29 November 2023 Eurozone Monitor Money Data Show Some Green Shoots but Are Still Recessionary

• Money supply is not falling as fast as it was earlier in the year, but it is still declining...
• ...Lending growth, meanwhile, is fading, which bodes ill for our call for a rebound in GDP in H1 2024.
• The package holiday CPI can be volatile in November; risks are tilted to the downside this week.

Claus Vistesen (Chief Eurozone Economist)Eurozone

28 November 2023 Eurozone Monitor Leading Indicators Suggest the Euro Should Be Stronger

• Interest-rate and core-inflation differentials suggest the EUR is currently undervalued against the USD...
• ...Political uncertainty measures suggest it is right where it should be, at 1.10...
• On balance, we think EURUSD will trade between 1.10 and 1.15 for most of 2024.

Melanie Debono (Senior Eurozone Economist)Eurozone

24 November 2023 Eurozone Monitor A Rise in PMI Doesn't Change Our View: The EZ is Likely in Recession

• The EZ PMI for November indicate that the slowdown in activity eased midway through Q4…
• ...But we still think the Eurozone economy is now in a technical recession.
• ECB accounts shows that policymakers are surprised over how quickly financial conditions are tightening.

Claus Vistesen (Chief Eurozone Economist)Eurozone

23 November 2023 Eurozone Monitor So Far So Good for Energy Prices and Gas Inventories in Europe

• Europe is sitting pretty on energy so far this winter; prices are low and gas inventories are full to the brim.
• The current trend in oil and gas prices indicates EZ inflation could hit 1.5% by the middle of 2024.
• Asia and North America have taken over from Russia as marginal energy suppliers to Europe.

Claus Vistesen (Chief Eurozone Economist)Eurozone

22 November 2023 Eurozone Monitor Early Q3 Wage Data Support the ECB's More Hawkish Policymakers

• Negotiated wage growth in the EZ accelerated slightly in Q3, likely boosted by Germany.
• Market expectations and ECB communication are now wildly at odds; something has to give soon.
• We still see scope for easing early next year, but this call depends on a shift in language in December.

Claus Vistesen (Chief Eurozone Economist)Eurozone

21 November 2023 Eurozone Monitor Negotiated Wage Growth Likely Eased in Q3, but Not by Much

• Today’s negotiated wage figures likely will show that wage growth eased in Q3, but only marginally.
• Construction output edged up in September; survey data suggest this was reversed in October...
• ...We think the sector will be a drag on growth again in Q4; luckily it accounts for only 5% of EZ GDP.

Claus Vistesen (Chief Eurozone Economist)Eurozone

17 November 2023 Eurozone Monitor Rising Savings Rate a Threat to the Outlook for Consumption

• Higher real interest rates will likely keep precautionary savings high, raising the savings rate further...
• ...If it rises gradually beyond our baseline by end- 2025, say to 18%, spending would fall next year...
• ...But it would need to rise much further, and much quicker, for the EZ recession we expect to last longer.

Claus Vistesen (Chief Eurozone Economist)Eurozone

16 November 2023 Eurozone Monitor Will the ECB Acknowledge the Sharp Increase in EZ Real Rates?

• Real rates in the EZ are now rising, even as the ECB stops hiking; we still see room for easing in Q1.
• The private sector’s interest rate costs will rise in 2024, even if the ECB holds or even eases slightly.
• Core inflation in France is now falling, EZ industry is still in recession, and EZ net trade likely rose in Q3.

Claus Vistesen (Chief Eurozone Economist)Eurozone

15 November 2023 Eurozone Monitor EZ Stuck in the Doldrums; All Change in Q1?

• The second estimate of Q3 GDP confirms it fell; we look for another decline in Q4 and a short recession.
• Investor sentiment data suggest the tide will turn in Q1, in line with our forecast for a rebound in GDP.
• Indeed, wage data suggest wage growth eased further at the start of Q4, but only marginally.

