Q4 will b e Better (Publication Centre)

French industrial production data offered a bit of relief last week following a string of woeful German data, and news of monthly falls in Italian and Spanish manufacturing output. Industrial production jumped 1.6% month-to-month in August, but the headline was flattered by a 0.3% downward revision of the July data. The monthly jump pushed the year-over-year rate higher to 1.6%, from a revised 0.9% fall in July. All sectors performed strongly in August, but the key story was a hefty increase in transport equipment manufacturing, due to a 11.9% surge in vehicle production.

12 September. 2016 More Poor Data Signal Slow Start to Q3 (Publication Centre)

Friday's economic data added to the evidence that the German economy stumbled in July. The seasonally adjusted trade surplus slipped to €19.4B, from a revised €21.4B in June.

11 Sept. 2015 Deflation Worry Dominates, but Inflation Could Hurt Bonds in Q4 (Publication Centre)

Final data today will likely confirm that German inflation was unchanged at 0.2% year-over-year in August. The increased drag from falling energy prices was likely offset by higher food prices, mostly fresh vegetables. Core inflation was likely stable at 0.9% year-over-year, with a marginal rise in consumer services inflation offset by a fall in net rent. Rents could fall further this year due to the implementation of caps in major cities, but we s till only have little evidence on how individual states will implement the new legislation.

11 October 2017 Hard Data Suggest German GDP Growth Slowed Slightly in Q3 (Publication Centre)

Germany's nominal external surplus rebounded smartly over the summer, but real net trade looks set to be a drag on Q3 GDP growth, again. The seasonally adjusted trade surplus increased to €21.6B in August from a revised €19.3B in July.

11 May 2017 A Poor Q1 for French Industrial Production, but Q2 will be Better (Publication Centre)

French manufacturing came roaring back at the end of Q1. Industrial production jumped 2.0% month-to- month in March, driving the year-over-year rate higher to +2.0%, from a revised -0.7% in February.

11 Mar. 2016 Significant Easing by the ECB Despite Markets' Initial Dissent (Publication Centre)

The ECB atoned for its "mistake" in December yesterday by delivering a new easing package that significantly beat markets' expectations. The central bank cut its main refi and marginal lending facility rates by 0.05 percentage points, to 0.00% and 0.25% respectively.

11 May. 2016 German GDP Growth Likely Rose Strongly in the First Quarter (Publication Centre)

Yesterday's industrial production data in Germany were downbeat. Output fell 1.3% month-to-month in March, pushing the year-over-over rate down to 0.3%, from 2.0% in February. Production was held back by weakness in manufacturing and a plunge in construction, Meanwhile, energy output rebounded slightly following last month's fall. Over Q1 as a whole, though, the industrial sector performed strongly.

11 Nov. 2015 Strong Finish to Q3 for French Manufacturing to Boost GDP? (Publication Centre)

French industrial production data surprised to the upside yesterday. Output rose 0.1% month-to-month in September, a solid gain following an upwardly-revised 1.7% rise in August, and also higher than the consensus, forecast for a 0.4% fall. The details, however, were less upbeat than the headline. Transport equipment fell, as expected, following production being pushed forward ahead of the Summer holidays. But this story was overshadowed by a 22.5% month-to-month jump in oil refining-- included in manufacturing--as refineries resumed full production following maintenance over the summer.

11 November. 2016 French Industrial Output Weak in Q3, Likely Better in Q4 (Publication Centre)

Yesterday's French industrial production data were worse than we expected. Output slipped 1.1% month-to-month in September, pushing the year-over-year rate down to -1.1% from a revised +0.4% in August. Mean-reversion was a big driver of the poor headline, given the upwardly-revised 2.4% jump in August.

13 Apr. 2015 Energy Output Helped French GDP to a Strong First Quarter (Publication Centre)

The French manufacturing sector remains challenged by weak end-demand. Industrial production was unchanged month-to-month in February, equivalent to a meagre 0.6% increase year-over- year; manufacturing output fell 0.8% on the same basis.

13 February 2017 Can French Investment Maintain Momentum in 2017? (Publication Centre)

French manufacturing cooled at the end of 2016. Industrial production slipped 0.9% month-to-month in December, partially reversing an upwardly revised 2.4% jump in November. The main hits came from declines in oil refining and manufacturing of cars and other transport equipment.

14 Apr. 2016 The Eurozone's Manufacturing Outperformance Likely Won't Last (Publication Centre)

Industrial production in the euro area dipped in February. Output fell 0.8% month-to-month pushing the year-over-year rate down to 0.8% from a revised 2.9% in January. This indicates that Eurozone manufacturing continues to lag the pace seen in previous business cycle upturns.

13 October. 2016 EZ Industrial Production Rebounded Only Modestly in Q3 (Publication Centre)

Yesterday EZ industrial production report confirmed the message from advance country data that manufacturing rebounded towards the end of summer. Output, ex-construction, jumped 1.6% month-to-month in August, and the July data were revised up by 0.4 percentage points.

14 Dec. 2015 Can Eurozone Equities Withstand Global Headwinds Next Year? (Publication Centre)

Barring a gigantic shock from the Fed this week--we expect a 25bp hike--Eurozone equities will end the year with a solid return for investors, who have been overweight. Total return of the MSCI EU ex-UK should come in around 10%, which compares to a likely flat return for the MSCI World, reflecting the boost from the ECB's QE driving out performance. Our first chart shows the index has been mainly lifted by consumer sector, healthcare and IT stocks, comfortably making up for weakness in materials and energy. The year has been a story of two halves, however, and global headwinds have intensified since the summer, partly offsetting the surge in the Q1 as markets celebrated the arrival of QE and negative interest rates.

14 December 2016 German and Eurozone Inflation is About to Shoot Higher (Publication Centre)

German inflation pressures were unchanged last month. The CPI index rose 0.8% year-over-year, matching the increase in October, and in line with the consensus and initial estimate. Energy deflation intensified marginally, as a result of lower prices for household utilities.

