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UK: GDP hit from November less bad than in spring

UK real GDP contracted by 2.6% mom in November as the return of lockdowns to contain the spread of the SAR-CoV-2 virus curtailed economic activity. It follows a gain of 0.6% in October. Albeit from a much lower base - after only a partial recovery during the summer from the initial pandemic shock - the initial hit from the winter wave of the pandemic appears to be much less bad than expected. If economic output remained at the November level in December, real GDP would have increased by 0.3% qoq in Q4 – largely due to the big carry over from the rapid monthly gains through Q3. Although output…

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German economy 2020: a year (never) to forget

The Covid-19 pandemic wreaked havoc on the German economy in 2020 and thus crushed our early 2020 expectations of a return from near-stagnation to trend growth following the Trump-led trade wars in 2019. According to a first estimate of Germany’s statistical office Destatis, German real GDP contracted by 5.0% (or 5.3% calendar-adjusted) in 2020 – the first contraction after ten years of growth.

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Political crisis in Italy: a cause for concern?

Italian prime minister Giuseppe Conte has lost a small coalition partner which had – so far – granted him a majority in parliament. The political crisis in the midst of the second wave of the pandemic shines a spotlight on Europe‘s long-standing top political risk: if new elections were to sweep anti-EU populists to power in Rome (or in Paris in 2022), the Eurozone could be in for some turbulence.

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COVID-19 in Europe: weekly update and slidepack

After a major fall in November the number of daily new infections is edging up again in Europe. Worryingly, they are rising from a still-high level.

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European PMIs: resilient December - setback in January?

The major European economies fared better than expected in the first two weeks of December according to the latest PMI surveys published today. The surprisingly strong improvement in the composite PMIs for the Eurozone reflects the easing of the tough virus restrictions across some major economies such as France as well as strong manufacturing activity. Lengthening delivery times caused partly by transport bottlenecks also played a role, artificially raising the results for manufacturing, especially in Germany and the UK.

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German politics after Merkel: stability or trouble ahead?

Three stages to choose a successor: German Chancellor Angela Merkel has shaped European politics like few other leaders in the past 15 years. She will leave office at the end of her fourth and final term next autumn. The three-stage process to replace her has just started.

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European update: growth, fiscal deal, ECB, Brexit

Ahead of another but now almost final Brexit deal deadline tonight, let us lean back and take a look at the bigger European picture. Although the economic situation looks set to worsen near-term due to a renewed rise in Sars-CoV-2 infections, the medium-term outlook remains unusually bright.

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ECB flash: no big surprises, more of the same for longer

The ECB has delivered on its promise to recalibrate its instruments. The just announced policy package is broadly in line with our and market expectations. Without easing the policy stance further, the ECB plans to extend it beyond mid-2021 to maintain the current favourable financial conditions.

 

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ECB: extending a helping hand for longer

More support for longer. The European Central Bank (ECB) today delivered roughly what markets and we had expected. This may have been the ECB’s last big push to fight the Covid-19 recession, but it remains to be seen whether it is its last big push to fight low inflation. In response to a yet again sizeable downgrade in inflation projections and a first 2023 inflation estimate of just 1.4%, the ECB vowed to maintain very favourable financial market conditions well into 2022.

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ECB preview: extend and enhance

Baring a major surprise, the ECB will announce a significant policy package next Thursday. Instead of easing its policy stance much further, the ECB Governing Council looks set to extend its current set of measures until at least the end of 2021 to maintain favourable financial market conditions. The ECB will probably also counteract a potential further tightening in bank credit standards and slightly enhance the transmission of its policy stance.

 

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COVID-19 in Europe: weekly update and slidepack

Further progress in Europe and first positive signs from the US: The second wave of the pandemic has receded for the fourth consecutive week in Europe. In the US, the recorded number of infections has also started to fall. However, the US per-capita rate of new infections is twice that of Europe. Despite the progress, daily new infections on both sides of the Atlantic remain well above their respective peaks in March and April.

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Cancelling ECB-held debt? The worst idea of the year

In response to the Covid-19 mega recession, debt ratios are surging across the advanced world. At the same time, central banks are gobbling up most of the increase in public debt through their asset purchases. Perhaps unsurprisingly, a few pundits and mid-level officials in Southern Europe have started to ponder a seemingly attractive idea: to reduce the debt burden of Eurozone member states, the European Central Bank (ECB) should simply cancel all or much of the public debt it has bought.

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Rapid rebound in 2021: but what could go wrong?

Trade tensions contained, the pandemic is brought under control, Brexit will be sorted one way or the other. The economic outlook for 2021 is unusually positive for advanced economies and many emerging markets. After a still dark winter, spring and summer should be bright once seasonal factors help to contain the spread of the Sars-CoV-2 virus in the Northern hemisphere.

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On our research portal

Every week we present a different chart on current develop­ments toge­ther with our in-depth analysis and offer you our assess­ments.

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On our research portal

Every week we provide you with a fore­cast of the economic develope­ment in the most impor­tant economies.

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COVID-19 in Europe: weekly update and slidepack

Further progress in infections: The second wave of the pandemic is receding gradually in major parts of Europe. The number of daily new infections has fallen sharply in Belgium, France, the Netherlands and Spain. Recorded cases have also started to roll over in Italy and the UK. Despite the progress, daily new infections remain at high levels, well above the peak during the first wave. In the US, the pandemic is still getting worse. While the daily number of recorded new cases is no longer rising exponentially in the US, it is now well beyond the European peak from early November on a…

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German Ifo falls by less than expected

Less bad than expected: In response to a renewed partial lockdown in November and the likely extension if not tightening of restrictions until 20 December, German business climate soured for the second consecutive month in November according to the Ifo survey. But in line with the German PMIs yesterday, the Ifo data held up better than expected.

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European PMIs: November setback smaller than in spring

The second lockdowns are significantly weighing on economic activity in Europe, but much less so than the first lockdowns did in March and April. While the major setback in the European PMIs suggests that November is a month to forget, markets have good reasons to largely look through the data.

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European update: growth, Covid-19, fiscal deal, Brexit

Despite serious near-term risks, the overall balance of risks for 2021 is tilting to the upside courtesy of Joe Biden, vaccine hopes and some progress on European fiscal issues. Once the second wave of the pandemic has run its course, the growth outlook will likely be unusually positive for the European continent in 2021 and 2022.

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Eurozone inflation: an even stronger case for the ECB to act

Despite the record-breaking rebound of the Eurozone economy in the summer months from the mega-recession in March/April, inflation pressures remained very subdued in October, that is just before major parts of Europe tightened restrictions or imposed new lockdowns to contain the second wave of corona infections.

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EU summit preview: €1.8trn deal at risk?

EU leaders will have three tough nuts to crack at their virtual summit this Thursday: the EU’s financial future, a more coordinated approach to the second wave of the corona pandemic, and the chances for a modest post-Brexit deal with the UK. The first of these three will shape the future of the EU even more than the two other issues.

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On our research portal

As required, we publish in-depth analyses on important individual topics and long-term outlooks such as the Euro Plus Monitor or Strategy 2030.

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COVID-19 in Europe: weekly update and slidepack

Infection numbers are falling in major parts of continental Europe: After an almost exponential surge in recorded SARS-CoV-2 infections from early October until early November across continental Europe, case numbers have rolled over in some heavily affected countries and have started to stabilise in some others.

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ECB: greener and even more supportive

Last week, I took part in the European Central Bank’s annual “Forum on Central Banking”, this time held virtually rather than at Sintra.

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