- Factory orders in Germany crashed in October, pegged back by a plunge in large orders…
- …But turnover jumped, by 3.6% on the month, pointing to a consensus-beating production report today.
- German manufacturing likely will do well in Q4, but the virus is now a severe risk for services.
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
In one line: First signs the new virus wave is weighing on activity.
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
- 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
- We think GDP in Germany rose by 1.8% q/q in Q3, 0.4pp slower than the consensus forecast.
- Sell-side forecasts for German GDP growth in 2021 will have to come down, to around 2.5%…
- …And we also struggle with consensus expectations for 4-to-4.5% growth in 2022; we're at 3.5%.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Will German growth forecasts have to fall further?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The composite PMIs are still consistent with robust GDP growth, but risks are stacked to the downside.
- If the PMIs are right, demand is now falling to match fixed supply; that means slower GDP growth.
- We look for another soft IFO today, but next week's consumer sentiment data should be more resilient.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German auto output crashed in August; we're nudging our Q3 GDP growth forecasts down, to 2.0% q/q.
- The Q3 plunge in German industry is clear evidence that supply-side woes are now hitting demand.
- The services surplus in France is rising strongly; net exports likely rebounded in Q3.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The IFO dipped again in September; it still points to solid growth, but Q4 risks are tilted to the downside.
- ISTAT's ESI eased again in September, but points to decent GDP growth in Italy in Q3...
- ...Growth in Italy will slow in Q4, but higher gas prices and/or an Evergrande default won't be to blame.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- In one line: Still falling, but signs that the decline in expectations is petering out.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- German industrial output rebounded at the start of Q3, but the trend likely is still flat.
- Consumers' spending propelled the EZ economy in Q2; a full recovery in GDP is possible in Q3.
- We are lifting our full-year forecasts for 2021, but this is mostly book-keeping; growth is now slowing.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Core inflation in the euro area rocketed in August, but we doubt that markets will notice.
- PEPP tapering is coming, but the overall tenor of the ECB's communication remains as dovish as ever.
- The EZ survey data are now softening, but that won't matter for GDP in Q3; for Q4, however, it might.
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
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
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
In one line: Still consistent with solid growth, but a warning, all the same.
Claus Vistesen (Chief Eurozone Economist)Eurozone
Data yesterday revealed that inflation in Germany eased slightly at the end of Q2.
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
Yesterday's INSEE surveys in France complemented the upbeat IFO in Germany earlier in the week.
Claus Vistesen (Chief Eurozone Economist)Eurozone
