German Q3 contraction: more than a blip?

Real GDP in Germany fell 0.2% q-o-q in Q3, compared with a 0.5% rise in Q2. This was below consensus and marks the first quarterly contraction in GDP since Q1 2015. The headline number looks horrible, but the market was prepared, as high-frequency data were already pointing in that direction. As usual, the Federal Statistical […]

US retail prices show limited signs of tariff effect

US core inflation (excluding energy and food prices) remains relatively muted, slowing slightly to 2.1% y-o-y in October, from 2.2% in September. The average over the past year is 2.1%. To some degree, the surprise was that prices did not increase more, especially given fresh tariffs on Chinese imports. In late September the Trump administration […]

After May’s divorce deal: the road ahead for Brexit

Theresa May’s cabinet has approved her divorce deal with the European Union (EU). A few cabinet secretaries have resigned, including Brexit Secretary Dominic Raab because the deal keeps the UK in a transitory ‘customs union’ with the EU, which in his view continues to give the EU too much influence on UK affairs. The next […]

China hard data for October reveals mixed picture

Hard data out of China for October was mixed. On the positive side, growth in infrastructure picked up, suggesting the government’s fiscal policy easing is taking effect in the real economy. Industrial production numbers stopped declining, and the mining sector has a particularly strong performance. Growth in fixed asset investment rebounded strongly in October, to […]

Italian government sticks to its 2019 deficit plan

In a letter to the European Commission on 13 November, the Italian government confirmed that it would aim for a budget deficit at 2.4% of GDP in 2019 and reasserted its real growth forecast of 1.5% for next year. Rome made only minor concessions to Brussels’ demand that it revise its fiscal plan. It committed […]


One-time Remain advocate, Jo Johnson (brother of leading Leave campaigner Boris), resigned from his position as minister of transport in protest at Theresa May’s handling of Brexit negotiations. Johnson’s departure signals an increased risk of no deal or a second referendum in our view, with a high level of uncertainty around the outcome persisting. Sterling’s […]

Euro area’s fiscal policy to turn supportive of growth next year

Euro area member states have all submitted their 2019 Draft Budgetary Plans (DBP) to the European Commission (EC) by now. These show that, collectively and based on EU Commission’s autumn forecasts, the euro area’s fiscal stance1 will turn supportive in 2019, although it varies significantly from one country to the next. Germany, Italy and the […]

Rising healthcare costs continue to be a hot-button issue in US politics

Healthcare policy was a key theme in the midterm elections and it seems that Democrats capitalised on this popular anxiety better than Republicans (they gained enough seats in the House of Representatives to secure a majority). Indeed, one of President Trump’s key failures over the past two years has been around healthcare policy. The Congressional […]

China’s days of current account surplus may be behind it

Over the first three quarters of this year, China ran a current account deficit of USD12.8 billion. It looks likely that China will see its first full-year current account deficit in over two decades in 2018. We believe that China’s current account position is going through structural change, driven by two trends. The first is […]

Trump fails to upset the law of (midterm) gravity

As predicted, Democrats gained enough seats in the House to form a majority (their first since Barack Obama’s first term). As also expected by polls, they lost seats in the Senate, where they remain a minority. With a Congress that will likely be gridlocked, legislation, including tax legislation, is likely to be meagre, leaving the […]

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