11 May 2022 If the EU Bans Russian Gas, Italy will Flirt with Recession in H2

Italy will probably avoid entering a technical recession in Q2, as services activity rebounds strongly...

...But we now expect an EU ban on gas imports from Russia, which will weigh on growth in H2.

Our forecasts for Spain are unchanged from March as recent developments offset each other.

Melanie Debono (Senior Eurozone Economist)Eurozone

5 May 2022 We Now Think the ECB will Lift its Deposit Rate in July, by 25bp

Hawkish comments from Isabel Schnabel seal the deal on a July rate hike, probably by 25bp.

Germany’s nominal trade surplus plunged in March, due mainly to a collapse in exports to Russia.

Retail sales in the Eurozone are flatlining, due almost exclusively to soaring prices.

Claus Vistesen (Chief Eurozone Economist)Eurozone

EZ Datanote: Retail sales, Eurozone, March 2022

In one line: Higher prices are weighing on spending. 

Melanie Debono (Senior Eurozone Economist)Eurozone

4 May 2022 Will the EZ Labour Market Take Stagflation in its Stride?

EZ unemployment was still falling by the end of Q1, defying the initial shock over the war in Ukraine.

The rate of improvement in the EZ labour market is now slowing, but it won’t stall.

Discretionary spending on goods in Germany is under pressure from higher inflation.

Claus Vistesen (Chief Eurozone Economist)Eurozone

EZ Datanote: Money Supply, Eurozone, March 2022

In one line: Yet another fall in real M1 growth. 

Melanie Debono (Senior Eurozone Economist)Eurozone

11 Apr 2022 What are Governments Doing to Combat Rising Energy Prices?

The big four EZ governments already have spent 1-to-1.5% of GDP to combat high energy prices. 

More will be needed; we think another 1% of GDP will be committed through Q2, at least. 

Industrial production in Spain and retail sales in Italy advanced in February; good news for Q1 GDP. 

Claus Vistesen (Chief Eurozone Economist)Eurozone

EZ Datanote: Retail Sales, Eurozone, February 2022

In one line: Pedestrian; sales likely fell by around 0.7% in Q1. 

Claus Vistesen (Chief Eurozone Economist)Eurozone

EZ Datanote: Retail Sales, Germany, February 2022

In one line: Better than we expected, but still soft overall.

Claus Vistesen (Chief Eurozone Economist)Eurozone

31 Mar 2022 Higher Energy Prices Mean Slower Growth in Italy

• Italy is the second-most reliant major EZ economy on Russian gas, after Germany.
• Cutting reliance on Russian gas is already hurting industry; we are revising down our GDP forecasts.
• We have revised up our EZ inflation estimate for March, after Spanish & German headlines surged.

Melanie Debono (Senior Eurozone Economist)Eurozone

28 Mar 2022 Spain was Already Falling Behind and Now the Outlook Worsens

• Spain's economy ended last year further below its pre-virus level than other major EZ economies...
• ...Now growth is slowing, and the outlook for Q2-Q4 is clouded by a hit to real incomes.
• The IFO was miserable in March, and real M1 growth points to an EZ PMI of 50 by summer.

Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone

EZ Datanote: Money Supply, EZ, February 2022

In one line: The fall in real M1 growth continues. 

Claus Vistesen (Chief Eurozone Economist)Eurozone

21 Mar 2022 Brace for the First Post-War Data in the Eurozone Economy

• Investor sentiment points to a fall in this week's eco- nomic surveys; brace for downside surprises.
• Near-real-time data signal little in the way of a direct hit to activity from the war in Ukraine, yet.
• The Eurozone's trade deficit narrowed slightly in January; is the deficit with China now shrinking?

Claus Vistesen (Chief Eurozone Economist)Eurozone

EZ Datanote: Car Registrations, EU/EZ, February 2022

In one line: Slide in EZ car sales stalls, for now.  

Melanie Debono (Senior Eurozone Economist)Eurozone

8 Mar 2022 The Stagflationary Shock is a Reality; What Happens Next?

• The EZ is now in stagflation; growth forecasts will come down, even as inflation projections rise.
• EZ energy inflation could rise above 40% in the next few months, lifting the headline HICP rate to 7%.
• Economic activity in Germany picked up in January, but growth through Q1 as a whole will be soft.

Claus Vistesen (Chief Eurozone Economist)Eurozone

7 Mar 2022 High Inflation is Not Hitting EZ Household Consumption, Yet

• Consumption had a rough start to Q1, as restric- tions were tightened at the end of December...
• ...But things now are looking up and we think high inflation won’t derail the consumer recovery.
• Volatility is the name of the game in markets for now; a return to pre-Ukraine normality is a long way off.

Melanie Debono (Senior Eurozone Economist)Eurozone

EZ Datanote: Retail sales, Eurozone, January

In one line: The readings in February and March will be much better. 

Melanie Debono (Senior Eurozone Economist)Eurozone

1 Mar 2022 Swiss Economy Outperforms Again; Spanish Inflation Jumps

• The Swiss economy was resilient in Q4; GDP ended the year 2.0% above its pre-pandemic level.
• Growth will pick up, but inflation will remain low; the SNB will not hike rates with the ECB later this year.
• Spanish inflation jumped to an eye-watering 7.4% in February; energy prices remain a wild card.

Melanie Debono (Senior Eurozone Economist)Eurozone

EZ Datanote: Money Supply, EZ, January

In one line: Amber alert; the slowdown in real M1 is accelerating. 

Claus Vistesen (Chief Eurozone Economist)Eurozone

EZ Datanote: Consumers' Spending & Inflation, France

In one line: Spending, ex-services, isn’t going anywhere, but inflation definitely is.

Claus Vistesen (Chief Eurozone Economist)Eurozone

21 Feb 2022 More Evidence that the ECB is About to Make a Hawkish Shift

• Comments from Mr. Lane and Ms. Schnabel add to evidence of a hawkish shift in ECB policy.
• French core inflation fell in January, but it will re- bound quickly, to 2.0%, where it will stay through Q3.
• EZ construction fell in Q4, again, and consumer sentiment remained soft midway through Q1.

Claus Vistesen (Chief Eurozone Economist)Eurozone