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Macro News

  • 03.05.2017 — EUROZONE RECOVERY GAINS TRACTION

    Eurozone GDP, Q1 (qoq, in %)   Actual:0.5Previous:0.5Consensus:0.5Berenberg:0.4      The Eurozone recovery is broadening, firming and becoming more resilient: The Eurozone economy expanded by 0.5% (0.46%) qoq in Q1, in line with consensus expectations and at a similar rate as in Q4 (revised up last week from 0.4% to 0.5% qoq). In a year beset with serious political risks, the economy got off to an encouraging start. With major uncertainties from elect (...)

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  • 03.05.2017 — UK UPDATE: CONSEQUENCES OF THE UK-EU BREXIT CLASH

    WHAT SHOULD WE TAKE AWAY FROM THE EARLY UK-EU HEADBUTTING?Why can’t we be friends? The recent comments from senior EU officials about Britain’s ‘delusions’ over what can be achieved during the Brexit negotiations indicate the stark difference between the starting positions of the UK and the EU. While Britain wants free trade in goods, services and capital without many strings attached, other EU members see the EU as a much more complex economic and political project. Issu (...)

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  • 02.05.2017 — POLITICAL UPDATE: LE PEN, BREXIT, RENZI, MERKEL, GREECE

    FRANCE: A SLIGHTLY TIGHTER RACEFive days ahead of the decisive vote on 7 May, the French presidential race has tightened slightly. Four of the last five opinion polls put support for the centrist reformer Emmanuel Macron at 59% versus 41% for far-right Marine Le Pen, with one poll at 61% for Macron. A week ago, the polls had projected 62% on average for Macron. To broaden her base, Le Pen has struck a deal with ultra-Gaullist Nicolas Dupont-Aignan, promising to appoint him as prime minister in r (...)

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  • 28.04.2017 — UK Q1 GDP: BACK TO REALITY, BUT THE OUTLOOK REMAINS POSITIVE

    Par for the course: After an unexpected surge in real GDP growth in the second half of 2016, with the data beating expectations for the previous two quarters in a row, the economic expansion eased sharply in the first quarter of 2017. (...)

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  • 28.04.2017 — ECB MONETARY POLICY IS WORKING

    The ECB’s monetary stimulus is reaching the real economy. The further advance in loan growth in March points to firm consumer demand and more business investment ahead.  (...)

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  • 28.04.2017 — US: FED’S PREFERRED WAGE MEASURE ACCELERATES IN Q1

    The US Employment Cost Index (ECI), a quarterly measure of wages, rose by 0.8% q/q (+2.4% yr/yr) in Q1 2017, its fastest quarterly rate of growth since Q4 2007. As usual, we advise caution in drawing conclusions from one data point and prefer to wait for more evidence of a sustained acceleration in wage growth. That said, the Q1 acceleration in the ECI which the Fed watches very closely will likely encourage the Fed to raise its policy rate again in June, to ensure that it does not fall further (...)

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  • 27.04.2017 — TRUMP, LE PEN, AfD: COPING WITH THE POLITICS OF ANGER

    So far so good: Four months into 2017, the major risks we had discussed in our Global Outlook at the start of the year have receded somewhat.  (...)

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  • 27.04.2017 — UK GROWTH: 10 REASONS TO BE OPTIMISTIC FOR 2017

    Bad news sells: Sometimes we need to ignore the headlines. UK GDP data for Q1 due tomorrow at 9:30am will likely show that the quarterly growth rate slowed to 0.4% qoq from 0.7% in Q4.  (...)

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  • 27.04.2017 — ECB: TOWARDS THE EXIT AT A SNAIL'S PACE

    The ECB is edging closer to the exit at a snail’s pace. However, it is still far away from it.  (...)

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  • 26.04.2017 — TRUMP’S TAX REFORM PROPOSAL - THE ADMINISTRATION STEPS UP TO BAT

    President Trump’s roll out of the Administration’s tax reform proposals represents a shift in gears that jumpstarts deliberations that will lead to enactment of significant tax policy changes. (...)

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  • 25.04.2017 — EUROZONE: A FIRMER ECONOMIC RECOVERY

    Life is full of risks. Politics could still go badly wrong in France. But with Macron in the pole position to be the next French president, the tail risks in the Eurozone have receded further. (...)