14 February 2017 Will Today's EZ GDP Report Overcome Poor German Data? (Publication Centre)

All eyes in the Eurozone will be on the second estimate of Q4 GDP today, and the report likely will confirm that growth accelerated in Q4. We think real GDP rose 0.5% quarter-on-quarter, up from a 0.3% increase in Q3, in line with the first estimate. If this forecast is correct, the year-over-year rate will be unchanged at 1.8%. Risks to the headline, however, are tilted to the downside.

13 October 2017 Eurozone GDP Growth Likely Slowed in Q3, but Only Sligh tly (Publication Centre)

The manufacturing sector likely was the primary driver of Q3 GDP growth in the Eurozone. Data yesterday showed that industrial production rose 1.4% month-to-month in August, pushing the year-over-year rate up to 3.8%, from a revised 3.6% in July.

21 May. 2015 Greece Needs EU Bailout Funds to Pay the IMF Next Month (Publication Centre)

The day of reckoning in Greece has been continuously postponed in the past three months, but government officials told national TV yesterday that the country cannot meet its IMF payment of €300M June 5th, without a deal with the EU. The urgency was echoed by the joint statement earlier this week by German Chancellor Merkel and French President Hollande that Greece has until the end of this month to reach a deal.

13 Jan. 2016 Even Senior Creditors are Not Safe in the Eurozone Banking Industry (Publication Centre)

Investors in Eurozone banks continue to face uncertain times, despite the ECB's best efforts to prop up the economy and financial markets via QE. The latest hit to confidence comes from the bail-in of selected senior debt in Portugal's Banco Espirito Santo. When the troubled lender was restructured in mid-2014, the equity and junior debt were left in a "bad" bank--and were virtually wiped out--while the deposits and senior debt went into the "good" bank Novo Banco. Senior debt holders expecting to recoup their money, however, were startled earlier this month by the decision to "re-assign" five selected bonds with total face value of €2B from Novo Banco to the bad bank, in effect wiping out the investors.

13 Jan. 2015 Ageing and Export Dependency go Hand-in Hand in the Eurozone (Publication Centre)

Population ageing is, arguably, the most important long-term socioeconomic trend in the Eurozone. The demographic transition did not end in the 1970s as fertility hit replacement levels, contrary to the prediction by the stylised models of population change.

13 January 2017 The Eurozone Economy Remains Oblivious to Political Risks (Publication Centre)

The euro area economy continues to defy rising political uncertainty. Data yesterday showed that industrial production, ex-construction, in the Eurozone jumped 1.5% month-to-month in November, pushing the year-over-year rate up to 3.2% from a revised 0.8% in October. Output rose in all the major economies, but the headline was flattered by a 16.3% month-to-month leap in Ireland. This was due to a production jump in Ireland's "modern sector" which includes the country's large multinational technology sector.

13 July 2017 The Eurozone Economy Maintained Momentum in Q2 (Publication Centre)

Yesterday's data showed that industrial production in the Eurozone accelerated at the end of spring. Output, ex-construction, jumped 1.3% month-to-month in May, much better than the downwardly-revised 0.3% rise in April; the rise pushed the year-over-year rate up to a six-year high of 4.0%.

13 July. 2015 A deal inches closer, but the EU is gambling dangerously with Grexit (Publication Centre)

The draft Eurogroup document circulated Sunday evening indicates that European leaders seemingly are willing to offer Greece a new bailout. But it is conditional on passing required legislation reforming pensions and taxes on Wednesday. A "time-out" from the Eurozone, was discussed as a bizarre alternative, but this would be the equivalent of Grexit and default.

11 June. 2015 Fall in Energy Output Will Weigh on French GDP growth in Q2 (Publication Centre)

Swings in energy output continue to add volatility to French manufacturing data. Industrial production fell 0.9% month-to-month in April, equivalent to a 0.1% fall year-over-year. This was a weak report, even if we factor in the 0.3% upward revision to the March numbers,but it was also he avily tainted by a 10.8% month-to-month collapse in oil refining.

11 July. 2016 Net Exports Boosted German GDP Growth in Q2, as Imports Fell (Publication Centre)

The German trade data on Friday completed a poor week for economic reports in the Eurozone's largest economy. The seasonally adjusted trade surplus fell to €22.1B in May, from €24.1B in April, mainly due to a 1.8% month-to-month fall in exports. Imports, on the other hand, were little changed.

08 May. 2015 French GDP Next Week Should Comfortably Beat Expectations (Publication Centre)

The headline 0.9% month-to-month increase in German factory orders--a 1.9% increase year-over-year-- is not enough to change the picture of an overall sluggish first quarter.

08 Mar. 2016 Will German Manufacturing Continue to Flatline in Q1? (Publication Centre)

Yesterday's German factory orders data suggest that manufacturing remained weak in the beginning of Q1. New orders fell 0.1% month-to-month in January, though the year-over-year rate rose to 1.1% from a revised -2.2% in December. The small monthly decline was due to a fall in domestic orders; this offset an increase in export orders to other Eurozone economies.

1 August. 2016 EZ GDP Growth Slowed in Q2, and Likely Will be Revised Down (Publication Centre)

Friday's data deluge suggests that EZ economic growth slowed less than we expected in the second quarter. The advance estimate indicates that real GDP in the euro area rose 0.3% quarter-on-quarter in Q2, down from a 0.6% jump in the first quarter. This was in line with the consensus, but it likely doesn't tell the whole story.

1 December. 2016 Higher EZ Inflation Won't Prevent the ECB from Extending QE (Publication Centre)

Inflation in the Eurozone rose modestly last month. Yesterday's advance CPI report showed the headline rate rising to 0.6% year-over-year in November, from 0.5% in October, mainly because of a jump in fresh food inflation. Energy prices fell 1.1% year-over-year, slightly more than the 0.9% decline in October, but we expect a sharp increase over the next six months.

