In one line: EZ manufacturing remained in recession in Q4; is the plunge in M1 fading?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ manufacturing remained in recession in Q4, but global data point to an improvement in Q1.
- The slowdown in narrow money growth is easing, adding to upside risks for the composite PMI in Q1.
- Private sector lending growth slowed midway through Q4; it will slow further in H1 2024.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Markets think the ECB will cut rates in March, as do we; inflation below 2% by February should do it.
- Energy prices are the key wildcard for headline inflation in Q1; so far the trend looks benign.
- In the core, non-energy goods inflation is about to collapse, but services inflation is still sticky.
Claus Vistesen (Chief Eurozone Economist)Eurozone
THE ECB IS DONE HIKING; WHEN WILL IT CUT?
- ...WE THINK EASING WILL BEGIN IN MARCH
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Drop confirmed. Inflation will rebound in December, but what happens in January?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Inflation fell sharply in November; it will rebound in December, but what will happen in January?
- Our inflation forecasts remain at odds with the ECB’s; we still see a March rate cut.
- We’re betting that inflation falling below target will prompt the ECB to focus less on wage growth.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Net exports are poised to lift GDP growth in Q4, but by how much? We look for a 0.1pp rise.
- Export growth will rebound next year, but we think imports will recover relatively more.
- We believe rising goods imports will weigh on net exports and GDP growth in 2024.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Friday’s PMIs confirmed the EZ economy was still is in a rut in December, pointing to falling GDP in Q4.
- The PMI input price component suggests EZ headline inflation will stabilise at just under 2% in H1 24.
- Accelerating third quarter growth in hourly labour costs is grist on ECB hawks’ mills.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Rapidly falling inflation and recessionary PMIs.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: If Mr. Powell is Santa, Ms. Lagarde is the Grinch.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Few signs of a shift in the guidance on rates, yet. QT will accelerate in H2-24.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The ECB lowered its inflation forecast in December; they will come down further in March, by a lot.
- Ms. Lagarde pushed back against our forecast for a March cut, but we think she’ll come around.
- The SNB stands pat, but sends a clear signal that it is now done raising rates; will it cut in March?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German politicians agreed to cut spending to stick to the constitutional debt brake...
- ...But it looks like a stop-gap solution to us, and fractures within the coalition will likely widen from here.
- EU fiscal rules return next year; in what form remains to be seen, but they will be laxer than before.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German manufacturing faces a host of challenges, but the country isn’t de-industrialising, yet.
- Politics are at odds with economic objectives in Germany; the latter will drive the former, eventually.
- Employment and investment in machinery are the key manufacturing variables to watch in 2024.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: A big decline; base effects in energy point to a snap-back in December.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The ECB will keep rates and the pace of QT unchanged this week; all eyes on the new forecasts.
- We think the ECB will lower its 2024 inflation forecast by 0.5pp, to 2.7%, and we look for 2.0% in 2026.
- The consensus now expects the first ECB rate cut in June next year; we still believe March is a good bet.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Hit by falling inventories; productivity fell further.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ GDP growth was stung by falling inventories in Q3, offsetting a rise in public and private spending.
- The slowdown in investment is intensifying, but the outlook for household consumption is brightening.
- We now think EZ GDP will rise by 0.5% this year, and next year too; no upward inflation pressures here.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Early days, but it looks like a decline in Q4.
Claus Vistesen (Chief Eurozone Economist)Eurozone