Melanie Debono (Senior Eurozone Economist)Eurozone

14 November 2023 Eurozone Monitor

• Falling EZ inflation and our call for policy rate cuts mean we do not expect faster ECB QT...
• ...The Bank has pushed ahead with conflicting policies before, however, so the risk remain.
• If we are wrong, the most likely rate of faster ECB balance-sheet shrinkage is tiny, just €30B per month.

Claus Vistesen (Chief Eurozone Economist)Eurozone

10 November 2023 Eurozone Monitor What Does the ECB Need to See to Cut Its Deposit Rate in Q1?

•  The central message from ECB policymakers is still that interest rates won’t be lowered any time soon...
• ...but we still see a path to a first rate cut in March, as core inflation undershoots the ECB’s forecasts.
• Sticky wage growth and rising unit labour costs are the main threats to our forecasts for cuts in H1 2024.

Claus Vistesen (Chief Eurozone Economist)Eurozone

9 November 2023 Eurozone Monitor Revising Down Our Call for EZ Consumption in Q4

• Retail sales slid in each month in Q3, making it a quarter to forget for the sector.
• Services spending rose in August, picking up the slack; surveys suggest it won’t do so again in Q4.
• We are revising down our consumption call for Q4 and therefore now look for a shallow EZ recession.

Melanie Debono (Senior Eurozone Economist)Eurozone

8 November 2023 Eurozone Monitor German and EZ Industry to Stay in Recession for Now

• German industry was in recession in early H2, and we suspect it will remain so at least to year-end.
• Spanish industry ended Q3 on a high but was still also in recession.
• Construction will continue to struggle; risks to our call for EZ GDP to rebound are to the downside.

Claus Vistesen (Chief Eurozone Economist)Eurozone

7 November 2023 Eurozone Monitor EZ PMIs Point to a Broad-Based Slowdown; Are They Correct?

• The PMIs warn that the slowdown in the EZ economy is becoming more broad-based...
• ...But they’re probably too pessimistic, and investor sentiment points to better headlines ahead.
• German factory orders edged higher in September, but the details show that overall weakness persists.

Claus Vistesen (Chief Eurozone Economist)Eurozone

EZ Datanote: Unemployment, EZ, September 2023

In one line: More increases are coming.

Melanie Debono (Senior Eurozone Economist)Eurozone

EZ Datanote: Trade Balance, Germany, September 2023

In one line: Net exports in goods were virtually flat in Q3.

Claus Vistesen (Chief Eurozone Economist)Eurozone

3 November 2023 Eurozone Monitor Slide in Swiss Inflation Stalls but More SNB Hikes are Unnecessary

• The slide in Swiss inflation appears to have stalled but we do not think the SNB needs to panic-hike.
• GDP in Switzerland likely fell in Q3—following in Ger- many’s footsteps—and likely will decline again in Q4.
• The election outcome means we should expect “more of the same” on the Swiss fiscal front.

Melanie Debono (Senior Eurozone Economist)Eurozone

2 November 2023 Eurozone Monitor Should Bunds be at 3% or Higher? The Term Premium Says Yes

• The rise in bund yields since summer is driven by a higher term premium, from a depressed level.
• Medium-term forecasts for the ECB’s policy rate suggest that the term premium could rise further.
• We still see a near-term fall in bond yields as core inflation undershoots the ECB’s expectations.

Claus Vistesen (Chief Eurozone Economist)Eurozone

1 November 2023 Eurozone Monitor Rapid Disinflation and Falling GDP in the EZ; Will the ECB Take Note?

• EZ inflation plunged in October, but energy inflation will snap back in November and December.
• We still see a much quicker fall in core inflation than the ECB between now and March.
• GDP in the Eurozone fell slightly in Q3, and we look for another poor quarter in Q4, with zero growth.

Claus Vistesen (Chief Eurozone Economist)Eurozone