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
- Spanish inflation rose 0.4pp to 3.2% in March, less than we expected...
- ...We are revising down our forecast for the Eurozone headline; it likely rose just 0.1pp to 2.7% in March.
- Spanish CPI is further along than the EZ headline, suggesting EZ inflation will rise further before it falls.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Pointing to a recovery in consumption, albeit a tepid one.
Melanie Debono (Senior 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
- The ECB faces a unique challenge in thinking about fiscal policy; fiscal tightening is now lifting inflation.
- We estimate that the unwinding of fiscal stimulus is now boosting EZ headline inflation by 0.4pp...
- ...In a fight for every percentage point to get inflation to target, this could prevent ECB rate cuts.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The Eurozone PMIs suggest services activity is now rebounding; the outlook for Q2 is brightening.
- Germany and France are holding the EZ economy back; Southern Europe is doing the heavy lifting.
- We still see the euro area economy returning to growth in Q1, with a 0.2% increase in GDP.
Samuel TombsEurozone
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: The SNB beats the ECB to the punch on rate cuts.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The SNB cut interest rates, beating other major DM central banks to the punch on easing policy.
- More easing is likely over the coming year; we look for 75bp of further cuts by December.
- The risks are to fewer cuts; the SNB sees inflation in line with its price-stability mandate out to 2026.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: On track for a rise in Q1, surprisingly.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Recovery in Italian industry is delayed.
Melanie Debono (Senior Eurozone Economist)Eurozone
- It’s a close call, but we think the SNB will hold fire at today’s meeting and first cut in June instead.
- Risks are tilted towards a rate cut today; markets are pricing in 40% probability of a move.
- mItalian industrial production started the year on a weak footing, but EZ construction is holding up.
Melanie Debono (Senior 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
- Hourly labour cost growth took a leg down in Q4, in line with other wage growth measures.
- Leading indicators suggest pay growth is easing again in Q1; we look for it to fall throughout 2024.
- The ECB can’t afford to wait for the all clear from wage negotiations to start easing policy.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Falling imports are still lifting EZ net trade in goods.
Claus Vistesen (Chief Eurozone Economist)Eurozone
