- EZ inflation is running red hot, hitting a record high of 4.9% in November.
- Shipping costs to the Eurozone's most important trading partners are still rising...
- ...Still, the fall in global measures points to shipping costs dragging headline inflation down.
Claus Vistesen and Melanie DebonoEurozone
In one line: A record high, but it still doesn’t justify rate expectations.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Spending starts Q4 on a weak foot; energy inflation drives the headline higher in November.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Expect another hot reading in December.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Euro depreciation adds additional upside risk to the ECB's December core inflation forecasts.
- The outlook for relatively rapid Fed tightening is leading the euro lower, but fundamentals matter too.
- Recent comments from Isabel Schnabel suggest the ECB is o.k. with expectations of a hike in 2023.
Claus Vistesen and Melanie DebonoEurozone
- EZ GDP and employment rebounded robustly in the third quarter, but growth is now slowing.
- We're sticking to our view of 0.8% q/q GDP growth in Q4, but risks are piling up to the downside.
- Core inflation in France will remain close to 1.5% through Q4, but we think the trend is around 1.0%.
Claus Vistesen and Melanie DebonoEurozone
- 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
In one line: Still going up, but the upturn in the core is levelling off.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The EC is adamant that governments will have to fend for themselves to combat higher gas prices.
- EZ countries are combining tax cuts and subsidies to shield the economy from higher electricity prices.
- It remains unclear whether Gazprom will supply enough gas to Europe for prices to keep falling.
Claus Vistesen and Melanie DebonoEurozone
In one line: EZ GDP is within touching distance of its pre-virus level; inflation is still running hot.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Boosted by higher energy inflation; the core likely rose fractionally.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: German inflation rose more than expected in October.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Euro area energy inflation will rise further in Q4, but we think the core rate has peaked.
- Risks are tilted towards persistently high core and headline inflation in the next 12 months…
- …But that doesn't justify the leap in Eurozone rate expectations in the past few weeks.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German core inflation is still rising; we think it will hit 3%-plus in Q4, before easing in January.
- Electricity inflation in Spain is still rocketing, threatening consumer's real incomes and industry.
- Core inflation in Spain is now back at its pre-virus rate; should we be looking for an overshoot now?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Inflation in Switzerland likely has peaked, keeping it lower than the headline HICP in the EZ...
- ...Currency effects will soon be a drag on headline inflation, to the SNB's dismay...
- ...Meanwhile, rising natural gas prices are no worry for the Swiss, and wage pressures are limited.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ inflation rose further in September, probably by 0.5pp to 3.5%, higher than the consensus, 3.3%.
- Core inflation in the EZ was lifted by gains in Italy and Germany in September.
- The rate of improvement in the EZ labour market is now slowing, but unemployment is still falling.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Our 2022 core inflation forecast signal that trouble is brewing for markets and the ECB.
- Core inflation will fall in Q1, but it will be back at just under 2% by spring, and through the summer.
- The ECB will stay dovish, but it will lift its inflation forecasts further; this will unsettle markets.
Claus Vistesen (Chief Eurozone Economist)Eurozone
Core inflation in the Eurozone is rising, but it's difficult to say how quickly, given one-off distortions.
Is the ECB preparing markets for a lift to inflation forecasts in Q4? That could be a forecast error.
Construction in the euro area seems to be stagnat- ing; supply-side constraints are to blame, in part.
Claus Vistesen (Chief Eurozone Economist)Eurozone
