In one line: A small rise despite the falls in Italian and German GDP.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Are investors no longer pricing in a German recession?
Melanie Debono (Senior Eurozone Economist)Eurozone
- Italian bond yields offer an attractive carry, but yields are likely to stay high this year and next...
- ...Even if the spread to bunds falls, as we expect, assuming Italy doesn’t rock the boat with the EU.
- We expect BTP yields to rise to 4.35% by June, before easing back to 4.0% by year-end.
Melanie Debono (Senior Eurozone Economist)Eurozone
Consumption propelled Italian economic growth in Q2 and Q3 but it will drag GDP down in Q4 and Q1.
We now look for a worse, albeit still shallow, recession in Italy over the coming quarters.
Swiss November inflation data support our call for just one more rate rise in the SNB’s hiking cycle.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Solid, but we remain confident that growth is slowing.
Claus Vistesen (Chief Eurozone Economist)Eurozone
The detailed Q3 GDP data in Germany paint too rosy a picture of growth; a recession is coming.
German consumers’ spending has been resilient so far, but we think this will end in Q4 and Q1.
We now see German growth of just 0.3% in 2023, but that’s still a lot better than the -0.7% consensus.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The second release of EZ Q3 GDP confirmed the downturn and a slowdown in productivity growth.
- The nominal goods trade deficit narrowed in September; it will likely continue to do so in Q4.
- Still, we think that net trade will contribute to a fall in GDP this quarter and next.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Factory orders in Germany are starting to match the grim surveys; output is set for a big fall in Q4.
- Early evidence suggests that EZ industrial output was resilient at the end of the third quarter.
- The composite EZ PMI was revised up marginally in October, but still points to a recession ahead.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Bond yields in Germany are rising at their fastest pace this side of reunification.
- The German 2s10s yield curve has collapsed to zero; we think it will invert soon.
- Normally, an inverted yield curve points to a policy mistake by the central bank, but not this time.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Stung by a plunge in Ireland, but the weakness was broad-based, overall.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The surge in gas prices adds to our conviction that inflation will remain high, despite a hit to EZ activity.
- A probable EZ recession is weighing heavily on the outlook for Switzerland’s economy in H2.
- EZ investor sentiment tumbled in September; it will sour further as the ECB continues to hike.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Germany is now likely entering a technical recession, but inventories and net trade are wildcards.
- The survey data in Germany are plunging, and real M1 growth is sinking without a trace...
- ...But near-real-time data are holding up and early hard data for Q3 have been robust.
Claus Vistesen (Chief Eurozone Economist)Eurozone
