The Eurozone’s trade deficit probably widened further midway through the first quarter.
EZ imports from China likely are now slowing, but the cost of energy imports is soaring.
An EU embargo on Russian gas could be an economic own goal, but a crucial political signal.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Russia accounts for around 3% of total EZ exports, and 6% of imports, the latter due mainly to energy.
- EZ manufacturing exports to Russia are likely now falling; we look for a 40% slide through Q2.
- European imports of energy from Russia will increase further in Q2, sanctions permitting.
Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone
- Slowing real M1 growth points to downside risks for EZ GDP growth in the second half of the year.
- The ECB will be worried about the impact on the economy from Russia’s invasion of Ukraine...
- ...But clear upside risks to inflation mean that its hands are tied, unless sentiment collapses.
Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone
- EZ industrial production fell again in Q4, but a rebound is underway; Q1 should be solid overall.
- Output in the EZ auto sector snapped back in Q4; we're hoping for more of the same in Q1.
- A surge in EZ demand for Chinese manufacturing goods is the main driver of the trade deficit in goods.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- 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 Debono (Eurozone Team)Eurozone
- 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 Debono (Eurozone Team)Eurozone
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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 Debono (Eurozone Team)Eurozone
- EZ imports are still outpacing exports by a hand- some margin; further downside for net trade in Q4?
- The EZ trade deficits with Asia and China are widening, this could sting Q4 GDP growth.
- Headline inflation in France is still rising, but the national core rate seems to have peaked.
Claus Vistesen (Chief Eurozone Economist)Eurozone
