November 2023 - EZ Economic Chartbook

THE EZ ECONOMY IS SLIPPING INTO RECESSION...

• ...WHEN WILL THE ECB’S MESSAGE SHIFT?

Claus Vistesen (Chief Eurozone Economist)Eurozone

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

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