Author Archive

ECB: see you in autumn

At its July meeting, the ECB made no change in its monetary policy statement, as we expected. Importantly, the bias for QE extension “in terms of size and/or duration” was kept in the statement. ECB president Mario Draghi mentioned that the Governing Council (GC) was unanimous in communicating no change to forward guidance. Draghi reiterated […]

Rise in our growth forecast for the euro area

Euro area Q1 GDP growth was today revised up to 0.6% quarter on quarter, from 0.5% in the previous estimate. This revision reflects large adjustments in several countries, and mechanically pushes our annual growth forecasts higher. We now expect euro area real GDP to grow by 1.9% on average this year, after 1.7% in 2016 […]

Euro area growth on track to reach at least 1.5% in 2017

According to Eurostat’s preliminary flash estimate released today, euro area real GDP expanded by 0.5% q-o-q in Q1 2017 (+0.455% q-o-q; 1.8% q-o-q annualised; 1.7% y-o-y), slightly above consensus expectations (0.4%). This flash estimate confirms that most business confidence surveys overestimated growth at the beginning of the year, with the ‘true pace’ of economic expansion […]

Distorted rebound in core euro area inflation

The big story from today’s set of economic data releases was the sharp rebound of euro area core HICP inflation, from 0.7% to 1.2% in April. While the ECB should welcome the news, our analysis points to large statistical distortions which will likely be reversed in the months ahead. We expect euro area core HICP […]

Bank lending gives no ground for ECB to change stance

Credit standards on loans to euro area enterprises eased in Q1, according to the ECB’s Bank Lending Survey (BLS), released today. Although banks expect a small net tightening of credit standards across all loan categories in Q2, credit conditions remain broadly favourable in the euro area. Demand for credit continued to rise in Q1, albeit […]

U.S. job creation slows but unemployment drops to a new record low

Non-farm payrolls increased by 98,000 m-o-m in March, well below consensus expectations (180,000). Adverse weather conditions likely weighed on the aggregate numbers. Moreover, job creation averaged 177,000 in Q1 2017, above the Q4 average of 147,000. Importantly, the US unemployment rate fell to a new cycle low of 4.5% in March, from 4.7% in February. […]

Euro area: reconciling soft and hard data

Recent composite purchasing manager surveys for the euro area are consistent with a growth rate of about 0.7% q-o-q in Q1, above our projection of 0.4%, and are pointing to similar levels of growth in Q2. More generally, ‘soft’ survey data and ‘hard’ activity data have been diverging significantly of late, with large differences across […]

Another spectacular rise in euro area PMIs

The average composite PMI is now consistent with a GDP growth rate of about 0.6% q-o-q in Q1, above our forecast. At the same time, hard data came in slightly weaker than expected, suggesting that business surveys might be overstating the pace of growth to some extent. As a result, we are keeping our growth […]

Euro area fiscal stimulus prospects

There has been growing evidence of a shift in the policy mix of various developed economies, from monetary to fiscal. In the euro area, we have likely entered a new cycle where the combination of austerity fatigue and greater flexibility on spending rules leads to more sustained fiscal support, however sub-optimal and uneven across countries […]

PMI survey signals sustained euro area expansion in Q1

The euro area composite flash PMI surged to 56.0 in February, the highest reading since April 2011. The main boost came from a surge in the services index due to strong data in Germany and France. The euro area average composite PMI is now consistent with a GDP growth rate of about 0.6% q-o-q in […]

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