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April 03, 2025

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ECB March Meeting Account – More Focus on Downside Risks than those on the Upside?
Freemium Article

03 April 2025 - 14:22

The Account of the Governing Council meeting on 5-6 March 2025 seemingly dwelt more on the downside risks posted by trade uncertainties than the upside risks posed by fiscal expansion plans across much of the EU.  It noted that not all members supported the proposal to lower the three key ECB inter

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U.S. Tariffs - the EZ/EU Response?
Paying Article

03 April 2025 - 10:24

The U.S is imposing a widespread tariff on the EU of 20%, higher and broader than expected, this based on U.S. calculation of an effective tariff rate of in effect 39 per cent, a figure the EU puts at about 1 per cent.  Moreover, rather than including factors such as VAT, and hygiene restrictions o

April 01, 2025

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EZ Data Review: Headline Edges Lower Again With Friendlier Services and Labor Market Messages?
Freemium Article

01 April 2025 - 09:45

Largely as expected, there was more supportive news in the March flash HICP numbers (Figure 1), with the headline down a notch and core down 0.2 ppt (the former to 2.2% and hence the lowest since last autumn).  Perhaps more notably services inflation slowed more clearly, dropping 0.3 ppt to 3.4%, a

March 28, 2025

Continuum Economics Calendar April 2025
Paying Article

28 March 2025 - 11:41

Data and Events Calendar April 2025.

March 25, 2025

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German & EZ HICP Preview (Mar 31/Apr 1): Headline Edges Lower Again With Friendlier Services Messages?
Freemium Article

25 March 2025 - 13:43

February HICP inflation numbers did deliver better news and broadly and less marginally so after revisions with the headline dropping 0.2 ppt to an as-expected 2.3%.  This ended a run of three successive rises and came about despite a rise in food inflation.  Regardless, the core also eased 0.1 pp

March 24, 2025

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Eurozone Outlook: At A Crossroads?
Paying Article

24 March 2025 - 10:45

·       For once in a long while, we have upgraded the EZ activity forecast and for 2026 actually to a notch above consensus thinking. However, the current backdrop still suggests that while the economy has been growing afresh it is doing so timidly, with downside risks persisting more clearl

March 18, 2025

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Uncertainty Over Pace and Scale of Extra European Defense Spending
Paying Article

18 March 2025 - 09:05

·       The crucial date for more clarity is the June 24-26 NATO summit.  Donald Trump might attend but will ask for more spending.  NATO head Rutte’s desire is for above 3% of GDP for NATO countries, but the politics and budget suggest that a 2.5% minimum may only be agreed with Germany

March 14, 2025

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Germany: Breakthrough in Attempt to Unlock Debt Brake?
Paying Article

14 March 2025 - 12:08

It does seem as if effective German Chancellor-elect Merz now has enough parliamentary support to amend the so-called debt brake and unlock more spending and borrowing to be directed toward added defense and infrastructure.  Thus, it does seem as if Germany and its economy are undergoing a sea-chan

March 06, 2025

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ECB Review: Disinflation Still On Track But Policy now ‘Work in Progress’
Paying Article

06 March 2025 - 15:01

Unsurprisingly, the ECB verdict was less important that the rhetoric. A sixth 25 bp discount rate was widely expected – and delivered - to 2.5%, but how wide the door is left open for further cuts may be more opaque.  This both reflects gauging the extent of any lingering degree of policy restric

March 05, 2025

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EZ Bilateral Trade Nuances with the U.S. – Its Imports Not Exports
Paying Article

05 March 2025 - 12:56

As the EU/EZ prepares for an almost certain trade spat if not trade war with the U.S. as the latter levies well-flagged and probably significant tariffs, we consider what is actually behind President Trump’s ferocity regarding bilateral trade.  As has been suggested widely, the EZ does not actual

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Germany Attempts to Unlock Debt Brake
Freemium Article

05 March 2025 - 07:42

Germany’s likely new Chancellor Friedrich Merz has (and as has been flagged since his election win last week) announced plans to amend the country’s constitutional fiscal restraints, the so-called debt brake and within the confines of the current parliament.  Merz said Tuesday evening the motto

March 03, 2025

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EZ HICP Review (Mar 3): Headline Edges Lower With Friendlier Services Messages?
Freemium Article

03 March 2025 - 16:17

February HICP inflation numbers may did deliver better news and broadly but only marginally so (Figure 1) with the headline dropping 0.1 ppt to a higher-than-expected 2.4%.  This ended a run of three successive rises and came about despite a rise in food inflation.  Instead, the core also eased’

February 27, 2025

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ECB Preview (Mar 6): Gauging Restrictiveness as Policy to be Eased Further
Paying Article

27 February 2025 - 13:55

As has been the case at most recent Council meetings, the ECB verdict is less important that the rhetoric. A sixth 25 bp discount rate is widely expected, to 2.5%, but how wide the door is left open for further cuts may be gleaned from any clear change in regard to how near(er) neutral policy the Co

Continuum Economics Calendar March 2025
Paying Article

27 February 2025 - 09:52

Data and Events Calendar March 2025.

