Pantheon Macroeconomics

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Companies ECB

29 Oct 2021 Either Markets aren't Listening to the ECB, or they Don't Believe it

Ms. Lagarde pushed back against rate expectations yesterday, but markets didn't listen. A deposit rate hike in 2022 would mean a swift end of QE next year; that won't happen. Eurozone inflation likely blew past the consensus again in October; we look for a headline of 4% y/y.

Claus Vistesen and Melanie DebonoEurozone

28 Oct 2021 The ECB will Push Back Against Rising Rate Expectations Today

Rising rate expectations are at odds with the ECB's forward guidance; we expect a push-back today. We still think the PEPP will end in March, but don't look for a clear signal today either way. Mixed consumer confidence data in the core, and a slowdown in headline EZ money supply growth.

Claus Vistesen (Chief Eurozone Economist)Eurozone

21 Oct 2021 EZ Inflation is Still Red Hot, but a Cyclical Peak is Close

Euro area energy inflation will rise further in Q4, but we think the core rate has peaked. Risks are tilted towards persistently high core and headline inflation in the next 12 months... ...But that doesn't justify the leap in Eurozone rate expectations in the past few weeks.

Claus Vistesen (Chief Eurozone Economist)Eurozone

19 Oct 2021 EZ Equity Earnings are Rising, but Can the Upturn Continue?

EZ equity earnings have recovered handsomely this year, leaving valuations more attractive. Markets still expect strong earnings growth in the next 12 months; the macro data suggest otherwise. The pace of policy tightening implied by global rate expectations will soon be an issue for EZ equities.

Claus Vistesen (Chief Eurozone Economist)Eurozone

15 Oct 2021 Core Inflation in Germany Will Rise above 3% in the Fourth Quarter

German core inflation is still rising; we think it will hit 3%-plus in Q4, before easing in January. Electricity inflation in Spain is still rocketing, threatening consumer's real incomes and industry. Core inflation in Spain is now back at its pre-virus rate; should we be looking for an overshoot now?

Claus Vistesen (Chief Eurozone Economist)Eurozone

14 Oct 2021 How Much Fiscal Support for the French Economy Next Year?

The burden of adjustment in France's budget deficit in 2022 will fall on lower expenditures... ...But the preliminary budget looks overall growth friendly; it will be 2.0pp wider than before the virus. We see an outsize risks of tax hikes in H2 22, and yields will have to rise as ECB support wanes.

Claus Vistesen (Chief Eurozone Economist)Eurozone

13 Oct 2021 GDP Growth Forecast Down and Inflation Forecasts Up in the EZ?

We look for lower consensus growth forecasts in Q4, even as inflation forecasts advance further. Fiscal stimulus is a wildcard for 2022 GDP forecasts, but near-term risks remain tilted to the downside. Stagflation risks are real, warning of less potent fiscal stimulus and a more constrained ECB.

Claus Vistesen (Chief Eurozone Economist)Eurozone

6 Oct 2021 How to Understand and Use Inflation Expectations in the EZ

EZ inflation expectations don't predict inflation, but they're not entirely without value either. Industrial production in France rose again in August; Q3 as a whole likely was decent. We think the PMI surveys are underestimating actual GDP growth in Q3, especially in Spain.

Claus Vistesen (Chief Eurozone Economist)Eurozone

1 Oct 2021 Another Month, Another Upside Surprise in the EZ Inflation Data

EZ inflation rose further in September, probably by 0.5pp to 3.5%, higher than the consensus, 3.3%. Core inflation in the EZ was lifted by gains in Italy and Germany in September. The rate of improvement in the EZ labour market is now slowing, but unemployment is still falling.

Claus Vistesen (Chief Eurozone Economist)Eurozone

29 Sept 2021 The ECB is on Team-Transitory on Rising Inflation in the EZ, for Now

Ms. Lagarde strikes a dovish tone at the ECB Forum, but sticks to the script that PEPP will end in Q1. Rate expectations have increased substantially in the EZ; we doubt the ECB is happy with this. Solid consumer sentiment data in France and Germany offer contrast to soft business surveys.

