- EZ construction output rose at the start of Q3, but don’t extrapolate; the sector is stuck in a downturn.
- Surveys indicate that building activity is crashing, but civil engineering is looking better.
- Investment in construction slowed sharply in Q2, and we’re looking for an outright fall in Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Decent, but the trend remains negative.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Headline and core inflation in the Eurozone remained sticky in August; they will fall back in September.
- Rising oil prices are only a minor threat to energy inflation at this point; don’t push the panic button.
- The ECB story is shifting; all eyes are now on the outlook for rate cuts in 2024; we still see two.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Swiss inflation is below the SNB’s target cap, but we think it will still hike this week, for a final time.
- If so, the key policy rate would peak at 2.0%, well below equivalent rates elsewhere.
- We expect the SNB to start cutting rates next year as inflation falls significantly below the 2% target cap.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Don’t read too much into the slowdown in hourly wage cost growth; net trade in goods will be a drag on GDP in Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The fall in the headline will resume soon.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EZ hourly labour-cost growth slowed in Q2, due mainly to favourable calendar adjustments.
- Trade data for July suggest that net exports will be a drag on EZ GDP growth in Q3, again.
- Inflation in France was revised a touch higher in August, but the trend in the core is now downward.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The bar for further hikes is high; no mention of cuts, yet.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The final hike in this tightening cycle.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The ECB lifted its key policy rates yesterday; this was likely the last hike in this tightening cycle.
- The central bank now sees headline inflation returning to target by the end of 2025, just.
- We still see a window for rate cuts next year, but it is narrowing; we look for cuts in March and April.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The PMIs are one of the best leading indicators for GDP in the EZ, but beware the post-Covid seasonals.
- Our analysis suggests a structural break in the seasonal adjustment of services since 2021.
- If we're right, the services PMIs will tend to be biased to the upside in Q2, but down in Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: ZEW suggests it will get worse before it gets better.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The focus on the EC’s GDP downgrades is much ado about nothing; our forecasts are lower still.
- The new inflation forecasts are in line with the ECB’s, and therefore higher than ours.
- The ZEW suggests September is the trough for the fall in German private-sector activity; will it be?
Melanie Debono (Senior Eurozone Economist)Eurozone
- Interest-rate and core-inflation differentials suggest EURUSD should be a lot higher...
- ...But the trend in political uncertainty suggests it is exactly where it is supposed to be.
- The relative downshift in the EZ PMIs hint at a return to parity for EURUSD; we're not buying it.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Solid in France; disappointingly soft in Spain.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Inflation in motor fuel is rising, temporarily; the core will fall sharply in September.
Claus Vistesen (Chief Eurozone Economist)Eurozone
