9 Aug 2022 EZ Monitor Are the Largest EZ Economies Already Rationing Energy

We now think it’s likely that the EU manages to fill its gas storage levels to the target 80% by November.

Storage will be drained more this winter than in the past, given lower flows, even assuming no cold snap.

This is despite rationing, which we doubt can be avoided, and will push the EZ into recession by Q4.

Melanie Debono (Senior Eurozone Economist)Eurozone

19 July 2022 Fiscal Aid in Spain and Italy is Not Enough to Boost Consumption

Italy’s overall aid to offset rising living costs still trails that in Spain, despite new fiscal support.

The measures announced so far likely won’t fully offset the hit to real incomes from higher inflation.

Windfall taxes are not enough, and further debt issuance will keep a floor under debt servicing costs.

Melanie Debono (Senior Eurozone Economist)Eurozone

8 July 2022 No Wage-Price Spiral this Year, but Next Year Could be Different

Wages are rising across the Eurozone’s largest economies, but nowhere near as quickly as inflation.

The squeeze on incomes will ease over the coming months as inflation falls, but it will remain severe.

A wage-price spiral is a risk for markets and the ECB next year, even with ’normal’ real wage growth.

Claus Vistesen (Chief Eurozone Economist)Eurozone

27 May 2022 Italian Debt will Remain Above Pre- Pandemic Levels to 2024

Italy’s budget deficit will narrow further this year, but it will stay wider than policymakers expect.

The government has lowered its expectation for the impact of EU recovery funds; it’s still too high.

Germany’s push for the return of the SGP is falling on deaf ears; it won’t come back in the same form.

Melanie Debono (Senior Eurozone Economist)Eurozone

16 May 2022 Is it Safe for Investors to Start Buying Eurozone Equities?

The medium-term outlook for EZ equities has improved significantly in the past 12 months...

...But earnings expectations have to fall further in the near term, weighing on prices over the summer.

EZ manufacturing will slow sharply in Q2; core inflation pressures in France have intensified.

Claus Vistesen (Chief Eurozone Economist)Eurozone

19 Apr 2022 The ECB Remains on Track to Dial Down QE by Early Q3

The ECB is holding the line that QE will end at the beginning of the third quarter.

We still look for two hikes in the deposit rate this year, by 25bp in September and December.

Data today likely will show that EZ industrial production, ex-construction, rose solidly in February.

Claus Vistesen (Chief Eurozone Economist)Eurozone

31 Mar 2022 Higher Energy Prices Mean Slower Growth in Italy

• Italy is the second-most reliant major EZ economy on Russian gas, after Germany.
• Cutting reliance on Russian gas is already hurting industry; we are revising down our GDP forecasts.
• We have revised up our EZ inflation estimate for March, after Spanish & German headlines surged.

Melanie Debono (Senior Eurozone Economist)Eurozone

28 Mar 2022 Spain was Already Falling Behind and Now the Outlook Worsens

• Spain's economy ended last year further below its pre-virus level than other major EZ economies...
• ...Now growth is slowing, and the outlook for Q2-Q4 is clouded by a hit to real incomes.
• The IFO was miserable in March, and real M1 growth points to an EZ PMI of 50 by summer.

Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone

25 Mar 2022 EZ Survey Data Stayed Resilient in March, For the Most Part

• Household confidence in the euro area plunged in March, but business surveys held up.
• Private sector activity was still expanding at a decent clip at the end of Q1, but storm clouds are gathering.
• The policy rate at the SNB isn't going anywhere, but the bank will intervene in FX markets, if needed.

Claus Vistesen and Melanie Debono (Eurozone Team)Eurozone

24 Feb 2022 EZ Inflation Data will Continue to Hold the ECB's Feet to the Fire

• We still think EZ core inflation is on track to hit 3.0% in Q2, underpinning the hawkish shift at the ECB.
• We now think the central bank will lift its deposit rate by 20bp in December, after ending QE in October.
• Soft GfK consumer confidence data in Germany, but solid INSEE business sentiment numbers in France.

Claus Vistesen (Chief Eurozone Economist)Eurozone