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  • 24.04.2017 — FRANCE: HOPE SEEMS TO BEAT ANGER

     France yearns for change. But what kind of change? After centrist reformer Emmanuel Macron qualified today for the 7 May run-off round of the French presidential election, chances are that France will get the economic reforms it needs to revive its fortunes and catch up with Germany and that France, Germany and their partners will work together to strengthen the cohesion of the Eurozone and the EU. (...)

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  • 24.04.2017 — GERMAN IFO CLIMBS FURTHER, STRONG Q1 TO CARRY INTO Q2

    Germany enjoying a little boom: According to the Ifo survey, the business climate improved in April to the highest since July 2011 (from 112.4 to 112.9). While political risks stemming from the French presidential elections weighed on expectations (down to 105.2, after 105.7), a strong improvement in the assessment of the current situation lifted overall sentiment (121.1 from 119.5 in March, see chart 1). (...)

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  • 21.04.2017 — EUROZONE PMIS CARRY STRONG MOMENTUM INTO Q2

    Eurozone business activity rises to six-year high, despite political risks stemming from the upcoming French elections. According to flash PMIs, the upswing registered in Q1 may gain further momentum in the second quarter.  (...)

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  • 21.04.2017 — US: SALES OF EXISTING HOMES JUMP TO POST-RECESSION HIGH IN MARCH

    Sales of existing homes rose by 4.4% to an annualized 5.71mn in March, a post-recession high. The strong gains come despite a very short supply of for-sale homes that is placing upward pressure on prices. Home prices increased by a sizable 6.8% yr/yr, a double-edged sword which increases net worth for existing home owners but keeps some potential home buyers on the sidelines. (...)

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  • 20.04.2017 — US REGIONAL MANUFACTURING SENTIMENT WEAKENS BUT UNDERLYING DETAILS SOLID

    The two major regional manufacturing surveys – Empire State and Philadelphia Fed – released thus far in April have revealed an interesting trend with the headline indexes (general business conditions) moving lower, indicating that the post-election euphoria is diminishing, but the underlying components continue to increase or are posting smaller declines than the headline indexes. (...)

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  • 18.04.2017 — POLITICAL UPDATE: FRENCH AND GERMAN POLLS

    The four-way presidential election race in France has tightened slightly further. Five days ahead of the first round on 23 April, opinion polls show a further gain for ultra-left insurgent Jean-Luc Melenchon to an average of 19.4% after 18.0% five days ago. (...)

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  • 18.04.2017 — US: SOLID Q1 FOR NEW RESIDENTIAL CONSTRUCTION AND MANUFACTURING PRODUCTION

    The headline GDP number will be unflattering in Q1, due to temporary factors holding back private consumption and possibly the statistical quirkiness that has held down reported Q1 growth. This masks the solid improvement in both housing and business fixed investment which underperformed significantly in prior quarters – a welcomed support to private consumption that was the only real driver of growth in 2016. The data received today provide further support of these recent trends. (...)

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  • 18.04.2017 — UK: 8TH JUNE 'BREXIT' ELECTION RAISES RISK OF 'HARDER' EU EXIT

    PM May seeks to strengthen her mandate: Rebuking previous promises not to hold early elections, Prime Minister Theresa May today announced that she wants to hold a snap general election on 8th June.  (...)

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  • 14.04.2017 — SOFT US CPI PARTLY DUE TO ANOMALOUS FACTORS AND CORE RETAIL SALES STRONG

    The Consumer Price Index (CPI) declined by a sizable 0.3% m/m (+2.4% yr/yr) in March due to lower retail gasoline prices and a stunning 0.1% m/m decline in the core CPI (excludes food and energy) – the first decline in this metric since January 2010 – pulling the yr/yr gain down 0.2pp to 2.0%. The downward surprise came in prices for wireless telephone services, which fell by 7% m/m - the largest decline in the 20 year history of the series – and subtracted 0.1pp from the headl (...)

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  • 11.04.2017 — UK: RISING INFLATION TAKES A BREATHER - BUT IT WON'T LAST, OR BE THAT BAD

    A temporary breather in March: After accelerating by more than expected in February, inflation stabilised in March (2.3%). But it won’t last.  (...)

