- Another rise in consumption pulled Q3 GDP in Switzerland above its pre-pandemic level.
- But activity is now softening; fast-falling surveys force us to cut our Q4 GDP estimate.
- The franc will strengthen further; we look for EURCHF of 1.03 at end-21 and 1.02 by mid-2022.
Claus Vistesen and Melanie DebonoEurozone
- 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
- Inflation in the Eurozone is still rising, but it will cool next year as core goods and energy inflation ease…
- …But rising services inflation will keep the core rate uncomfortably high for the ECB in H1 22.
- Construction output in the EZ rebounded at the end of Q3; we look for further gains through Q4.
Claus Vistesen and Melanie DebonoEurozone
In one line: A few more high numbers are on the way, before the drop in Q1.
Melanie Debono (Senior Eurozone Economist)Eurozone
- 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
In one line: Energy inflation is still rocketing; the core is held up by robust services inflation.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ Labour demand has surged and the supply-side labour market recovery has also been impressive...
- ...But in Italy the participation rate remains below its pre-virus level, trailing that in Spain.
- We expect the jobless rate in both to fall over the coming quarters, but Italy will underperform.
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 trade wars between the EU and the U.S. seem over, but a new front is opening with the U.K.
- Slowing demand from China is the biggest threat to euro area exports in the next six months.
- Our forecasts for the U.S., U.K. and China point to a slowdown in EZ goods exports next year.
Claus Vistesen and Melanie DebonoEurozone
- GDP growth in Germany stalled at the end of Q3, and the rebound in early Q4 looks tepid.
- Growth in France is now slowing, but momentum at the end of Q3 was encouragingly robust.
- Industrial production in Spain rose modestly in September, not enough to salvage Q3 as a whole.
Claus Vistesen and Melanie DebonoEurozone
- German factory orders are losing momentum, and output flatlined at the end of Q3.
- Virus cases are still rising in the Eurozone; Germany is hit hardest, due to a surge in the south-east.
- The PMIs point to EZ GDP growth at 0.5-to-1.0% q/q in Q4, with risks tilted to the downside.
Claus Vistesen and Melanie DebonoEurozone
- 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
- 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
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