1 February 2017 The EZ Economy Finished 2016 Strongly, and Q1 Outlook is Solid (Publication Centre)

Yesterday was a good day for headline EZ economic data. GDP growth accelerated, inflation rose and unemployment fell further. Advance Q4 data showed that real GDP in the Eurozone rose 0.5% quarter-on-quarter in Q4, marginally faster than the upwardly revised 0.4% in Q3. Full-year growth in 2016 slowed slightly to 1.7% from 2.0% in 2015.

08 Feb. 2016 German Manufacturing likely Ended Q4 on a Weak Note (Publication Centre)

Demand in the German manufacturing sector stumbled at the end of Q4. Factory orders fell 0.7% month-to-month in December, but the details of the report were slightly more upbeat than the headline. The main hit came from a 2.5% fall in domestic orders, chiefly as a result of weakness in the intermediate goods sector.

07 Jan. 2016 Solid EZ Economic Data Amid Rising Volatility in Equity Markets (Publication Centre)

Increased volatility has given equity investors a torrid start to the year, but economic reports have been strong, and yesterday's PMIs were no exception. The composite index in the Eurozone rose marginally to 54.3 in December from 54.2 in November, slightly higher than the initial estimate of 54.0. This is consistent with a continuing cyclical recovery, and real GDP growth of 0.4%-to-0.5% in Q4, modestly higher than the 0.3% rise in the third quarter.

02 Feb. 2016 EZ Public Spending will Support GDP Growth in 2016 (Publication Centre)

Economic theory tells us that government spending should be counter-cyclical, but recent experience in the Eurozone tells a slightly different story. The contribution to GDP growth from government spending rose during the boom from 2004 to 2007, and remained expansionary as the economy fell off the cliff in 2008. As the economy slowed again following the initial recovery, the sovereign debt crisis hit, driving a severe pro-cyclical fiscal hit to the economy.

01 Feb. 2016 Inflation Data Indicate Bund Buyers Should Exercise Caution (Publication Centre)

Investors were presented with a barrage of mixed EZ economic data on Friday, fighting for attention amid markets celebrating the arrival of negative interest rates in Japan. Advance Eurozone CPI data gave some respite to the ECB, with inflation rising to 0.4% year-over-year in January from 0.2% in December.

03 Feb. 2016 Cyclical Optimism, but Structural Pessimism, on EZ Unemployment (Publication Centre)

Data yesterday showed that the downward trend in Eurozone unemployment continued towards the end of last year. The unemployment rate fell to 10.4% in December from 10.5% in November, extending an almost uninterrupted decline which began in the first quarter of 2013.

04 Jan. 2016 Narrow Money is Growing Solidly, but Likely Peaked in Q4 (Publication Centre)

Data released over the holidays suggest that money supply dynamics in the Eurozone remain solid, but also that growth is no longer accelerating. M3 growth slipped to 5.1% year-over-year in November from 5.3% in October, partly due to a sharp monthly fall in the stock of repurchase agreements. Momentum in narrow money, however, also dipped. M1 growth slowed to 11.2% year-over-year from 11.8% in October, mainly due to a modest fall in overnight deposit growth.

07 August. 2015 EZ GDP likely rose 0.4% quarteron- quarter in Q2 due to Ne t Trade (Publication Centre)

This is the final report before your Eurozone correspondent dials down for the summer, and heads for the beach. Advance Q2 GDP data next week is the key release while we are away, with the latest Bloomberg consensus--published July 20th--looking for a 0.4% increase quarter-on-quarter. Everything we look at suggests the consensus is right on this one, with risks tilted to the upside due to strong net exports in Germany.

1 July. 2015 Upside Risks to Core Inflation Remain, Despite Dip in June (Publication Centre)

Eurozone inflation eased slightly to 0.2% year-over- year in June, down from 0.3% in May, according to the advance data but we continue to think that the trend has turned up. A 5.1% fall in energy prices, accelerating from a 4.8% in May, was partly to blame for the fall in June. But the key driver was the sharp drop in services inflation to 1.0% from 1.3% in May, likely due to volatility in package holiday prices.

1 July. 2016 EZ Inflation Will Edge Higher, Regardless of Political Uncertainty (Publication Centre)

The Eurozone escaped deflation last month, and we doubt it will return in this business cycle. Inflation rose to 0.1% year-over-year in June, up from -0.1% in May; it was lifted chiefly by the gradual recovery in oil and other global commodity prices. Energy prices fell 6.5% in June, up from a 8.4% fall in May, and we think the recovery will accelerate in coming months.

10 March 2017 A Guide to ECB Speak: Getting Better, but We're not Done Yet (Publication Centre)

The ECB made no major policy changes yesterday. The central bank kept its refinancing and deposit rates unchanged at 0.00% and -0.4% respectively, and the scheduled reduction in the pace of QE to €60B per month was confirmed. The core part of the central bank's language retained its dovish bias.

10 Dec. 2015 Oil Prices to Play Tricks with German Net Exports Again in Q4? (Publication Centre)

German exports had a sluggish start to the fourth quarter, falling 1.2% month-to-month in October. The monthly drop pushed the year-over-year rate down to 3.0% from 4.2% in September, well down from the 5.6% third quarter average and extending the loss of momentum in recent months. Imports fell 3.6%, so net exports rose, but it's too early to make any useful estimates of net trade in the fourth quarter as a whole.

10 Nov. 2015 Trade Data Confirm Our Worst Fears for German Q3 GDP (Publication Centre)

German trade data yesterday added further evidence that net exports likely will wreak havoc with the Q3 GDP report this week. Exports rose 2.6% month-to-month in September, partially rebounding from a 5.2% plunge in August. But imports jumped 3.6%, further adding to the net trade drag on a quarterly basis. Our first chart shows our estimate of real net trade in Q3 as the worst since the collapse in 2008-to-09.