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  • 11.04.2017 — GERMAN SENTIMENT IMPROVES FURTHER: ZEW BACK TO AUGUST 2015 LEVEL

    German economy enjoying a little boom: The headline expectations indicator of the ZEW survey jumped to its highest level since August 2015.  (...)

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  • 07.04.2017 — US MARCH JOBS SLOWDOWN ATTRIBUTABLE TO BAD WEATHER

    The BLS’ measure of US job growth surprised to the downside in March, rising by a meager 98k, as an unseasonably severe snowstorm during the survey period distorted estimates. Besides the weak increase in establishment payrolls, the other details in the BLS’ Employment Report were solid, consistent with other statistical releases and surveys that suggest an improving economy. The unemployment rate fell 0.2pp to 4.5%, its lowest level since May 2007. (...)

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  • 05.04.2017 — SOLID PMIS FOR Q1 SHOW THE UK STARTED 2017 ON A FIRM FOOTING

    Growth is normalising after a temporary - above-trend - acceleration in H2 2016: The surprise surge in real GDP growth in the second half of 2016 probably moderated to more normal levels at the start of the year. (...)

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  • 05.04.2017 — US NATIONAL BUSINESS SENTIMENT MIXED IN MARCH

    The Institute for Supply Management’s (ISM) measure of national non-manufacturing sentiment fell more than expected in March (-2.4pts to 55.2) but remained positive in the expansionary territory, while its manufacturing index remained elevated (-0.5pt to 57.2). Unlike other regional manufacturing surveys, the ISMs cover sentiment for the full month, so some reaction to the healthcare policy reform failure was at least partially captured in the surveys. (...)

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  • 05.04.2017 — FED MINUTES: JUSTIFY RATE INCREASE, CHANGE TO ITS REINVESTMENT POLICY SOON

    The minutes of the FOMC’s March 15th meeting provided support for its decision to raise its Federal funds rate but importantly revealed an extensive discussion of the steps the Fed is considering to begin reducing the size of its balance sheet. The Fed’s portfolio has a massive $4.5 trillion in assets. With signs of the economy improving and inflation at the Fed’s long-run target, and with the normalization of interest rates already well underway, addressing the Fed’s bal (...)

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  • 03.04.2017 — MONDAY MACRO UPDATE: THE BREXIT GAP, FRENCH AND GERMAN POLITICS

    Even in the best case, the uncertainty over the UK’s post-Brexit access to the EU27 market won’t be over when Britain leaves the EU on 29 March 2019. The two-year divorce process from the EU27 may be starting with a little misunderstanding as to what exactly the two sides can achieve until then.  (...)

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  • 15.03.2017 — FED RAISES RATE, SIGNALS MORE TO COME

    The FOMC voted to raise the Federal funds rate by 25 basis points to 0.75%-1.0% and maintain its current policy of reinvesting maturing assets in its portfolio. There was one dissent, by President of the Federal Reserve Bank of Minneapolis, Kashkari, who favored maintaining the existing level of the Fed funds rate. The Fed’s rate hike clearly indicates that the Fed is confident that the economic improvement will be sustained. We welcome such confidence. (...)

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  • 06.03.2017 — STATUS OF US TAX AND FISCAL REFORM PROPOSALS

    Last week I met with numerous Congressional leaders--several Members of Congress plus senior staffers who are integral to developing the tax and fiscal reform proposals and navigating them through the legislative process. In general, I am left with the impression that tax and fiscal reforms will be enacted in 2017, but similar to all tax reform legislation, the process will be contentious and bumpy and there will be modifications to the proposals.  (...)

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  • 15.02.2017 — US DATA UPSIDE SURPRISES AS 2017 UNFOLDS

    US economic data on consumer spending, labor markets, consumer and business sentiment, and manufacturing production have been strong in early 2017, setting the stage for a major economic policy regime shift in 2017. The post-election surge in confidence and diminishing headwinds, including the powerful rally in equity markets, seems to be lifting economic activity that had stagnated for such a long time. In addition to establishing a firm basis for the fiscal and regulatory reforms that are now (...)