February 26, 2025

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Eurozone: Gauging ECB Neutral Amid a Wandering R-Star
Freemium Article

26 February 2025 - 12:14

It is clear that, especially with another official rate cut due at the looming ECB Council meeting (Mar 6), the existing debate about how restrictive policy will be may only intensify.  Indeed, the debate is already quite vocal, led by the hawks who are trying to argue for policy pause at least. 

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Equities: Growth, Rates and Tariffs
Paying Article

26 February 2025 - 08:30

·        EZ equities still have further scope to outperform U.S. equities in the remainder of 2025 helped by further ECB easing/hopes of a Ukraine peace deal and U.S. equity market overvaluation restraining the U.S.  However, this can be volatile with uncertainty over the scale of U.S. tari

February 25, 2025

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Eurozone: Wages – Good News Comes in Threes?
Paying Article

25 February 2025 - 11:40

They say that good things often come in threes.  For the ECB, Q4 data on negotiated wages just released adds to both INDEED compiled wage indicator and the central bank’s own wage tracker data in suggesting softening if not very muted cost pressures, something we attribute to the rising EZ labor

February 24, 2025

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EZ HICP Preview (Mar 3): Headline Back Down With Friendlier Core Messages?
Paying Article

24 February 2025 - 15:34

February HICP inflation numbers may deliver better news and broadly so (Figure 1) and thus contrast with the mixed messages in the higher-than-expected January flash HICP numbers.  Indeed, for a third successive month in January, the headline rose but by ‘only’ 0.1ppt, to a six-month high of 2.

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Germany: A New but Hampered Government
Freemium Article

24 February 2025 - 08:53

The German election delivered few surprises with the electorate swinging even more clearly away from the political middle ground.  It clearly means that many difficult decisions lie ahead with questions over the effectiveness of the likely new government.  The result is only likely to inflame US c

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Ukraine Peace, U.S. Troop Withdrawals and Trump NATO Threats
Paying Article

24 February 2025 - 08:27

·       Our baseline remains of a Russia-friendly peace deal in Ukraine, but this need not lead to a weaker European security situation.  This is our baseline (Figure 1), but does require Europe to make concessions to the Trump administration on defence spending increases and trade. However,

February 21, 2025

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Eurozone: More Sobering Economic News
Freemium Article

21 February 2025 - 10:21

The February composite PMI data may have not fallen (stable at 50.2) and the weaker-than-expected outcome was dominated by sharp addition weakness in France, but the data will be uncomfortable reading for the ECB.   The data very much suggest that the better news regarding EZ consumer spending see

February 20, 2025

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Bunds and ECB Easing/Trump Tariffs
Paying Article

20 February 2025 - 08:03

          It is highly likely in April that the U.S. will announce a 25% tariff on EU cars and pharmaceuticals (here) and also reciprocal tariffs against the EU. The majority could be implemented given Trump’s desire to raise revenue/dislike of the EU as well as negotiate trade deals. This

February 18, 2025

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Europe: Economic Consequences of Likely Defence Build-Up
Freemium Article

18 February 2025 - 15:29

As Europe is forced to consider a massive and rapid ramp up to its relatively mediocre defence spending (Figure 1) as it contemplates a reduction in military support from the US, key questions emerge as the economic effect(s).  Will it boost or inhibit growth, add to inflation, and how will/should

February 13, 2025

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Europe’s Ukraine Political Fallout and Market Hopes
Freemium Article

13 February 2025 - 12:33

European politicians are surprised and angry at the U.S. stance on a peace deal for Ukraine and less military support for Europe, but eventually they will have to accept the new reality.  Europe is too divided to provide security guarantees to Ukraine on its own. A further increase and acceleration

February 11, 2025

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Europe’s Gas Problem Again?
Freemium Article

11 February 2025 - 08:30

The ECB staff forecasts on March 6 will be revised upwards for 2025 and 2026, due to the surge in wholesale gas prices.  However, the ECB will likely take the view that 2 round effects from higher gas prices on balance are unlikely to boost core inflation (especially given wage tracker softness) an