10 November. 2016 A Trump Victory Means Revisions to EU Leaders' Playbooks (Publication Centre)

EZ equity futures predictably fell out of bed as the news of the Trump victory gradually became clear overnight yesterday. The reaction was less violent than after the U.K. Brexit referendum, though, and Mr. Trump's balanced victory speech appears to have calmed nerves for now.

11 Jan. 2016 Did German GDP Growth Slow Significantly in Q4? (Publication Centre)

Industrial production and trade data on Friday ended last week on a downbeat note, amid otherwise solid economic reports. In Germany, industrial output fell 0.3% month-to-month in November, pushing the year-over-year rate down to 0.1% from a revised 0.4% in October. The details, however, were better than the headline. Production was hit by a 3.3% plunge in capital goods output, offsetting gains in all other key sectors, and net revisions added 0.3% to the October data.

10 Dec. 2015 Lower Oil Prices are Only Modestly Positive for the U.K. Economy (Publication Centre)

The U.K. is one of the smallest winners among advanced economies from the precipitous decline in oil prices. British oil production still fulfils about 55% of the U.K.'s demand, even though it has declined by two-thirds since its 1999 peak. Oil consumption therefore exceeds production by a much smaller margin in the U.K. than in most other European countries. As a result, the boost to the U.K. economy from the $10 decline in oil prices over the last month isn't much to write home about.

10 Dec. 2014 German Exports are Holding Up, But Greek Election Risks Loom (Publication Centre)

The German manufacturing sector is showing signs of stabilisation with industrial production rising 0.2% month-on-month in October, equivalent to 0.8% year-over- year. This is consistent with a decent retracement in production this quarter, but growth is still only barely above zero.

1 June. 2015 Modest Slowdown Likely Ahead for Consumers' Spending in Q2 (Publication Centre)

Last week's consumption releases were the first data from the real economy in the second quarter. In Germany, retail sales jumped 1.7% month-to-month in April, equivalent to a 1.0% rise year-over-year, an impressive start to the quarter. But our first chart shows that this still points to a moderate slowdown in Q2, consistent with mean-reversion following rapid gains in Q4 and Q1.

1 March 2017 Don't Fret over Rising TARGET2 Imbalances in the Eurosystem (Publication Centre)

The Eurozone's TARGET2 system is a clearing mechanism for the real-time settling of large payments between European financial intermediaries. It's an important piece of financial architecture, ensuring the smooth flow of transactions. But we struggle to see these flows containing much information for the economy.

1 Oct. 2015 Deflation Will Likely Bully the ECB to Expand QE this Month (Publication Centre)

Economic survey data have been upbeat recently, but key Eurozone data releases yesterday suggest the ECB will be under pressure to increase monetary policy stimulus further this month. The advance inflation estimate showed that the euro area slipped back into deflation in September, as inflation fell to -0.1% year-over- year, from +0.1% in August. The fall was mainly due to a 8.9% collapse in energy prices, though, and we are very confident the relapse is temporary.

1 Sept. 2016 Soft EZ Inflation Data Pave the Way for QE Extension Next Week (Publication Centre)

Yesterday's EZ CPI report points to a dovish backdrop for next week's ECB meeting. Advance data show that inflation was unchanged at 0.2% year-overyear in August, lower than the consensus, 0.3%. The headline was held back by a dip in the core rate to 0.8%, from 0.9% in July; this offset a lower deflationary drag from energy prices.

14 Jan. 2016 A Downbeat Outlook for Q4 GDP Data in the Eurozone (Publication Centre)

EZ survey data were solid in the fourth quarter, pointing to robust GDP growth, but numbers from the real economy have so far not lived up to the rosy expectations. Data yesterday showed that industrial production fell 0.7% month-to-month in November, pushing the year-over-year rate down to 1.1% from a revised 2.0% in October. Italian data today likely will force marginal revisions to the headline next month, but they are unlikely to change the big picture.

13 May. 2016 EZ Manufacturing Jumped in Q1, but Likely Will Nosedive in Q2 (Publication Centre)

Activity in the Eurozone industrial sector cooled at the end of the first quarter. Manufacturing production declined 0.8% month-to-month in March, pushing the year-over-year rate down to 0.2% from a revised 1.0% in February. Over Q1 as a whole, though, the story was positive.

19 October 2017 Q3's Slowdown in EZ Construction is no Threat, the Trend is Firm (Publication Centre)

The upturn in the Eurozone construction sector likely paused in Q3. Yesterday's August report showed that output fell 0.2% month-to-month, pushing the year-over-year rate down to +1.6%, from a revised +2.8% in July.

19 July 2017 Credit Conditions in the Eurozone Continue to Support the Recovery (Publication Centre)

Yesterday's ECB bank lending survey suggests that credit conditions remain favourable for the EZ economy. Credit standards eased slightly for business and mortgage lending and were unchanged for consumer credit.

2 Feb. 2015 Will core inflation push the ECB to do even more QE this year? (Publication Centre)

The ECB moved ahead of the curve this month with its QE program of €60B per month, starting in March. But still-abysmal inflation data will prompt journalists to ask Mr. Draghi, at the next ECB meeting, about the conditions under which the central bank plans to do more.

2 June 2017 PMIs Signal a Strong Q2 for the EZ Manufacturing Sector (Publication Centre)

Yesterday's final May manufacturing PMIs confirmed that the EZ industrial sector is in fine form. The PMI for the euro area was unchanged at a cyclical high of 57.0 in May, in line with the initial estimate.

2 Mar. 2015 Eurozone Deflation Pressures Eased Slightly in February (Publication Centre)

Advance inflation data in the Eurozone will likely surprise to the upside today. The consensus forecast expects inflation to rise slightly to -0.5% year-over-year in February from -0.6% in January, but we expect a much bigger jump, to -0.2% year-over-year.