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  • 14.02.2017 — US: FED CHAIR YELLEN’S SEMIANNUAL TESTIMONY TO CONGRESS

    Federal Reserve Chair Yellen delivered the Fed’s semiannual monetary policy testimony to Congress today before the Senate Committee on Banking. She will deliver the same testimony before the House Financial Services Committee tomorrow. The testimony reflected a more hawkish tilt from the Fed relative to expectations, as it placed a March rate hike on the table. This testimony follows more hawkish comments from other Fed presidents recently (Williams and Harker) that a March rate hike shoul (...)

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  • 02.02.2017 — US: FOMC LEAVES POLICY UNCHANGED BUT APPEARS MORE CONFIDENT IN OUTLOOK

    As expected, the FOMC voted to leave the federal funds rate target unchanged at its January 31-February 1 meeting. There were no material changes made to the Fed’s official Policy Statement, but the Committee indicated more confidence in its economic outlook. (...)

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  • 04.01.2017 — DECEMBER FOMC MINUTES STRESS UNCERTAINTY ABOUT OUTLOOK

    The minutes of the December FOMC meeting suggest clearly that Fed members are thinking about impending fiscal policy changes, but the FOMC’s median forecast of real GDP and the unemployment rate barely nudged over the projection period. However, at the same time, the median forecast of the appropriate Federal funds rate for end-2017 rose to 1.4% from 1.1%, implying a 3rd rate increase during the year. (...)

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Macro Flash

  • 28.04.2017 — UK Q1 GDP: BACK TO REALITY, BUT THE OUTLOOK REMAINS POSITIVE

    Par for the course: After an unexpected surge in real GDP growth in the second half of 2016, with the data beating expectations for the previous two quarters in a row, the economic expansion eased sharply in the first quarter of 2017.

    Als PDF downloaden
  • 28.04.2017 — ECB MONETARY POLICY IS WORKING

    The ECB’s monetary stimulus is reaching the real economy. The further advance in loan growth in March points to firm consumer demand and more business investment ahead. 

    Als PDF downloaden
  • 27.04.2017 — TRUMP, LE PEN, AfD: COPING WITH THE POLITICS OF ANGER

    So far so good: Four months into 2017, the major risks we had discussed in our Global Outlook at the start of the year have receded somewhat. 

    Als PDF downloaden
  • 27.04.2017 — UK GROWTH: 10 REASONS TO BE OPTIMISTIC FOR 2017

    Bad news sells: Sometimes we need to ignore the headlines. UK GDP data for Q1 due tomorrow at 9:30am will likely show that the quarterly growth rate slowed to 0.4% qoq from 0.7% in Q4. 

    Als PDF downloaden
  • 27.04.2017 — ECB: TOWARDS THE EXIT AT A SNAIL'S PACE

    The ECB is edging closer to the exit at a snail’s pace. However, it is still far away from it. 

    Als PDF downloaden
  • 25.04.2017 — EUROZONE: A FIRMER ECONOMIC RECOVERY

    Life is full of risks. Politics could still go badly wrong in France. But with Macron in the pole position to be the next French president, the tail risks in the Eurozone have receded further.

    Als PDF downloaden
  • 24.04.2017 — FRANCE: HOPE SEEMS TO BEAT ANGER

     

    France yearns for change. But what kind of change? After centrist reformer Emmanuel Macron qualified today for the 7 May run-off round of the French presidential election, chances are that France will get the economic reforms it needs to revive its fortunes and catch up with Germany and that France, Germany and their partners will work together to strengthen the cohesion of the Eurozone and the EU.

    Als PDF downloaden
  • 24.04.2017 — FRENCH WRAP-UP: THE GOOD NEWS AND THE LESS GOOD NEWS

    Tail risks remain. But most likely, the French election can mark a turning point for France and Europe. If Macron wins on 7 May and manages to forge a coalition of pro-reform forces ‎after the 11 and 18 June parliamentary elections, France, the Eurozone and the EU could benefit significantly over coming years.

    Reform progress in France and Europe, the pro-mainstream precedents set by voters in the Netherlands and France and the likely boost to the European economic outlook could also help to keep the Italian political risks in check.

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  • 24.04.2017 — GERMAN IFO CLIMBS FURTHER, STRONG Q1 TO CARRY INTO Q2

    Germany enjoying a little boom: According to the Ifo survey, the business climate improved in April to the highest since July 2011 (from 112.4 to 112.9). While political risks stemming from the French presidential elections weighed on expectations (down to 105.2, after 105.7), a strong improvement in the assessment of the current situation lifted overall sentiment (121.1 from 119.5 in March, see chart 1).

