In one line: Another soft inflation print in France; soft core in Switzerland.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ inflation data are in line with further gradualism from the ECB this month, implying a 25bp cut.
- We still see little chance of either EZ headline or core inflation making a perfect landing at 2%.
- Outright deflation is a remote risk in Switzerland; the SNB will make a final 25bp rate cut in March.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Hot; EZ inflation to overshoot the consensus tomorrow.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German inflation overshoots expectations; we now see EZ HICP inflation at 2.6% in December.
- A rebound in services pulled the EZ PMIs higher in December, amid still-depressed manufacturing.
- Seasonals, investor sentiment and firming real M1 growth promise a further rise in the EZ PMI in Q1.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Relief in the PMIs; investor sentiment and seasonals signal further gains ahead.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Better than markets expected, but surveys warn of accelerating weakness in Q1.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German unemployment held steady in December, but surveys warn of further increases in Q1.
- We think EZ HICP inflation rose by 0.3pp in December, to 2.5%, 0.1pp above the consensus.
- The upturn in German retail sales is intact, but manufacturing is still stuck in the mud.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Sustained weakness in manufacturing; upturn in real M1 growth is accelerating.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The PMIs suggest manufacturing in the Eurozone remained mired in recession at the end of 2024…
- …But we still hope US tariff front-running will lift the hard data for Q4 and Q1, in time.
- The upturn in real M1 growth continued midway through Q4; ignore this signal at your peril.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Uncertainty over EZ fiscal policy at the start of 2025, but the outlook for monetary policy is clearer.
- Data released over the holidays confirm stellar Q3 GDP growth, and slightly higher inflation, in Spain.
- Early 2025 data to signal still-difficult conditions in industry, but a continued upturn in M1 growth.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Consumer sentiment takes a hit as the Holidays approach.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Rising IESI still points to downside risks for Q4 GDP.
Melanie Debono (Senior Eurozone Economist)Eurozone
- President Lagarde said data in coming months—not weeks—will offer clarity on the ECB’s next moves.
- This lowers the chance of a 50bp rate cut in January; we think the Bank will opt for a smaller 25bp cut.
- Three conditions, though, may push the Bank to make the next cut a jumbo one.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Not as bad as PMIs but still in line with our view that GDP will flat-line in Q4 after the Olympics boost in Q3.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Politics still holding back consumer confidence.
Melanie Debono (Senior Eurozone Economist)Eurozone
ECB HAS FURTHER ROOM TO EASE POLICY...
...BUT WE ARE CLOSER TO NEUTRAL THAN MARKETS BELIEVE
Melanie Debono (Senior Eurozone Economist)Eurozone
- Political uncertainty weighed on business sentiment in France in December…
- ...Politically-driven sentiment moves don’t usually translate into hard data, but growth will still slow.
- Services trade figures in the EZ current account point to downside risk to our EZ net trade call in Q4.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EZ inflation rose less than previously thought in November, to 2.2%—rather than 2.3%—from 2.0%.
- It will increase further in December, and risks to our call for a 2.5% print are to the upside.
- The headline will fall in early 2025, allowing the ECB to cut rates further, less than markets expect though.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Construction escaped recession in Q4.
Melanie Debono (Senior Eurozone Economist)Eurozone
