- Spanish growth slowed in Q1 but still comfortably outperformed growth in the rest of the big four.
- The SNB is easing policy without cutting rates, signalling a desire to steer clear of negative rates.
- Money and credit data remain positive on outlook for the EZ economy but tariffs still threaten.
Claus Vistesen (Chief Eurozone Economist)Eurozone
UNCERTAINTY OVER GLOBAL TRADE WILL WEIGH ON GROWTH...
- ...A SHORT TECHNICAL RECESSION IN H2 IS NOW OUR BASELINE
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Market expectations for the ECB’s deposit rate to stay below 2.0% next year are a sitting duck.
- Bunds are fairly valued at 2.5%; fiscal policy poses upside risk, but trade wars pull in the other direction.
- EURUSD is overshooting our models; EZ equities are set to struggle for a while longer.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: In line with our view that consumer spending growth is now slowing.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: French industry intends to make hay while the sun is still shining.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Our forecasts for Q1 GDP and the April HICP imply upside risk for ECB rate expectations this week.
- Robust national business surveys point to upside risk to our Q2 forecasts for GDP in Germany and France.
- Tariff front-running seems to be just what the doctor ordered for manufacturing in France.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Lifted by tariff front-running, still pointing to downside risks to growth.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Resilient, but labour market prospects remain difficult.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Don’t show Donald Trump the trade charts; Construction down but still defied surveys in Q1
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Trade wars are not good for firm morale.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: As in France, domestic demand is rattled by tariff concerns and PMI shows clear signs of tariff front-running.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Most near-real-time consumers’ spending indicators suggest it is holding up well in April.
- The trade war also hasn’t hit job postings, while Google searches for ‘unemployment’ are down.
- Leading indicators on production, meanwhile, reflect greater activity, boosted by tariff front-running.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Fastest fall in demand for services since Covid pulls down the headline.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Soft April PMIs signal downside risk to our Q2 GDP call, but we still think tariff front-running will help.
- Demand for services is retreating, confirming that trade uncertainty is weighing on domestic demand.
- Manufacturing is holding the fort for now, with new orders recovering thanks to tariff front-running.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: EZ consumers didn’t like Trump’s tariff announcements.
Melanie Debono (Senior Eurozone Economist)Eurozone
- We look for a chunky decline in the April PMIs; falling new orders likely will bear the brunt of the hit.
- The euro’s rise is supported by strong portfolio inflows, which look set to continue in Q2.
- Is euro strength a sign of a more structural shift in FX reserve portfolios? Perhaps, but it’s too soon to say.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The ECB is making a dovish shift, conditional on a benign tariff outcome for core inflation.
- Energy prices and the euro can be cruel mistresses for policymakers looking for signals on inflation.
- Markets are pricing in the tail-risk for ECB rates; we still think the Bank will be more conservative.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Easing, as economic uncertainty rises.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Falling oil prices and a stronger euro are gifts to ECB doves.
Claus Vistesen (Chief Eurozone Economist)Eurozone
