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Below is a list of our Eurozone Publications for the last 6 months. If you are looking for reports older than 6 months please email firstname.lastname@example.org, or contact your account rep
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In one line: Stabilising but still depressed.
Higher inflation for longer will lead to higher interest rates, which will support banks’ interest margins.
This implies higher profits, which makes bank equities attractive right now.
But risks to the profit outlook remain in the form of windfall taxes and falling demand for loans.
Strong EZ macro data signal a 50bp hike in September, but we no longer see a hike in February.
The German economy stalled in Q2, setting the scene for a technical recession in H2....
...EZ GDP rose by a solid 0.7% q/q in Q2, but we think it will be revised lower in time, probably to 0.4%.
The slowdown in real M1 growth continues to suggest that the EZ economy is now in recession.
ISTAT’s ESI for Italy for July supports our view that Italy, with Germany, will be drags on EZ activity in Q3.
Consumers are shifting their attention to the worsening economic environment.
Russian gas will soon flow to Europe again, but at a severely reduced rate; a full shutdown remains likely.
The IMF estimates that Europe will be short some 50bcm gas if Russian supplies are halted, at best.
Only demand compression, via higher prices and or rationing, solves this problem; it will sting.
EURUSD is closing in on parity and it won’t stop falling there; don’t buy the dip yet.
We think French GDP rose by 0.4-to-0.5% q/q in Q2, better than the INSEE estimate...
...But we are less optimistic than the statistical office on H2; we see growth of just 0.1% in Q3 and Q4.
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.
Forecasting recessions is risky, but that’s where we think the EZ is headed, all the same.
A thawing of the relationship with Russia and excess household savings could prevent the downturn...
...So could stronger-than-expected capex and net exports; we doubt any of these will ride to the rescue.
The Spanish economy gained steam in Q2, and probably will do so again in Q3, thanks to tourism.
Italy’s economy will not be so lucky. We have revised down our forecast for H2 & now expect a recession.
One-off fiscal measures in Germany will result in uncomfortably high EZ core inflation for longer.
Consumer confidence in the Eurozone is still falling, and we see little relief in the near term.
Household sentiment is consistent with our forecast for falling consumers’ spending in H2...
...But the slowdown won’t feel anywhere near as bad as in 08 and 11/12, when activity was crushed.
Bond markets are starting to take a more nuanced view of the data; are inflation fears fading?
The fall in the IFO BCI in June suggests a German recession is coming, consistent with our baseline.
Italy’s IESI held up in June, but consumers are now feeling the pinch from soaring inflation.
Gas prices are rising again, as the Kremlin cut flows to some EU countries and US supply hit snags.
This is laying the groundwork for government controls on energy usage by firms; rationing is here...
...Still further upside for gas prices is likely, keeping energy inflation and the headline rate elevated.
Mortgage rates in the EZ tend to trend in line with the main ECB policy rates, so they will rise this year.
Around a fifth of mortgages incur a variable rate and so are sensitive to changes in ECB policy rates.
Households can withstand higher borrowing costs, but growth in house prices will slow significantly.
Survey data point to a relatively robust French economy, but we still see a slowdown in H2.
We expect 3.0 full-year growth in France in 2022, down 0.7pp from our previous forecast.
Consumption in France will suffer from higher inflation, but we’re betting on solid growth in capex.
Italy will probably avoid entering a technical recession in Q2, as services activity rebounds strongly...
...But we now expect an EU ban on gas imports from Russia, which will weigh on growth in H2.
Our forecasts for Spain are unchanged from March as recent developments offset each other.
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