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Limited market reaction to Catalan developments

On 27 October, the Catalan parliament voted for a unilateral declaration of independence. The same day, the Spanish senate approved the terms of application of Article 155 of the constitution, allowing Madrid to impose direct rule on Catalonia. Prime Minister Mariano Rajoy called a snap election in Catalonia for 21 December, earlier than any dates […]

ECB QE composition – some degree of constructive ambiguity

Arguably, the most important aspect of last week’s ECB quantitative easing (QE) announcement was that the programme will remain open-ended. As we have long suggested, the pledge to extend asset purchases beyond September 2018 can only be credible if there are enough German Bunds for the ECB to buy. Bund scarcity could be addressed through […]

The U.S. economy is doing fine

US GDP grew 3.0% q-o-q SAAR in Q3 2017, pushing up the y-o-y print to 2.3%. In a word, the US economy is doing fine, although it still lacks sparkle. The impact of August hurricanes was barely perceptible. IT investment was particularly solid, rising 8.6% y-o-y, but consumer spending growth was tepid (up 2.6% y-o-y), […]

A buoyant euro area labour market

Recent economic crises took a heavy toll on the employment level in the euro area, with almost five years of uninterrupted employment losses. Between its pre-crisis peak in the first quarter of 2008 and the second quarter of 2013, euro area employment levels fell by 3.6%, or more than 5.5 million. However, since hitting a […]

Bend it like Draghi

The European Central Bank’s (ECB) decisions today were in line with our and consensus expectations, including a slower pace of asset purchases (rescaled from EUR60bn to EUR30bn per month), a longer and open-ended extension (until September 2018, or beyond if necessary), and stronger forward guidance (committing to keeping policy rates at present levels until “well […]

China: Xi might stay beyond a second term

The Central Committee of the Chinese communist party convened for the first time on 25 October to elect the new Politburo and the Politburo Standing Committee (PSC). Unsurprisingly, Xi Jinping and Li Keqiang were both re-elected as members of the PSC, and Xi was reappointed general secretary of the Party. The other five seats went […]

Swiss economy scores in international sports events

According to SECO’s estimates, the Swiss economy contracted in the final quarter of 2016, while Q3 2016 and Q1 2017 figures were revised down. The downturn in SECO’s GDP figures was exacerbated by special effects related to the inclusion of sports events in the “Art, entertainment, recreation and other services” sector. “Art, entertainment, recreation and […]

Stagnant tax collection is a further challenge to tax cuts

US fiscal year 2017, which ended on September 30, did not end on a high note. The deficit rose to 3.5% of GDP, edging up 0.3 percentage point from fiscal year 2016. This deterioration stands in stark contrast to the overall improvement in the US economy. GDP growth remains above potential, and unemployment has been […]

Broad-based rebound in euro area credit demand

The ECB’s October Bank Lending Survey (BLS) indicated that credit standards were broadly unchanged in Q3, while some modest easing was expected in Q4. The brightest spot is loan demand, which is expected to rebound for all types of loans moving forward. Net demand for bank loans to enterprises increased further in Q3, in line […]

Small dip in headline PMI hides robust domestic momentum

The euro area composite flash PMI declined to 55.9 in October, from 56.7 in September, below consensus expectations, led by a drop in the services sector which offset an increase in manufacturing. However, survey details were fairly strong, especially in terms of job creation. In Germany, the survey points to robust private sector growth. The […]

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