- The EZ PMIs weakened further in September, and we fear further declines lie ahead.
- Industrial output in French transport equipment jumped by 16% in August; the recovery looks real.
- German net exports of goods fell in Q3, but we think overall net trade rose, due to falling services imports.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The September inflation data were terrible, but we think both the headline and the core have peaked.
- Core inflation will fall only slowly, however, staying above 2% through 2023.
- Energy inflation is impossible to pin down, but we see downside risks for the rest of the year.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We detect no push-back from ECB policymakers against the idea of a 75bp rate hike next month.
- The ECB is clear in its message; higher rates are needed to reduce demand in line with supply.
- Quantitative tightening makes little sense in the EZ, but the discussion has started, all the same.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The EZ composite PMI sank further in September, consistent with GDP falling in the third quarter
- Supply-side tensions eased in September, but higher energy costs drove a rise in input price inflation.
- Markets look for the ECB deposit rate to end 2022 at 2.25, with 75bp more in 2023; that's too much.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Polls point to a right-wing coalition leading Italy soon; the economy is still headed for recession.
- Deep-rooted issues need to be tackled to ensure a growth profile that keeps public debt sustainable.
- BTP yields will rise until the new PM starts work, but will fall next year as political uncertainty abates.
Melanie Debono (Senior Eurozone Economist)Eurozone
- A further leap in core inflation in September will push the ECB to deliver another 75bp hike next month.
- Energy inflation is now falling, slightly, but it won’t prevent the headline from rising again in September.
- Disinflation in oil products is accelerating, but gas and electricity prices still have further to rise.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The rise in inflation since the SNB’s last meeting means it will surely raise rates on September 22.
- The ECB went big last week; the SNB will follow suit as it seems happy with current franc strength.
- In Q4 we think the SNB will hike by 50bp, much less than the 125bp we expect from the ECB.
Melanie Debono (Senior Eurozone Economist)Eurozone
- We look for a 75bp hike from the ECB this week, but the consensus is evenly split between this and 50bp.
- Ms. Lagarde will be asked about the terminal and neutral rates; will she get pinned down on a number?
- Factory orders in Germany fell further in July, and turnover points to a decline in production.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- When the facts change, so do our forecasts; we now think the ECB will hike by 75bp next week.
- Headline inflation in the Eurozone could hit 10% in September, with core inflation at 4.5%.
- Core goods inflation is rocketing, and it likely will remain higher than implied by surveys, for a while.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We now think the ECB will lift rates by 50bp three times this year, but still expect a pause in H1-23.
- Today's EZ inflation data will offer little relief for markets recently stung by hawkish ECB comments.
- Surveyed inflation expectations are falling, in line with the idea of a reduced tightening pace in 2023.
Claus Vistesen (Chief Eurozone Economist)Eurozone
Soft money data rounded up a week of gloomy leading indicators for EZ GDP last week.
ISTAT data lend support to our view that Italy, along with Germany, is leading the EZ downturn in H2.
The sour data spooked some ECB members, but the ECB is not about to turn dovish.
Melanie Debono (Senior Eurozone Economist)Eurozone
