ECB MONETARY EASING WILL BEGIN SOON...
- ...APRIL IS LIVE, BUT JUNE IS MORE LIKELY
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Solid, but is fiscal tightening now a downside risk?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German consumer confidence remains depressed, but the headlines are poor indicators of spending.
- Rising real income growth and a stabilisation in the labour market are tailwinds for German consumers…
- ...But early-Q1 data on retail and car sales point to near-term downside risks for consumption growth.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Boosted by a soaring surplus in goods.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Lifted by strong momentum in Southern Europe.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Better, but likely not enough to prevent another decline in GDP in Q1.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: On track for a rise in Q1, surprisingly.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Investor sentiment is still rising; a dovish plunge in EZ labour cost growth.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Falling imports are still lifting EZ net trade in goods.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ inflation dipped in February, matching the first estimate; upside risks are now building for March.
- An upward surprise in the March and April inflation reports would put a June rate cut in jeopardy.
- We still struggle to see a perfect landing for inflation at 2%; how will the ECB respond to this?
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The core is on track for sub-2%, despite sticky services inflation.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Inflation at 3% in Q2 likely will prevent ECB easing in June; a 50-to-75bp cut would need inflation at 2%.
- Sticky wage growth remains a risk to ECB cuts, but we think the Q1 numbers will play ball.
- It would require significant outliers in the non-HICP numbers for the ECB’s near-term path to change.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- European defence spending is ramping up and is set to double by 2026, in nominal terms.
- Europe needs to help Ukraine beat Russia, as well as rebuild its own military; the EU is here to help.
- Joint EU debt issuance to finance defence spending is coming; €100B-to-200B would be a good start.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The core is sticky, but will fall back soon; beware an incoming rebound in food inflation.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Comments from ECB policymakers are keeping hopes of an April rate cut alive, but we still see June.
- The bar is high for the March HICP to deliver a down- side surprise big enough for the ECB to cut in April.
- We think bond yields will drift lower over the summer, before an inflection point in late Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Likely the beginning of a more sustained softening in net exports.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Positive, but is it the start of a sustained pick-up?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The EZ economy remained stuck in the mud in Q4; we think growth is now rebounding, slightly.
- A rise in consumers’ spending and a lift from inventories should be key drivers of growth in 2024.
- Industrial output in Germany and Spain rose in January, but a plunge in Ireland will drive the EZ headline.
Claus Vistesen (Chief Eurozone Economist)Eurozone
