In one line: Mixed, but consistent with a modest recovery in consumption growth.
Claus Vistesen (Chief Eurozone Economist)Eurozone
THE ECB IS DONE HIKING; EASING WILL BEGIN SOON
- ...WE STILL SEE A FIRST RATE CUT IN APRIL
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The inventory cycle in France likely bottomed out in Q4; total capital formation should rebound in H1...
- ...But surveys warn that growth in otherwise resilient services investment is now rolling over.
- A drop in auto sales will weigh on consumption in 2024, but rising real income growth will dominate.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Investment crashed at the end of 2023.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- A crash in investment weighed down the German economy in Q4; capex is set for a big fall in 2024.
- Consumers’ spending is now rebounding in Germany, in line with firming growth in real income.
- We now see zero growth in Germany this year, down from +0.3% previously; risks are to the downside.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Core inflation remains on track for 2% by summer, but beware Easter effects in March and April.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Weakness in Germany holds back the recovery.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Better, but rise in the PMI is at odds with the INSEE data.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ inflation will fall further in February; Easter effects will then add volatility over Spring.
- The euro area composite PMI is rebounding, but Germany’s index remains stuck in the mud.
- The February PMIs pour cold water on hopes of a Q1 rebound in EZ’s moribund manufacturing sector.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: On the up; we think it will continue.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Russia now accounts for just 15% of EZ gas imports, down from 45% before its invasion of Ukraine.
- Oil imports from Russia have slumped but are likely still entering Europe after being refined elsewhere.
- Non-energy trade has shrunk and will dissipate further this year, as the latest EU sanctions hit.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: The recovery in construction will be slow coming.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Boosted by a narrower primary income deficit; is the trend in portfolio outflows stalling?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Negotiated wage growth in the EZ slowed slightly in Q4; it will decelerate further at the start of 2024.
- EZ construction output rebounded in December, leaving a decent carry-over for Q1.
- The Eurozone current account surplus jumped at the end of Q4 but will soon decline.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Leading indicators point to significant downside risks for German construction at the start of 2024.
- The fall in real estate prices is happening amid solid growth in rents; the cap rate is soaring as a result.
- German commercial real estate is in trouble, but cap rates are now rocketing, for both retail and office.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The sticky core will come undone soon; we look for a big fall in February
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Swiss industrial production fared worse than we thought in Q4, but construction outperformed...
- ...We are sticking to our call that GDP fell by 0.2% on the quarter in Q4; if so, it rose by 1.2% in 2023.
- Base effects point to a big fall in French core inflation in February, to around 2% on the HICP.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Old news; net trade will be a drag on growth this year.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EZ GDP growth is falling behind the US; relatively sluggish productivity is part of the reason.
- The inflation shock has depressed EZ labour productivity, but it should now be rebounding.
- Our interest rate forecasts are consistent with a relative shift in the EZ inflation and policy regime.
Melanie Debono (Senior Eurozone Economist)Eurozone