14 July. 2016 EZ GDP Growth all but Stalled in Q2, as Domestic Demand Slowed (Publication Centre)

Data yesterday showed that industrial production in the Eurozone stumbled in May. Production fell 1.2% month-to-month, driven by weakness in all major economies and falling output in all sub-industries. The poor headline follows an upwardly revised 1.4% jump in April, which means that production rose marginally in the first two months of the second quarter.

19 December 2016 How Much Support can Tourism Provide to the Economy? (Publication Centre)

The media abounds with anecdotal evidence of a pickup in domestic and inbound tourism following sterling's sharp depreciation, but the reality is that the weaker pound has not had a tangible positive impact yet.

18 May 2017 The Revival in Eurozone Construction is Real. Don't Miss It (Publication Centre)

The Eurozone construction sector took a step back at the end of Q1, but only temporarily. Construction output fell 1.1% month-to-month in March, after a revised 5.5% jump in February. The year-over-year rate slipped to +3.6%, from a two-year high of 5.5% in February.

18 Feb. 2016 Construction Investment Turned Up in Q4 - More Upside Ahead (Publication Centre)

Fourth quarter construction activity in the Eurozone was much better than in Q3, despite a dip in December. Output fell 0.6% month-to-month in the final month of the year, pushing the year-over-year rate down to -0.4% from a revised 0.3% in November.

18 November. 2016 New Car Sales Growth is Slowing in the Eurozone (Publication Centre)

Growth in EZ car sales slowed further at the beginning of Q4. New registrations in the euro area fell 1.2% year-over-year in October, down from a 7.2% increase in September.

18 October 2017 Core Inflation in the EZ Dipped in September, but the Trend is Rising (Publication Centre)

Yesterday's final CPI report in the Eurozone confirmed that headline inflation was unchanged at 1.5% in September.

19 Apr. Are the Treasury's Brexit Calculations Plausible? (Publication Centre)

The Treasury waded in to the Brexit debate yesterday with a 200-page report concluding that U.K. GDP would be 6.2% lower in 2030 than otherwise if Britain left the E.U. and entered into a bilateral trade deal similar to the one recently agreed by Canada. All long-term economic projections should come with health warnings, and the Treasury's precise numbers should be taken with a pinch of salt.

2 March 2017 Is it all over for Mr. Fillon? (Publication Centre)

The French presidential election campaign remains chaotic. Republican candidate François Fillon had to defend himself again yesterday as investigations into his potential misuse of public funds deepened. Mr. Fillon and his wife have now been summoned to court to explain themselves. Markets expected Mr. Fillon to resign as the Republican front-runner. Instead, he used his unscheduled media address to defiantly declare that he is staying in the race.

2 May 2017 Don't get too Excited by the April Jump in EZ Core Inflation (Publication Centre)

Eurozone inflation pressures snapped back in April. Friday's advance report showed that headline inflation rose to 1.9% year-over-year, from 1.5% in March, lifted by a jump in the cor e rate to 1.2% from 0.7% the month before.

20 September 2017 Construction in the Eurozone Will Continue to Lift GDP Growth in Q3 (Publication Centre)

Construction in the Eurozone had a decent start in the third quarter. Output rose 0.5% month-to- month in July, pushing the year-over-year rate down to 1.9% from 2.8% in June.

20 September 2016 The Recycling of the EZ's Current Account Surplus Continues (Publication Centre)

The external surplus in the EZ economy slipped in July. The seasonally-adjusted current account surplus dropped to €21.0B, from a revised €29.5B in June, hit by an increase in the current transfers deficit, and a falling trade surplus. The recent increase in the transfers deficit partly is due to the migrant deal with Turkey, and we expect it to remain elevated.

21 August 2017 Construction is Propelling the Eurozone Economy in 2017 (Publication Centre)

The construction sector remains a stand-out performer in the Eurozone economy, despite stumbling at the end of Q2.

21 December 2016 Is FDI Now the Main Driver of Eurozone Capital Outflows? (Publication Centre)

The Eurozone's external surplus is on track for a record-breaking year in 2016. Data yesterday showed that the current account surplus rose to €28.4B in October, from €27.7B in September. The trade surplus in goods fell, but this drag was offset by a higher services and income surplus, and a lower current transfers deficit.

21 March 2017 Real Wage Growth in the Eurozone is Being Hit by Higher Inflation (Publication Centre)

One of the key characteristics of this euro area business cycle has been near-zero inflation due to structurally weak domestic demand and depressed prices for globally traded goods and commodities. This has supported real incomes, despite sluggish nominal wage growth.

20 February 2017 Is the Eurozone Construction Sector is Back in Business? (Publication Centre)

Construction in the euro area stumbled at the end of last year. Output fell 0.2% month-to-month in December, but the year-over-year rose to 2.4%, from a revised 1.6% in November.

20 Feb. 2015 Greek deal in sight, despite German rejection (Publication Centre)

Greek Finance Minister Yanis Varoufakis' letter requesting a six-month loan extension has been interpreted widely as Syriza throwing in the towel. But we don't see this way. The best possible outcome for Greece is to be able to participate in the ECB's sovereign QE program, and to negotiate a new deal with the Troika; the request for an extension could very well achieve both.

2 Nov. 2015 Inflation to Rise Rapidly, but It won't Stop the ECB in December (Publication Centre)

The Eurozone limped out of headline deflation in October, with inflation rising to 0.0% from -0.1% in September, helped by higher core and food inflation. Energy prices fell 8.7% year-over-year, up trivially after a 8.9% drop in September, but base effects will push up the year-over-rate significantly in coming months. Core inflation edged higher to 1.0% from 0.9% in September, due to 0.1 percentage point increases in both non-energy goods and services inflation.

