In one line: Stuck in the mud, but also underestimating growth.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The EZ PMI held steady in June, and averaged broadly the same in Q2 as in Q1…
- ...But EZ GDP will not repeat its 0.6% growth in Q1; we look for GDP to stagnate this quarter.
- Demand is recovering but, once tariff front-running ends, will likely correct; price pressures are easing.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Recovery from March and April’s drops has ended already
Melanie Debono (Senior Eurozone Economist)Eurozone
- A firm commitment from Germany to spend 5% of GDP on defence would be a rug-pull for Bunds.
- Rising investor sentiment and calmness on the trade front point to decent June survey data this week.
- Early-Q2 data indicate upside risk to GDP growth in France, but we still look for just 0.1% q/q.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: We were wrong; SNB opts for another small cut.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: A September cut is still on, but the ECB will end up regretting it.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The SNB shied away from a jumbo cut, opting for a 25bp reduction for its sixth straight policy rate cut.
- The policy rate is now at zero; we doubt the SNB can avoid negative rates for long…
- ...We now expect another 25bp cut in September but think the SNB will be back hiking next year.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The EZ current account surplus crashed in April, pulled lower by net trade in goods and services.
- Portfolio in- and outflows in the Eurozone remain strong, but both are now likely peaking.
- Final EZ HICP data leave intact yesterday’s forecast update, save for a small revision to inflation in 2025.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Investor sentiment continues to rise.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Inflation in the EZ will settle at 2.0% over the summer, with the core also hitting 2% by August…
- …This should be enough for a final 25bp ECB rate cut in September, to 1.75%, setting up hikes next year.
- We’re lowering our inflation forecasts for 2026, but we’re still well above the ECB’s June projections.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Tariff-front running boost to industry and trade fading in early Q2.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Energy and services pull headline down.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Stable, in line with advance release.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The SNB is sure to ease this Thursday, and more analysts have joined us in expecting a sub-zero rate.
- Strength in EURUSD is supported by leading indicators, but the recent rally will fade soon.
- Disinflation in core goods from EURUSD at 1.15 is trivial, despite the ECB’s stringent forecast rules.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ industrial production fell in April, as goods exports retreated.
- The increase in tariff rates in April hurt exports, but the main hit came from fading tariff front-running.
- The risks to our calls for net trade and GDP in Q2 are to the downside.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Post-meeting comments from ECB Council members are mixed, but do not rule out another cut.
- Markets, like us, look for one more rate cut—in September—but it will be a close call.
- The ECB’s wage tracker eased in Q1, in line with other measures; wage growth will remain high.
Melanie Debono (Senior Eurozone Economist)Eurozone
