- 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
- Italian GDP will probably fall in Q4, even if revisions don’t show it declined in the third quarter.
- Budget negotiations are heating up; BTP yields will stay high next year despite a likely fall in spreads.
- Spain may end the year with a government after all, but this won’t change the economic outlook.
Claus Vistesen (Chief 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
In one line: Headline lifted by large orders, and revisions signal downside risks to the initial Q3 GDP estimate.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The EZ unemployment rate will rise further, but prob- ably not enough to sway ECB hawks...
- ...Still, we think the Bank will cut rates come March, as inflation likely will fall faster than it expects.
- Unemployment will rise most in industry, which will stay in recession until global trade recovers.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Net exports in goods were virtually flat in Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: French industry stuttered at the end of Q3.
Melanie Debono (Senior Eurozone Economist)Eurozone