2 September. 2016 German Manufacturing is Doing Well, but Others are Struggling (Publication Centre)

Yesterday's final EZ PMIs imply that growth in manufacturing slowed marginally in August. The PMI fell to 51.7, from 52.0 in July, trivially below the initial estimate, 51.8. Output and new orders growth declined, pushing down the pace of new job growth. But we think the hard data for industrial production in Q3 as a whole will be decent.

20 April 2017 Don't Miss Today's Soaring Eurozone Construction Data (Publication Centre)

Markets tend to ignore Eurozone construction data, but we suspect today's report will be an exception to that rule. Our first chart shows that we're forecasting a 8.5% month-to-month leap in February EZ construction output, and we also expect an upward revision to January's numbers.

20 December 2016 The IFO Points to a Strong Finish for the German Economy to 2016 (Publication Centre)

Yesterday's IFO survey capped a fine Q4 for German business survey data. The headline business climate index climbed to a 34-month high of 111.0 in December, from 110.4 in November. An increase in the "current assessment" index was the main driver of the gain, while the expectations index rose only trivially.

18 August 2017 Higher Core Inflation in the Eurozone Should be a No Brainer (Publication Centre)

Inflation data are known to defy economists' forecasts, but it should in principle b e straightforward to predict the cyclical path of EZ core inflation. It is the longest lagging indicator in the economy, and leading indicators currently signal that core inflation pressures are rising.

19 Feb. 2016 The Main EZ Economies Will Try to Accommodate Mr. Cameron (Publication Centre)

Talks between the EU and the U.K. Prime Minister David Cameron are expected to culminate with a deal today, but we doubt this week's summit will be the final word. A detailed re-negotiation of the U.K.'s relationship with the EU is the last thing the large continental economies need at the moment.

15 September 2016 A Critical 12 Months Ahead for the EU (Publication Centre)

Yesterday's State of the Union address by EC president Jean-Claude Juncker commanded more attention than usual, but contained little news on the key talking points for investors.

15 May 2017 The Jump in Q1 German GDP Growth Likely Overstates the Trend (Publication Centre)

The German economy fired on all cylinders at the beginning of the year. Advance data on Friday showed that real GDP rose 0.6% quarter-on-quarter, accelerating from a 0.4% increase in Q4.

15 September 2017 Growth in EZ Car Sales Rose in August, but the Trend Has Slowed (Publication Centre)

Momentum in new EZ car sales improved slightly in the middle of Q3. New registrations in the euro area rose 6.8% year-over-year in August, accelerating marginally from a 5.3% increase in July.

16 December 2016 The Eurozone Manufacturing Sector is Picking up Momentum (Publication Centre)

Yesterday's euro area PMI data continue to tell a story of a firm business cycle upturn. The composite PMI was unchanged at 53.9 in December; an increase in the manufacturing index offset a decline in the services PMI.

16 June. 2016 EZ Inflation is in the Twilight Zone, But it Will Get Lighter Soon (Publication Centre)

Final May CPI data in the Eurozone today likely will confirm that inflation pressures edged marginally higher last month. We think inflation increased to -0.1% year-over-year, from -0.2% in April, as a result of slightly higher services inflation, and a reduced drag from falling energy prices.

15 March 2017 Headline Inflation in Germany will Ease in the Next Few Months (Publication Centre)

The German inflation rate soared at the start of 2017, but it likely will fall in the next few months. Final February data yesterday showed that inflation rose to 2.2% in February, from 1.9% in January, consistent with the initial estimate. Since December, headline inflation in Germany, and in the EZ as a whole, has been lifted by two factors. Base effects from the 2016 crash in oil prices have pushed energy inflation higher, and a supply shock in fresh produce--due to heavy snowfall in southern Europe--has lifted food inflation.

18 April 2017 The Weather is Playing Tricks with EZ Industrial Production Data (Publication Centre)

As warned--see our Monitor April 7--economic data in the Eurozone disappointed while we were away. Industrial production, ex-construction, in the euro area slipped 0.3% month-to-month in February, and the January month-to-month gain was revised down by 0.6 percentage point to +0.3%.

14 September 2017 Robust Manufacturing and Rising Employment in the Eurozone (Publication Centre)

Manufacturing in the Eurozone had a slow start to the third quarter. Industrial production rose only 0.1% month-to-month in July, though the year-over-year rate was pushed up to 3.2% from a revised 2.8% in June.

14 June 2017 Fact-checking the ECB on Low Wages and Employment in the EZ (Publication Centre)

Today's employment report in the euro area should extend the run of positive labour market data. We think employment rose 1.4% year-over-year in Q1, accelerating marginally from a 1.2% increase in Q4.

15 August 2017 The German Economy Fired on All Cylinders in the First Half of 2017 (Publication Centre)

Today's advance Q2 GDP report in Germany will add evidence that the EZ economy performed strongly in the first half of 2017. We can be pretty sure that the headline will be robust. The German statistical office reports a confidential number to Eurostat for the first estimate of EZ GDP--two weeks ahead of today's data--which was a solid 0.6%.

15 August. 2016 July Inflation Figures to Show Adverse Brexit Impact (Publication Centre)

July's consumer price figures, due tomorrow, likely will bring early evidence that sterling's Brexit-driven depreciation already is pushing up inflation. We think that CPI inflation picked up to 0.6% in July from 0.5% in June, exceeding the consensus forecast for an unchanged reading. Experience of past depreciations suggests that July's figures likely won't be the last time the consensus is surprised by the speed of the rise in inflation.

15 February 2017 The EZ Economy is Resilient, but Fell Short of Expectations in Q4 (Publication Centre)

The Eurozone economy was resilient at the end of last year, but yesterday's reports indicated that growth was less buoyant than markets expected. Real GDP in the euro area rose 0.4% quarter-on-quarter in Q4, the same pace as in Q3, but slightly less than the initial estimate 0.5%.

