In one line: Only little signs of a hit from higher US tariffs.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The PMIs suggest higher US tariffs are weighing on export orders, as we expected…
- ...But the EZ economy is still resilient; the composite PMI edged up to a 15-month high in August.
- Price pressures rose again, implying the risk to our call for an ECB rate cut in September is for no cut.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Inflation will rise to year-end, but there’s still chance of an ECB rate cut in September.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Stable inflation in July was confirmed; the core held steady but food and energy inflation rose.
- Higher inflation is on the cards, as energy deflation continues to unwind and food inflation climbs.
- For now, though, we think a fall in core inflation will convince the ECB to push through another rate cut.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The EZ current account surplus widened in June, despite a sharp drop in the goods trade balance.
- Services trade was a boost to GDP in Q2, unlike goods trade.
- Foreign investors are funnelling into EZ assets, but this isn’t a new Trump-era trend.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The hit to EZ goods trade from higher US tariffs is visible in the nominal monthly figures.
- Goods trade was a drag on EZ GDP in Q2, mainly due to a fall in exports to the US in April to June.
- We suspect the nominal goods trade surplus will turn to a deficit in Q3.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Net trade in goods was a drag on GDP in Q2.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Q2 slowdown confirmed; industry partly to blame.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EZ PPI inflation, ex-services, is stabilising just below 1%, but divergence among sectors is high.
- The trend in global energy prices points to continued deflation in EZ energy producer prices…
- …But food producer price inflation is sticky, signalling upside risk to consumer prices in this category.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The slowdown in EZ GDP growth in Q2 was confirmed, mainly due to weakness in industry.
- Industry will likely be a bigger drag on GDP in Q3, and the strength in construction will not continue.
- The labour market continues to support GDP growth; surveys suggest employment will stay solid.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Down, in line with the fall in the sentix.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Swiss GDP growth likely slowed sharply in Q2 from the 0.8% q/q read in Q1 led by tariff front-running.
- Hard data and surveys imply a print of around 0.2% quarter-to-quarter.
- Switzerland will enter recession in H2, even if “gold will not be tariffed!”.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The ZEW confirms the message from the Sentix: investors don’t like the EU-US trade deal.
- Investor sentiment indices still point to a rise in the PMI in the coming months, but we doubt it.
- The EZ economy will struggle now that US tariffs have risen further.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The shape of the Phillips curve is unstable over time, but its shifts are difficult to pin down with data.
- Data point to a flat PC in the EZ, and a high sacrifice ratio for the ECB, but only for demand-pull inflation.
- Our estimates of the NKPC support our broader call that EZ inflation will ultimately settle above 2%.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- National data for Q2 suggest a rise in EZ negotiated wage growth after a plunge in Q1.
- Early data for Q3 are mixed, but stable inflation points to wage growth holding broadly steady ahead.
- Falling Irish and German industrial production mean EZ industry had a difficult end to Q2.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Industrial output will be revised up; net trade was a drag on GDP growth in Q2.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Industrial production in Germany plunged in June, or did it? We are not so sure.
- Green shoots in leading indicators for German capex, but an inventory overhang still looms in H2.
- German exports remain stuck in the mud, and US tariffs add further downside risk in H2.
Claus Vistesen (Chief Eurozone Economist)Eurozone
