- Rising energy inflation is a threat to the June rate cut, but we think falling core inflation will do the trick.
- The early Easter sustained services inflation in March, due to a leap in airfares; it will fall in April.
- Our forecast for a July rate cut is now hanging by a thread; we’ll update our view with the April HICP.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: A setback was coming, but the improvement remains intact.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Spain was again the star performer in Q1; we look for GDP to have risen by 0.6% quarter-to-quarter.
- Italy was close behind, faring better than France and Germany, as construction investment rose again.
- Growth should rise in Spain and Italy later this year, but risks are to the downside, especially in Italy.
Melanie Debono (Senior Eurozone Economist)Eurozone
- We see little reason why the ECB should worry about the euro if it has to cut rates before the Fed.
- Our Nowcast model now points to EZ GDP rising by 0.2% in Q1, despite soft industrial production data.
- A volatile Middle East could divert attention away from Ukraine’s war with Russia; Mr. Putin knows this.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Industry was still a drag on EZ GDP growth in Q1.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: A big decline, and risks are tilted towards a slide in the core in April
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Pushed lower despite an early Easter boost in services.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Our preliminary forecasts for France and Germany point to downside risks to EZ core inflation in April.
- A VAT hike on gas in Germany and higher oil prices are near-term upside risks to energy inflation.
- Italy will struggle to shrink its budget deficit to 3% any time soon; will the EU take note?
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The ECB will cut in June, barring a significant shift in its Q2 forecasts.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The ECB will cut in June, barring a significant shift in its Q2 forecasts.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: A dovish hold—as expected—with a clear signal of a June cut.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Industry was a bigger drag on Italian Q1 GDP than we previously thought.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The ECB stood pat yesterday but sent a clear signal of a first rate cut at its next meeting, on June 6.
- We expect the Bank to cut rates by 25bp in June, and at each of the next three meetings.
- Markets have pared back expectations of ECB cuts after the hot US CPI data; that is a mistake.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- A lot can still go wrong in the EZ economy, but the data suggest that GDP growth firmed in Q1.
- Early data imply that EZ services production rebounded strongly in the first quarter.
- Mild weather boosted construction in Q1, and manufacturing, ex-Ireland, improved too.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Net trade is still likely to have been a drag one growth in Q1.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EZ compensation-per-employee growth slowed in Q1, but what about negotiated wages?
- The HICP components most correlated with wage growth point to a significant slowdown in H1 2024.
- The Q1 bank lending survey is not the slam dunk for ECB doves that many seem to believe.
Melanie Debono (Senior Eurozone Economist)Eurozone
- This week’s ECB meeting will be a dovish hold; Ms. Lagarde will lay the foundation for a June cut.
- The consensus and markets see the ECB’s policy rate falling below 2.5% in 2025; we beg to differ.
- Rising production in industry and services points to upside risks to German GDP growth in Q1.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Pointing to further gains in the PMI.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Much better; time to lift Q1 GDP growth forecasts?
Claus Vistesen (Chief Eurozone Economist)Eurozone
