- Italian government bond yields likely will rise further in the run-up to the end of QE...
- ...But they will reverse some of their increase later in the year, even as the ECB tightening cycle begins.
- EZ headline inflation could hit 7% in the second quarter, with core inflation rising to just over 3%.
Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone
- EZ industry has moved sideways since the start of 2021, as supply constraints held back output.
- There are signs that higher energy costs are having a dampening affect on the most exposed sectors.
- The war in Ukraine risks exacerbating this drag, further disrupting global supply chains.
Melanie Debono (Senior Eurozone Economist)Eurozone
- 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 inflation jumped by 0.7pp to 5.8% in February, driven by higher energy inflation, again.
- We think the energy rate will start to fall soon, but some of this will be offset by a higher core.
- The ECB will pause in light of the war in Ukraine, but can't avoid unwinding QE this year.
Melanie Debono (Senior Eurozone Economist)Eurozone
The ECB will end PEPP in March, but is keeping the door open for a resumption if the virus worsens.
ECB asset purchases will be around €500B next year on current plans, half the pace in 2021.
The SNB is standing pat, as expected, and we're lowering our outlook for EZ growth in Q1.
Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone
Ms. Lagarde will stick to the signal that PEPP is likely to end in March, but Omicron is a big risk to this call.
The ECB's inflation forecasts will increase today; how close to 2% will they be for 2023 and 2024?
No rate hikes in 2022, but speculation about lift-off will intensify in the next six-to-12 months.
Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone
Higher inflation recently has allowed the SNB to tolerate a much stronger franc than in the past.
We expect the Bank to keep all policy settings unchanged at its meeting on Thursday.
But falling inflation and a stronger franc heading into 2022 will force it to ramp up CHF sales soon.
Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone
All signs point to stronger EZ wage growth next year, but it won't be easy to tell in real time.
Negotiated wage growth is still slowing, but the ECB’s preferred compensation measure is firming.
The trend in unemployment points to negotiated wage growth rising towards 3% next year.
Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone
In one line: Terrible headline, but better details; output jumped in October.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Factory orders in Germany crashed in October, pegged back by a plunge in large orders…
- …But turnover jumped, by 3.6% on the month, pointing to a consensus-beating production report today.
- German manufacturing likely will do well in Q4, but the virus is now a severe risk for services.
Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone
In one line: Firms are still struggling to get what they need at the start of Q4.
Melanie Debono (Senior Eurozone Economist)Eurozone
- The composite PMIs are still consistent with robust GDP growth, but risks are stacked to the downside.
- If the PMIs are right, demand is now falling to match fixed supply; that means slower GDP growth.
- We look for another soft IFO today, but next week's consumer sentiment data should be more resilient.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- In one line: Growth is now slowing; how far down will it go?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- In one line: The constrained supply side is stifling demand.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- In one line: Services are driving the recovery, as manufacturing is stuck in the mire.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- In one line: Still-consistent with solid growth in spending.
Claus Vistesen (Chief Eurozone Economist)Eurozone