February 07, 2025

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Eurozone: The Neutral Rate – Probably Little Changed Recently Unlike Central Banks
Freemium Article

07 February 2025 - 13:14

A well-advertised research paper from the ECB suggests that the real neutral rate of interest for the EZ has not changed very much in the last few years but with a likely range of between -0.5% and +0.5%, but still well below estimates for what is so-called r* prior to the pandemic (Figure 1).  The

February 05, 2025

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Eurozone: Trump Taking Aim at the EU?
Freemium Article

05 February 2025 - 09:06

President Trump has made it clear that the EU is going to face US tariffs in the not too distant future.  Admittedly, tariff threats have been used as the basis for negotiation elsewhere, this may be the case for the EU too – as was the case during Trump’s first term.  As for the EU, it does h

February 03, 2025

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EZ HICP Review: Headline Rises Amid Still Friendly Core Messages?
Paying Article

03 February 2025 - 10:38

There were mixed messages in the higher-than-expected January flash HICP numbers.  For a third successive month, the headline but this time by ‘only’ 0.1ppt, to a six-month high of 2.5%, but where the core (again) stayed at 2.7%, partly due to what is seemingly relatively stable services inflat

January 30, 2025

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ECB Review: Policy Still Restrictive
Paying Article

30 January 2025 - 14:34

It was always likely that the ECB verdict at this month’s Council meeting would be less resounding than that seen in December.  A fifth 25 bp discount rate cut did occur, to 2.75%, but may not have seen any demand to at least consider a larger move as was the case last month.  But the door is le

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Eurozone Flash GDP Review: Momentum Missing as Divergence Continues?
Paying Article

30 January 2025 - 10:31

After a series of upside surprises, EZ GDP both weakened and undershot both consensus and ECB expectations in Q4 (Figure 1). There is a certain irony that for an ECB Council that has evidently shifted its main concern away from broadly falling inflation to real economy weakness, the soft Q4 GDP outc

January 29, 2025

Continuum Economics Calendar February 2025
Paying Article

29 January 2025 - 16:50

Data and Events Calendar February 2025.

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EZ Monetary Insight: Politics Making Banks More Risk Averse Accentuating EZ Divergences
Paying Article

29 January 2025 - 11:01

Ahead of what seems to be a routine decision tomorrow, recent monetary data complicate the policy outlook for the ECB in the months ahead.  Positively, ECB compiled money data show discernible signs of as revival in bank lending, even for companies, although still hardly any growth in real terms. 

January 27, 2025

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EZ HICP Preview (Feb 3): Headline to Slip Amid Friendlier Core Messages?
Paying Article

27 January 2025 - 11:42

There were mixed messages in the December HICP numbers.  For a second successive month, the headline rose 0.2 ppt, but to 2.4%, but where the core (again) stayed at 2.7%, partly due to what is seemingly stable services inflation.  Once again, higher energy costs, mainly base effects, were the main

January 24, 2025

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ECB Preview (Jan 30): A Staging Post in Easing Cycle
Paying Article

24 January 2025 - 10:32

It is unlikely that the ECB verdict at this month’s Council meeting will be anything like as resounding as that seen in December.  A fifth 25 bp discount rate cut is virtually assured, to 2.75%, but may not see any demand to at least consider a larger move as was the case last month.  Admittedly

January 22, 2025

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Eurozone Flash GDP Preview (Jan 30): Are Surveys Too Gloomy?
Paying Article

22 January 2025 - 11:33

There is certain irony that for an ECB Council that has evidently shifted its main concern away from broadly falling inflation to real economy weakness, its next policy decision arrives on the day of the next GDP release. We see the ECB cutting a further 25 bp but with some Council members again cal

January 16, 2025

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ECB December Council Meeting Account Review: The ‘Last Mile’ Appears to Have Shortened Somewhat?
Freemium Article

16 January 2025 - 13:27

As the account of the December 11-12 Council meeting noted, a fourth 25 bp discount rate cut was agreed but there appeared to be a minority wanting a 50 bp move. But this account also shows some confusion as to just what the advertised change in forward guidance (in which the ECB accepts that on-tar

January 14, 2025

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U.S. Yields Drag Germany and France Higher
Paying Article

14 January 2025 - 08:15

The EUR real exchange rate is well above the 2014 low, while ECB officials are guiding that more rate cuts are coming.  2yr German yields are unlikely to rise much further and will likely come back down in Q2 (here).  A January 30 ECB cut will likely build more easing expectations, though more of

