In one line: Better than expected but still a gloomy start to the year.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Inflation in the EZ has peaked, but core inflation above 2% will be a challenge for the ECB in 2022.
- Watch services inflation closely after the decline in January; it could hit 3%-plus in Q3.
- We see three conditions for the ECB to lift its deposit rate by 30bp in H1 2023.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: All set for a big drop in Q1, but the core will rebound strongly in Q2 and Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Industrial production should rebound soon; services are softening.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The EZ's trade surplus in goods is a lot perkier if we choose to believe the ECB's current account data.
- Net services exports likely jumped in Q4, but this means intellectual property investment plunged.
- EZ portfolio outflows are now slowing, belatedly; inflows signal trouble for equities in 2022.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: A decent Q4 for construction, despite downward revisions.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EZ auto sales fell in 2021, again, though we suspect they rebounded in Q4, after a terrible Q3.
- Investment by EZ auto-makers has fallen in line with weakening production, due to supply-side woes…
- …But employment has rebounded strongly, pointing to underlying confidence in the future.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Are analysts too positive on Germany? We think so.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: No recovery, but car sales likely rebounded slightly in Q4.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Growth in EZ house prices accelerated at a record pace in Q3; at this rate, it will hit 10% soon.
- With most tailwinds still around this year, we expect further house price growth increases.
- This will put a floor on any slowdown in spending growth, but will also raise alarm bells at the ECB.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We still think net trade supported GDP growth in Q4, despite the nominal goods trade deficit.
- Leading indicators suggest net exports won't pro- vide much of a boost to GDP growth in 2022.
- Full-year German GDP data for 2021 suggest growth was slower than previously thought in Q4.
Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone
In one line: A surplus no more, but net trade still probably provided a little boost to GDP growth in Q4.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Q4 was nothing to write home about, Q1 likely will be worse.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Core inflation was still rising by the end of 2021, but it will fall in January.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Decent hard data lead us to raise our Q4 forecast for Italy, as for Spain, but GDP growth has slowed.
- Italian GDP likely rose by 0.8% in Q4; Q1's outcome will be little more than zero, as virus restrictions bite.
- An early election in Italy would put upward pressure on BTP yields, but it would prove short-lived.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: More evidence that industry in the periphery continues to outperform that in the core.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Valuations point to subpar returns for euro area large-cap equities in the post-pandemic expansion.
- Equities in Spain and Italy are priced for average returns of around 10% in the next five years…
- …The corresponding numbers for German and French equities are just 5% and 2½%, respectively.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Distorted by Irish data; industry was probably a small drag on GDP growth in Q4.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Stronger-than-expected industry and retail data lead us to revise up our Q4 GDP forecast for Spain.
- We now think GDP grew by 1.5% q/q, much quicker than in the other major EZ economies.
- Solid Q4 growth increases the carry-over for 2022 growth forecasts, but Spain is still a laggard.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Industry supported growth last quarter.
Melanie Debono (Senior Eurozone Economist)Eurozone
