In one line: The gift that keeps on giving to ECB doves.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Downtrend continues as unemployment fears near Covid-time peak.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Boosted by investment and consumption.
Claus Vistesen (Chief 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
- A sustained 50% tariff on EU exports to the US would send the EZ economy into recession.
- The route to an EU-US trade deal is relatively easy, but the EU will respond in kind to US tariff threats.
- The German economy was in rude health in Q1, but trade uncertainty will now weigh on growth.
Claus Vistesen (Chief Eurozone Economist)Eurozone
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
- The EC’s new economic forecasts see a ‘Goldilocks’ boom next year; the economy won’t be that lucky.
- We see stronger growth in Germany than the EC next year, but weaker in France and Spain.
- The EC’s forecast for EZ inflation in 2026, at 1.7%, rests on too dovish energy and core goods forecasts.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ construction output is slowing after a strong finish to 2024, but leading indicators are improving.
- The EZ current account surplus soared in March, reflecting tariff front-running in goods.
- Portfolio outflows fell sharply in March, and likely crashed outright in April.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Headed for 2% over the summer; enough for two more ECB cuts?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ headline inflation is about to fall to 2%, helping to get further ECB easing over the line, but how much?
- Survey data continue to signal significant upside risk to food inflation; energy inflation will rebound too.
- Services inflation will drop sharply in May but is set to be sticky around 3%.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: A new record high, thanks to tariff front-running by US firms.
Melanie Debono (Senior Eurozone Economist)Eurozone
- We look for broad-based strength in the surveys for May, but we think it will be temporary.
- The Eurozone’s trade surplus soared in Q1, boosted by tariff front-running in pharmaceuticals.
- The EZ runs a deficit with the US in services, but a surplus if intellectual property is excluded.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Industry supported EZ GDP in Q1, as did the labour market.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: The core remains soft, but surveys point to upside risks.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: A strong first quarter for the Swiss economy.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Switzerland’s economy was on a tear before the trade-tariff shock hit.
- Strong growth is not inflationary, and is now slowing; the SNB will cut in June, taking rates below zero.
- EZ GDP was revised down in Q1 and will also slow ahead, but the unemployment rate will stay low.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Front-loaded fiscal stimulus can add 0.5pp to German growth this year, in the best-case scenario.
- Defence spending is poised to accelerate after a slow start to the year, but the multiplier is low.
- Front-loading of infrastructure spending via €100B in funding for local government is a key upside risk.
Claus Vistesen (Chief Eurozone Economist)Eurozone
