EZ ECONOMY SHOWS RESILIENCE IN THE FACE OF TARIFF THREATS…
- …SUB-2% SUMMER INFLATION WILL GET A SEPTEMBER RATE CUT OVER THE LINE
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Temporary slowdown in M1, we hope, resilient IFO and ISTAT surveys.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Unemployment fears fall slightly, but saving intentions rise further.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ money supply growth slowed in June, but the trend is solid and the credit impulse improved again.
- IFO expectations in Germany are rising across almost all sectors; is a cyclical upturn underway?
- French consumer confidence rose marginally in July, but Italy’s IESI was held back by services weakness.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Still on track for a final rate cut in September.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Nothing in here to suggest an ECB rate cut today.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: The German economy was barely growing in July.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Not much to see; near-term downside risks persist.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Income expectations are firming, but so are saving intentions.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The ECB stood pat, as expected; Ms. Lagarde turned hawkish during the press conference.
- We still think inflation below 2% over the summer will be enough for a 25bp rate cut in September.
- EZ PMIs for July point to resilience, but also continued fragile growth in the core economies.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Supply and demand analysis on BTPs would suggest a lower yield over the coming years…
- ...But more accurate spread analysis implies it will fall only slightly from current levels out to 2027.
- We expect the BTP-Bund spread to fall to 50bp by year-end and to 30bp by Q1 next year.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Lending standards still tight while demand for loans is rising.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Lending standards for firms were left unchanged in Q2, so they remain tight…
- ...Meanwhile, banks made it harder for households to borrow money, and rejection rates jumped…
- ...Q2’s bank lending survey is one for ECB doves, but only slightly; it won’t prompt a cut this week.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The ECB will keep its powder dry this week, waiting for the September forecasts to decide its next move.
- The range of forecasts for the ECB’s policy rate next year has widened significantly.
We still see the deposit rate falling below 2% this year, setting up hikes by the end of 2026.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Down, but big revision to the April data suggests Q2 was good.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Still on track to hand the ECB a 25bp rate cut in September.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We’re lowering our Q2 GDP growth forecast for France, but lifting it for Spain and Italy…
- …We now think EZ GDP rose by 0.2% quarter-to-quarter, with the risk tilted to the upside.
- Near-term risks are balanced as we prepare to be marked-to-market on our H2 slowdown call.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Headline and core inflation remain on track to support a 25bp ECB rate cut by September.
- The key difference between our and the ECB’s latest forecast is that we see inflation rebounding in Q4.
- The outlook for the ECB is bi-modal; the Bank will stay at 2.0% in 2026 if it holds fire in September.
Claus Vistesen (Chief Eurozone Economist)Eurozone