Claus Vistesen (Chief Eurozone Economist)Eurozone

28 Sept 2021 A Traffic Light or a New Grand Coalition in Germany

Germany will get a Traffic Light or a new Grand Coalition, but we don't dare bet on either outcome. Slower growth in EZ real M1 points to a further dip in the composite PMI to about 55 in Q4. Bank lending to non-financial firms is now rising again, slightly; the trend has slowed.

Claus Vistesen (Chief Eurozone Economist)Eurozone

23 Sept 2021 Another SNB Snoozefest; Limited Impact from Evergrande on EZ

No one expects any changes at the SNB today, us included; we think policy will be on hold until 2024. The CHF will strengthen to the end of the year, but not enough to warrant significant FX intervention. Markets are worried about Evergrande--rightly--but contagion is limited, for now.

Claus Vistesen (Chief Eurozone Economist)Eurozone

22 Sept 2021 A New Chancellor in Germany, but Same-Old Murky Coalition Politics

The polls in Germany have stabilised, pointing to an inconclusive result in Sunday's vote. The SPD's Olaf Scholz likely will be Chancellor, but the route to a stable coalition isn't clear. All eyes on the combined tally of the SPD, the Greens, and Die Linke; +50% and bunds will suffer.

Claus Vistesen (Chief Eurozone Economist)Eurozone

21 Sept 2021 Inflation Next Year Will be a Challenge for the ECB and Markets

Our 2022 core inflation forecast signal that trouble is brewing for markets and the ECB. Core inflation will fall in Q1, but it will be back at just under 2% by spring, and through the summer. The ECB will stay dovish, but it will lift its inflation forecasts further; this will unsettle markets.

Claus Vistesen (Chief Eurozone Economist)Eurozone

16 Sept 2021 EZ Wages are Back to Pre-Virus Levels, and More Gains to Come

Growth in EZ hourly labour costs plunged in Q2, but other, more timely, data point to robust wage gains. Ms. Lagarde's comments last week suggest that we should watch negotiated wages closely in H2. We see few signs of accelerating wage growth in 2021 collective bargaining agreements, yet.

Claus Vistesen (Chief Eurozone Economist)Eurozone

15 Sept 2021 Will High, and Rising, Gas Prices Keep EZ Inflation Elevated?

The trend in oil prices suggests energy inflation will soon fall and even turn negative next year in the EZ... ...But high, and rising, gas prices will offset this impact, keeping energy inflation sticky. We doubt this will lead the ECB to taper more quickly, particularly if some restrictions return in winter.

Claus Vistesen (Chief Eurozone Economist)Eurozone

14 Sept 2021 How to Think about the Trajectory of EZ Fiscal Policy Next Year

EZ fiscal policy will tighten next year, but it will remain much more supportive than before Covid.  EU grants will fund public expenditure to the tune of about 0.5% of GDP in 2022, mostly in the South. Public investment as a share of GDP was rising before the virus; we think this trend will continue.

Claus Vistesen (Chief Eurozone Economist)Eurozone

10 Sept 2021 A Slight Slowdown in PEPP is Coming in Q4, as Expected

The ECB will slow the pace of PEPP in Q4, probably by around €20B, to €60-€70B per month. Bond yields fell as Ms. Lagarde spoke, but will the ECB's decision on PEPP in Q4 satisfy markets? The German trade surplus snapped back in July, as imports plunged; more of the same is coming.

Claus Vistesen (Chief Eurozone Economist)Eurozone

9 Sept 2021 The ECB will Signal a Slower Q4 Pace of PEPP Purchases Today

The ECB will announce a slowdown in the pace of PEPP today, but markets likely won't flinch. The central bank's new forecasts will deliver upgrades to the outlook for growth and inflation. Trade data in France suggest that tourism is rebounding, but a full recovery is still a way off.

Claus Vistesen (Chief Eurozone Economist)Eurozone

8 Sept 2021 A V-Shaped Recovery in the EZ Economy is Now in Sight

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

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