In one line: Consumers’ spending rocketed in Q3; now comes the slowdown.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The green energy transition can be modelled as a sustained inflationary supply shock to the economy.
- In the extreme case, a rise in oil and gas prices could lift EZ inflation by 0.5pp between now and 2026.
- The price of CO2 emissions is rising; it could lift EZ inflation significantly over the next few years.
Claus Vistesen and Melanie DebonoEurozone
- Italy has a reputation for a slow judicial system, weak tax collection and low labour productivity...
- ...But Draghi has pushed through reforms aimed at reversing these drags on the economy.
- We are hopeful, but sceptical, about how much reform will happen before the next election, in 2023.
Claus Vistesen and Melanie DebonoEurozone
- The Eurozone economy recovered further in Q3, and revisions could close the gap with Q4-2019.
- France and Italy stood out to the upside in Q3, with Germany lacklustre, and Spain implausibly weak.
- We're lifting our inflation forecasts, again, but we still think markets are wrong on ECB tightening in 2022.
Claus Vistesen and Melanie DebonoEurozone
- French GDP growth rebounded strongly in Q3, from a lacklustre Q2; we look for a 2.4% rise in output.
- Italian GDP is also likely to have posted a solid quarter, but base effects kept a lid on the headline.
- Spain's economy likely took pole position in Q3; services exports rocketed as tourism reopened
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ construction output slipped in August, all but ensuring a decline through Q3 as a whole.
- Shortages in labour and raw materials are holding back construction, but output should rebound in Q4.
- A traffic light coalition is now a solid base-case in Germany, but a leap in fiscal stimulus isn't.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The burden of adjustment in France's budget deficit in 2022 will fall on lower expenditures…
- …But the preliminary budget looks overall growth friendly; it will be 2.0pp wider than before the virus.
- We see an outsize risks of tax hikes in H2 22, and yields will have to rise as ECB support wanes.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The Spanish government is continuing to support the recovery next year...
- ...But its GDP growth forecasts, reliant on hefty in- creases in investment, seem too high to us.
- The budget deficit is all but certain to be higher than the government’s 5% estimate next year.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Don't fret the July plunge in EZ retail sales; Q3 as a whole will be OK, and services will do even better.
- The risk of new virus restrictions remains low, de- spite the uptick in new cases since the end of Q2.
- Consumers' spending in services will deliver strong growth in Q3 in the major EZ economies.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Banks went into the crisis in a relatively healthy state; much better than in 2007.
- The jump in emergency loans during Covid is un- likely to be destabilizing, even if some of it turns sour.
- Stress tests show that banks can handle a jump in NPLs, and foreign risks are generally limited.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The second Q2 GDP estimate for the EZ will confirm the advance report while we are away.
- Detailed GDP data in Germany will show that consumers' spending rocketed in Q2.
- We look for soft surveys for August, but we still think Q3 as a whole will be great for the EZ economy.
Claus Vistesen (Chief Eurozone Economist)Eurozone
We're raising our 2021 growth forecasts for France, mostly due to technicals linked to recent revisions.
We now think German GDP will rise by just 2.7% in 2021, but the carry-over into 2022 will be solid.
Our new Q3 forecasts are broadly in line with the consensus; all set for a spectacular quarter.
Claus Vistesen (Chief Eurozone Economist)Eurozone
EZ GDP data beat expectations in Q2, which will drive upward revisions to 2021 forecasts.
We now expect full-year GDP growth in the Euro- zone of 5.0% in 2021, up from 4.5% previously.
Ignore the July dip in euro area core inflation; it will leap to 1.5% in August.
Claus Vistesen (Chief Eurozone Economist)Eurozone
Robust M1 growth points to solid GDP growth in the Eurozone, once the dust settles from reopening.
Loan growth is slowing, but that's mainly due to base effects; the underlying trend remains robust.
Non-financial firms are substituting short-term for long-term lending, a good sign for investment.
Claus Vistesen (Chief Eurozone Economist)Eurozone
We look for Q2 GDP growth in the EZ at 1.5% quarter-on-quarter, the same as the consensus.
This week's EZ inflation reports for July are a banana-skin for forecasters; don't bet the farm.
The IFO softened significantly in July, but it remains consistent with robust GDP growth in Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
Virus cases fell throughout the second quarter, allowing EZ governments to ease restrictions and the economy to roar back to life.
Claus Vistesen (Chief Eurozone Economist)Eurozone
The ECB sprang a surprise on markets yesterday, releasing the details of its policy review—see here—ahead of the planned announcement in September.
Claus Vistesen (Chief Eurozone Economist)Eurozone
Yesterday's national survey data in the core Eurozone economies added to the evidence that services are now driving the recovery.
Claus Vistesen (Chief Eurozone Economist)Eurozone
European Commission President Ursula von der Leyen is currently on tour in Europe, negotiating with national governments on the final makeup of the spending plans for the Recovery and Resilience Fund, or RFF.
Claus Vistesen (Chief Eurozone Economist)Eurozone
The Eurozone's external surplus rebounded at the start of Q2.
Claus Vistesen (Chief Eurozone Economist)Eurozone