16 May. 2016 Eurozone GDP Growth is Not Accelerating, Despite Strong Q1 (Publication Centre)

The second round of EZ GDP data on Friday confirmed the resilience of cyclical upturn. Real GDP in the euro area rose 0.5% quarter-on-quarter in Q1, up from 0.3% in Q4, and the fastest pace since the first quarter of last year. But the headline was slightly lower than the initial estimate, 0.6%, and consistent with our forecast before Friday's data.

15 July. 2015 Q2 GDP Tracking Models are Too Pessimistic, Focus on Net Trade (Publication Centre)

Yesterday's industrial production report was grim reading, with volatility in Greece and the Netherlands, as well as revisions, throwing off our own, and the market's, forecasts. Output fell 0.4% month-to-month in May, well below the consensus and our expectation for a 0.2% rise, pushing the year-over-year rate higher to 1.6%, from a revised 0.9% in April.

17 July 2017 Eurozone Consumers' Demand for New Cars is Slowing (Publication Centre)

Consumers' demand for cars slowed in the Eurozone at the end of the second quarter. New car registrations in the euro area rose 3.0% year-over-year in June, slowing dramatically from a 10.3% rise in May.

17 May. 2016 The EZ Trade Surplus is Stalling, but Net Exports will Lift Q2 GDP (Publication Centre)

Data today likely will show that the seasonally adjusted trade surplus in the Eurozone jumped to €23.0B in March, from €20.2B in February. The headline was boosted, though, by sharp month-to-month falls in German and French imports, partly due to the early Easter.

17 November. 2016 Will Europe Have to Increase Spending on Defence Soon? (Publication Centre)

The winds of global politics are changing, and the major Eurozone countries could be forced to take heed. Donald Trump's foreign policy position remains highly uncertain. Our Chief Economist, Ian Shepherdson, expects the U.S. to increase defence spending next year; see the U.S. Monitor of October 20.

16 Nov. 2015 Slightly Disappointing Q3 GDP Data Likely Enough for ECB Doves (Publication Centre)

Eurozone GDP data on Friday were better than we expected, but were still soft compared to upbeat market expectations. Real GDP rose 0.3% quarter-onquarter in the third quarter, down slightly from 0.4% in Q2, and lower than the consensus forecast for another 0.4% gain. These data are not a blank check for ECB doves, but they probably are enough to push through further easing in December. This looks odd given growth in the last four quarters of an annualised 1.6%--the strongest since 2011--and probably slightly above the long-run growth rate.

17 Dec. 2015 Core Inflation Lags the Economy, and Will Increase Next Year (Publication Centre)

Eurozone inflation continued its slow rebound last month. Final CPI data showed that inflation rose marginally to 0.2% in November from 0.1% in October, a bit higher than the initial estimate of 0.1%. The upward revision was due to marginally higher services inflation at 1.2%, compared to the initial 1.1% estimate. Non-energy goods inflation eased slightly to 0.5% from 0.6% last month. We have received push-back on our call for higher inflation next year, but core inflation is a lagging indicator, and it can rise independently of the story told by GDP or survey data. Core inflation tends to peak during recessions, and only starts falling later as prices are adjusted downwards, with a lag, to the cyclical downturn.

17 March 2017 Embattled Pro-EU Parties Secure Decisive Victory in the Netherlands (Publication Centre)

Centrist politicians and markets breathed a sigh of relief yesterday as the results of the Dutch parliamentary elections rolled in. The incumbent conservatives, led by PM Mark Rutte, lost ground but emerged as parliament's biggest party with 33 seats out of the total 150.

16 November. 2016 Strong Growth Outside Germany Saved the Day for the EZ In Q3 (Publication Centre)

Yesterday's GDP reports confirmed that growth was stable at 0.3% quarter-on-quarter in the Eurozone, leaving the year-over-year rate unchanged at 1.5%. Rebounding growth outside Germany, which has been a main driver of EZ GDP growth in this cycle, was the key story.

16 Oct. 2015 Bund Yields are Too Low, but no Serious Increase Until Next Year (Publication Centre)

Bond markets in the euro area have been a calm sea recently relative to the turmoil in equities, credit and commodities. Following the initial surge in yields at the end of second quarter, 10-year benchmark rates have meandered in a tight range, recently settling towards the lower end, at 0.5%. Our outlook for the economy and inflation tells us this is to o low, even allowing for the impact of QE.

16 Sept. 2015 Will Downbeat Sentiment Push the ECB into More QE this Year? (Publication Centre)

Economic data are telling a story of a strengthening recovery, but downbeat investor sentiment points to a more difficult environment. The headline ZEW expectations index fell to a ten-month low of 12.1 in September, from 25.0 in August. This takes sentiment back to levels not seen before QE was announced, highlighting the increasing worry that deflation risks and low growth in China will derail the recovery. We don't agree, but we can't be sure the ECB thinks the same, and risks of additional stimulus this year have increased.

17 August 2017 Strong and Broad-based Growth in the Eurozone (Publication Centre)

The cyclical upturn in the euro area's economy is going from strength to strength. Yesterday's second Q2 GDP estimate confirmed growth at 0.6% quarter- on-quarter, marginally stronger than the 0.5% rise in the first quarter.

16 September 2016 Evidence of a Slowdown in EZ New Car Sales is Mounting (Publication Centre)

Yesterday's data on EZ car sales added to the evidence that consumers' spending is slowing. We now reckon sales will rise by 1% quarter-on-quarter in the third quarter, after gains averaging 2.6% in the first half of the year.

15 Dec. 2015 Solid Industrial Production in the Eurozone Given Global Weakness (Publication Centre)

Industrial production in Eurozone had a decent start to the fourth quarter. Output ex-construction rose 0.6% month-to-month in October, pushing the year-over-year rate up to 1.9% from a revised 1.3% in September. Production was lifted by gains in the major economies, and surging output in the Netherlands, Portugal and Lithuania. Across sectors, increases in production of capital and consumer goods were the main drivers, but energy output also helped, due to a cold spell lifting demand and production in France.

