- We still think net trade supported GDP growth in Q4, despite the nominal goods trade deficit.
- Leading indicators suggest net exports won't pro- vide much of a boost to GDP growth in 2022.
- Full-year German GDP data for 2021 suggest growth was slower than previously thought in Q4.
Claus Vistesen and Melanie DebonoEurozone
- Decent hard data lead us to raise our Q4 forecast for Italy, as for Spain, but GDP growth has slowed.
- Italian GDP likely rose by 0.8% in Q4; Q1's outcome will be little more than zero, as virus restrictions bite.
- An early election in Italy would put upward pressure on BTP yields, but it would prove short-lived.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Valuations point to subpar returns for euro area large-cap equities in the post-pandemic expansion.
- Equities in Spain and Italy are priced for average returns of around 10% in the next five years…
- …The corresponding numbers for German and French equities are just 5% and 2½%, respectively.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Stronger-than-expected industry and retail data lead us to revise up our Q4 GDP forecast for Spain.
- We now think GDP grew by 1.5% q/q, much quicker than in the other major EZ economies.
- Solid Q4 growth increases the carry-over for 2022 growth forecasts, but Spain is still a laggard.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ unemployment fell further in November, due to an improvement in all major economies.
- Unemployment in the euro area will fall below 7% soon, even with Omicron now a near-term threat.
- Our labour market forecasts imply accelerating wage growth in 2022; the ECB will take note.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Retail sales data had a decent November, but online sales can't offset falling services spending.
- Germany is on track to meet our expectations for Q4 growth, but we're reducing our forecasts in France.
- EZ inflation has peaked; a strong rebound in the core will be a headache for the ECB in Q2 and Q3.
Claus Vistesen and Melanie DebonoEurozone
- German factory orders are running hotter than manufacturing production...
- ...And the jump in manufacturing turnover points to a consensus-beating production report today.
- Headline inflation in Germany was broadly stable in December, but the core rate rose further.
Claus Vistesen and Melanie DebonoEurozone
- Advance November retail sales data point to relative strength in EZ consumption midway through Q4.
- Germany's labour market recovery continued in Q4, but surveys warn of a setback in Q1.
- Headline inflation in France remained high in December, but energy inflation is now falling.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The upward revision to Q3 GDP in Spain still leaves it further below the Q4 2019 level than elsewhere...
- ...The recovery has now slowed sharply; we look for just 1.0% growth in Q4; risks are to the downside.
- Data over the holidays are likely to show soft retail sales and yet more softening in business surveys.
Claus Vistesen and Melanie DebonoEurozone
- Gas prices have further to rise in the short term boosting energy inflation into Q1.
- But easing demand and base effects will then bring gas inflation hurtling down.
- Political tensions with Russia, and Germany's plans to wind down nuclear energy, present upside risks.
Claus Vistesen and Melanie DebonoEurozone
- Supply bottlenecks are now easing, but likely will remain a challenge at the start of next year.
- Rising energy costs and new virus restrictions are the key risks to manufacturing in the near term.
- The virus might also drive more long-lasting distortions between supply and demand.
Claus Vistesen and Melanie DebonoEurozone
- We are raising our headline inflation forecasts for next year, but we're still well behind the ECB.
- Core inflation will hover around 2% for much of next year, causing a headache for the central bank.
- More poor survey data reassert our view that Q4 and Q1 won’t be pretty for the EZ’s largest economy.
Claus Vistesen and Melanie DebonoEurozone
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 DebonoEurozone
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 DebonoEurozone
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 DebonoEurozone
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 DebonoEurozone
- 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
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German consumers' spending soared in Q3, offsetting falling investment and net exports.
We are lowering our Q4 growth forecasts to 0.4-to- 0.5%, from 0.7% before; the virus is a threat.
German investment in machinery and equipment looks terrible; it will get better next year.
Claus Vistesen and Melanie DebonoEurozone
- The Q4 survey data in France have been robust so far, pointing to solid underlying GDP growth…
- …But the return of the virus threatens new restrictions, putting Christmas festivities in question.
- We're reducing our forecast for Q4 quarteron-quarter GDP growth, by 0.6pp, to 0.6%.
Claus Vistesen and Melanie DebonoEurozone
- The new virus wave and associated return of restrictions adds to the downside risks for Q4...
- ...November's rise in the PMI hasn't captured the recent reimposition of restrictions in Germany.
- GDP growth in Q4 looks to be closer to 0.6% quarter-on-quarter; we are nudging down our forecast.
Claus Vistesen and Melanie DebonoEurozone
