- The BTP-Bund spread has held broadly steady at around 100bp so far this year.
- We still see scope for further narrowing in 2025, to 70bp, implying BTPs trading inside OATs in France.
- Risks are broadly balanced, with German stimulus a downside and further trade uncertainty an upside.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EZ compensation per employee growth slowed in Q1, in line with easing negotiated wage growth.
- Other measures out in the coming days are likely to also show slower wage growth in Q1.
- We suspect wage growth will now plateau in the 2.5%-to-3.0% range, remaining historically high.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Fastest growth in eleven quarters thanks to tariff-front-running-led jump in Irish GDP.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: PMI still paints a picture of underlying weakness in construction.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: A rough start to Q2; little sign of tariff front running supporting industry.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Below zero; brace for a 50bp cut from the SNB.
Melanie Debono (Senior Eurozone Economist)Global
In one line: Below zero; brace for a 50bp cut from the SNB.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The 0.3% increase in Italian GDP in Q1 was driven by both domestic demand and net trade.
- In Switzerland, it was just domestic demand that pushed GDP up by a whopping 0.8% on the quarter.
- Growth is now slowing in both economies, though risks to our H2 calls are likely to the upside.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Switzerland was on a tear before the tariff shock; surveys point to slower growth in Q2.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Still consistent with slight slowdown in growth in Q2.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Stronger than the increase in goods spending in France.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Early evidence on Q2 points to upside risk to our forecasts for Spain and Italy…
- ...This reinforces our view that both will outperform France and Germany again.
- Southern Europe’s outperformance in H2 will be even bigger than we expect if US tariff hikes are cut.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The ECB’s measure of consumer inflation expectations in one year’s time rose again in April.
- Other measures are stable, while various data point to general economic weakness…
- ...So, we reiterate our call for the ECB to cut twice more this year, in June and July.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: EZ inflation expectations jumped on the eve of the tariff shock.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Downtrend continues as unemployment fears near Covid-time peak.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Weak French inflation data put ECB doves in the driving seat ahead of next week’s May EZ HICP.
- German GfK consumer confidence and the ESI were robust midway through Q2; what tariff shock?
- EZ wage growth slowed sharply at the start of 2025; we doubt it will fall much further.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Services downturn clouding manufacturing’s recovery.
Melanie Debono (Senior Eurozone Economist)Global
In one line: Services downturn clouding manufacturing’s recovery.
Melanie Debono (Senior Eurozone Economist)Eurozone
- A second straight fall in the EZ composite PMI in May points to downside risk for GDP in Q2.
- The INSEE and PMI suggest services are weakening, despite tight labour markets and little hit from tariffs.
- Inflation pressures are unwinding, so we are maintaining our call for further ECB easing.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: A new record high, thanks to tariff front-running by US firms.
Melanie Debono (Senior Eurozone Economist)Eurozone