14 June. 2016 Eurozone Investment is Improving, But Growth will Slow in Q2 (Publication Centre)

Data today likely will show that manufacturing in the Eurozone was off to a strong start to the second quarter. Advance country data suggest that industrial production jumped 1.1% month-to-month in April, pushing the year-over-year rate up to 1.9% from 0.1% in March. The rise in output was driven mainly by Germany and France, but decent month-to-month gains in Ireland, Portugal and Greece also helped.

17 October. 2016 Eurozone Car Registrations Slowed Significantly in Q3 (Publication Centre)

Growth in new EZ car sales remained brisk last month, growth slowed in Q3. New registrations rose 9.4% year-over-year in September, marginally lower than the 9.6% increase in August. Growth in France fell most, sliding to 2.5% from 6.7% in August, but sales in Germany picked up to 9.4%, from 8.3%.

19 October. 2016 EZ Construction Fell in August, but Q3 as a Whole Was Solid (Publication Centre)

We think the EZ construction industry stuttered in August, following a strong start to Q3. Advance data from Germany, France and Spain suggest that output fell 1.4% month-to-month, pushing the year-over- year rate down to 1.8%, from a revised 3.1% in July.

12 Jan. 2015 More Misery for Industrial Production in the Eurozone (Publication Centre)

Manufacturing data for the euro area's major economies point to renewed downside risks for GDP growth, despite the likely tailwind to consumption from low oil prices. November industrial production fell 0.1% and 0.3% month-to-month in Germany and France respectively, indicating that the manufacturing sector remains under pressure.

2 Dec. 2015 Plunging German Unemployment Will Challenge the ECB Next Year (Publication Centre)

The labour market in the Eurozone continues slowly to improve. The unemployment rate fell to 10.7% in October from 10.8% in September, reaching its lowest level since 2013. The divergence in rates, however, between the major economies remains significant. Unemployment in France, Italy and Spain is still above 10%, but the advance German number continued their record-breaking form in November.

*March 2017 - Eurozone Economic Chartbook* (Publication Centre)

Dutch Pro-EU Centrists Carry The Day...But We Can't Assume The Same Will Happen In France

12 May 2017 Will Mr. Macron Unleash Animal Spirits in Eurozone Equities? (Publication Centre)

Emmanuel Macron's victory in France has lifted investors' hopes that the good times in the Eurozone economy and equity markets are here to stay. On the face of it, we share markets' optimism. Mr. Macron and his opposite number in Germany--our base case is that Ms. Merkel will remain Chancellor--will form a strong pro-EU axis in the core of the Eurozone.

31 January 2017 Focus on Strong EZ Q4 GDP Data On a Busy Day in the Eurozone (Publication Centre)

Today will be an incredibly busy day for EZ investors with no fewer than eight major economic reports. Overall, we think the data will tell a story of a stable business cycle upturn and rising inflation. Markets will focus on advance Q4 GDP data in France and in the euro area as a whole. Our mo dels, and survey data, indicate that the EZ economy strengthened at the end of 2016, and we expect the headline data to beat the consensus.

30 Apr. 2015 Real M1 Growth Points to Strengthening Cyclical Recovery (Publication Centre)

Survey and money supply data remain consistent with an improving Eurozone economy. Yesterday's EC sentiment index fell to 103.7 in April, from 103.9 in March, due to weakness in France and Germany, but it is consistent with GDP growth of about 0.4% quarter-on-quarter in Q2.

8 Apr. 2016 Net Exports Likely Weighed on French GDP Growth Again in Q1 (Publication Centre)

External demand in France probably weakened in the first quarter. The trade deficit widened sharply to €5.2B in February, from a revised €3.9B in January, pushing the current account deficit to an 18-month high. It is tempting to blame the stronger euro, but that wasn't the whole story.

2 Oct. 2015 Eurozone Manufacturing is Weak, and Will Likely Deteriorate in Q4 (Publication Centre)

Final PMI data in the Eurozone yesterday confirmed that manufacturing remains under pressure from global headwinds. The manufacturing PMI in the zone fell to 52.0 in September from 52.3 in August, in line with the initial estimate. A rare upside surprise in France was not enough to offset weakness in the other major economies, and the trend in private investment growth likely will stay subdued this year.

29 July. 2016 Brace for Downside Surprise in Today's Advance Q2 EZ GDP Data (Publication Centre)

Today's Eurozone data schedule is very hectic, but attention likely will focus on advance Q2 GDP data. France, Austria and Spain will report advance data separately ahead of the EZ aggregate estimate, which is released 11.00 CET. This report will include a confidential number from Germany.

25 July. 2016 EZ Sentiment Looks Resilient in the Face of Brexit...For Now (Publication Centre)

Friday's July PMI reports presented investors with a rather confusing story. The composite PMI in the Eurozone fell trivially to 52.9 in July, from 53.1 in June, despite rising PMIs in Germany and France. The final data on 3 August will give the full story, but Markit noted that private sector growth outside the core slowed to its weakest pace since December 2014.

25 April 2017 Mr. Macron Hasn't Won Yet, Despite what Markets are Saying (Publication Centre)

Markets are trading like Emmanuel Macron has already moved into the Élysée Palace. Eurozone equities soared at the open yesterday, lead by the French banks, 10-year yields in France plunged, and the euro jumped. This makes sense given the signal from the polls. They were correct in their prediction of Mr. Macron's victory on Sunday, and they have been consistently forecasting that he will comfortably beat Mrs. Le Pen in the runoff.

Claus Vistesen

Claus Vistesen has several years' experience in the independent macro research space, as a freelancer, consultant and, latterly, as Head of Research of Variant Perception, Inc. He holds Master's degrees in economics and finance from the Copenhagen Business School and the University of Hull.

CNBC - These are the stocks that will outperform if Macron wins (Media Centre)

Chief Eurozone Economist Claus Vistesen discussing the potential impact of the French Election Results on the Eurozone

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