- Higher real interest rates will likely keep precautionary savings high, raising the savings rate further...
- ...If it rises gradually beyond our baseline by end- 2025, say to 18%, spending would fall next year...
- ...But it would need to rise much further, and much quicker, for the EZ recession we expect to last longer.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Real rates in the EZ are now rising, even as the ECB stops hiking; we still see room for easing in Q1.
- The private sector’s interest rate costs will rise in 2024, even if the ECB holds or even eases slightly.
- Core inflation in France is now falling, EZ industry is still in recession, and EZ net trade likely rose in Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: No light at the end of the tunnel for industry yet; net trade in goods boosted GDP in Q3.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Disinflation will continue, despite stickiness in services.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: We think GDP will fall again in Q4; surveys suggest robustness in employment growth will not last.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The second estimate of Q3 GDP confirms it fell; we look for another decline in Q4 and a short recession.
- Investor sentiment data suggest the tide will turn in Q1, in line with our forecast for a rebound in GDP.
- Indeed, wage data suggest wage growth eased further at the start of Q4, but only marginally.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Falling EZ inflation and our call for policy rate cuts mean we do not expect faster ECB QT...
- ...The Bank has pushed ahead with conflicting policies before, however, so the risk remain.
- If we are wrong, the most likely rate of faster ECB balance-sheet shrinkage is tiny, just €30B per month.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The first quarterly increase since mid-2022.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The central message from ECB policymakers is still that interest rates won’t be lowered any time soon...
- ...but we still see a path to a first rate cut in March, as core inflation undershoots the ECB’s forecasts.
- Sticky wage growth and rising unit labour costs are the main threats to our forecasts for cuts in H1 2024.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Slide in inflation is in full swing.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Confirming that net exports were a drag on GDP in Q3.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Retail sales slid in each month in Q3, making it a quarter to forget for the sector.
- Services spending rose in August, picking up the slack; surveys suggest it won’t do so again in Q4.
- We are revising down our consumption call for Q4 and therefore now look for a shallow EZ recession.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Not enough to prevent a quarterly fall in Q3 overall.
Melanie Debono (Senior Eurozone Economist)Eurozone
- German industry was in recession in early H2, and we suspect it will remain so at least to year-end.
- Spanish industry ended Q3 on a high but was still also in recession.
- Construction will continue to struggle; risks to our call for EZ GDP to rebound are to the downside.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The PMIs warn that the slowdown in the EZ economy is becoming more broad-based...
- ...But they’re probably too pessimistic, and investor sentiment points to better headlines ahead.
- German factory orders edged higher in September, but the details show that overall weakness persists.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Pointing to better times ahead for the economic surveys.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The slowdown is becoming broad-based.
Claus Vistesen (Chief Eurozone Economist)Eurozone