December 31, 2024

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EZ HICP Preview (Jan 7): Headline Higher Again, But Core Still Clearly Friendly?
Freemium Article

31 December 2024 - 10:48

There were mixed messages in the November HICP numbers.  After a downward revision, and thus below consensus thinking, the headline rose 0.2 ppt to 2.2%, but where the core stayed at 2.7%, partly due to what is seemingly stable services inflation.  Higher energy costs, mainly base effects, were th

December 20, 2024

Continuum Economics Calendar January 2025
Paying Article

20 December 2024 - 14:33

Data and Events Calendar January 2025.

December 17, 2024

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Eurozone Outlook: Trump, Tariffs and the Possible Trade Tremor
Freemium Article

17 December 2024 - 08:16

 ·       Once again, it does seem as if EZ activity expectations are being pared back in line with our below consensus thinking, most notably for next year. The result is that while the economy has been growing afresh it is doing so timidly, with downside risks persisting more clearly into 2

December 12, 2024

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ECB Review: Clearly Flagging An End to Policy Restriction
Paying Article

12 December 2024 - 15:02

A fourth 25 bp discount rate cut at this latest Council meeting, to 3%, was also the third in a row. But this meeting was important for the (as we expected) change in forward guidance in which the ECB accepts that on-target inflation is likely to be durable enough so that it no longer has to pursue

December 05, 2024

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France: A Political Crisis But Not (Yet) a Fiscal One
Paying Article

05 December 2024 - 08:56

With a parliamentary no-confidence vote having toppled the Barnier administration convincingly, France has no government.  This far from unexpected development is a political crisis and one that even without the fiscal cuts that the failed Budget envisaged is likely to mean that the country also fa

December 04, 2024

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ECB Preview (Dec 12): Flagging An End to Policy Restriction
Paying Article

04 December 2024 - 15:53

While a larger move is possible, we think that the ECB will instead opt for a fourth 25 bp discount rate cut at this month’s Council meeting, to 3%. But this meeting may be as important for what may be a change in forward guidance in which the ECB accepts that on-target inflation is likely to be d

December 02, 2024

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France: The Beleaguered Consumer Hit Further by Fiscal Impasse
Paying Article

02 December 2024 - 17:07

As France’s political deadlock intensifies amid a likely toppling of the fledgling government, markets are worried about the fiscal fall-out of what may at best be emergency legislation, a so-called Special Law that would keep the country running, but with funding approved month by month.  To som

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Eurozone: What Services Inflation?
Paying Article

02 December 2024 - 13:28

While real economy considerations seem to have taken over as the policy focus for the ECB majority, there are still some mutterings about apparent resilient services inflation. The latter is certainly the case when such inflation is measured on the conventional but possibly untimely y/y basis.  How

November 29, 2024

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EZ HICP Review: Headline Higher, But Core Messages Still Friendly?
Paying Article

29 November 2024 - 11:04

There were mixed messages in the November flash HICP.  Matching consensus thinking, the headline rose 0.3 ppt to 2.3%, but where the core stayed at 2.7%, partly due to what is seemingly stable services inflation.  Higher energy costs, mainly base effects, were the main factor behind the rise back

Continuum Economics Calendar December 2024
Paying Article

29 November 2024 - 09:51

Data and Events Calendar December 2024.

November 28, 2024

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France Budget Deal or Crisis?
Paying Article

28 November 2024 - 12:54

Concerns about the 2025 French budget failing have caused new spread widening for 10yr France v Germany.  What are the prospects?If the new and still very much minority government reaches agreement with National Rally and passes the 2025 budget, then it will produce some relief in markets but will

November 27, 2024

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Eurozone: Measuring Monthly GDP Highlights Growing Weakness
Paying Article

27 November 2024 - 11:01

Getting a reliable coincident assessment of the EZ real economy, let alone any insight into the likely near-term outlook, is difficult.  EZ GDP data are prone to rapid revision, arrive only quarterly and only with a long lag offer detail from either the spending or output side that would allow a be

November 21, 2024

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EZ HICP Preview (Nov 29): Headline Higher, But Core Messages Still Friendly?
Freemium Article

21 November 2024 - 09:59

Slightly higher energy costs were the main factor behind the rise back in HICP inflation in October to 2.0% having fallen to a well-below target 1.7% in the previous month (Figure 1).  The outcome was a little higher than expected, not least with another apparently resilient services inflation read