    Als PDF downloaden
  • 21.04.2017 — EUROZONE PMIS CARRY STRONG MOMENTUM INTO Q2

    Eurozone business activity rises to six-year high, despite political risks stemming from the upcoming French elections. According to flash PMIs, the upswing registered in Q1 may gain further momentum in the second quarter. 

    Als PDF downloaden
  • 21.04.2017 — US: SALES OF EXISTING HOMES JUMP TO POST-RECESSION HIGH IN MARCH

    Sales of existing homes rose by 4.4% to an annualized 5.71mn in March, a post-recession high. The strong gains come despite a very short supply of for-sale homes that is placing upward pressure on prices. Home prices increased by a sizable 6.8% yr/yr, a double-edged sword which increases net worth for existing home owners but keeps some potential home buyers on the sidelines.

    Als PDF downloaden
  • 20.04.2017 — US REGIONAL MANUFACTURING SENTIMENT WEAKENS BUT UNDERLYING DETAILS SOLID

    The two major regional manufacturing surveys – Empire State and Philadelphia Fed – released thus far in April have revealed an interesting trend with the headline indexes (general business conditions) moving lower, indicating that the post-election euphoria is diminishing, but the underlying components continue to increase or are posting smaller declines than the headline indexes.

    Als PDF downloaden
  • 18.04.2017 — POLITICAL UPDATE: FRENCH AND GERMAN POLLS

    The four-way presidential election race in France has tightened slightly further. Five days ahead of the first round on 23 April, opinion polls show a further gain for ultra-left insurgent Jean-Luc Melenchon to an average of 19.4% after 18.0% five days ago.

    Als PDF downloaden
  • 18.04.2017 — US: SOLID Q1 FOR NEW RESIDENTIAL CONSTRUCTION AND MANUFACTURING PRODUCTION

    The headline GDP number will be unflattering in Q1, due to temporary factors holding back private consumption and possibly the statistical quirkiness that has held down reported Q1 growth. This masks the solid improvement in both housing and business fixed investment which underperformed significantly in prior quarters – a welcomed support to private consumption that was the only real driver of growth in 2016. The data received today provide further support of these recent trends.

    Als PDF downloaden
  • 18.04.2017 — UK: 8TH JUNE 'BREXIT' ELECTION RAISES RISK OF 'HARDER' EU EXIT

    PM May seeks to strengthen her mandate: Rebuking previous promises not to hold early elections, Prime Minister Theresa May today announced that she wants to hold a snap general election on 8th June. 

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  • 14.04.2017 — SOFT US CPI PARTLY DUE TO ANOMALOUS FACTORS AND CORE RETAIL SALES STRONG

    The Consumer Price Index (CPI) declined by a sizable 0.3% m/m (+2.4% yr/yr) in March due to lower retail gasoline prices and a stunning 0.1% m/m decline in the core CPI (excludes food and energy) – the first decline in this metric since January 2010 – pulling the yr/yr gain down 0.2pp to 2.0%. The downward surprise came in prices for wireless telephone services, which fell by 7% m/m - the largest decline in the 20 year history of the series – and subtracted 0.1pp from the headline CPI.

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  • 11.04.2017 — UK: RISING INFLATION TAKES A BREATHER - BUT IT WON'T LAST, OR BE THAT BAD

    A temporary breather in March: After accelerating by more than expected in February, inflation stabilised in March (2.3%). But it won’t last. 

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  • 11.04.2017 — GERMAN SENTIMENT IMPROVES FURTHER: ZEW BACK TO AUGUST 2015 LEVEL

    German economy enjoying a little boom: The headline expectations indicator of the ZEW survey jumped to its highest level since August 2015. 

    Als PDF downloaden
  • 07.04.2017 — US MARCH JOBS SLOWDOWN ATTRIBUTABLE TO BAD WEATHER

    The BLS’ measure of US job growth surprised to the downside in March, rising by a meager 98k, as an unseasonably severe snowstorm during the survey period distorted estimates. Besides the weak increase in establishment payrolls, the other details in the BLS’ Employment Report were solid, consistent with other statistical releases and surveys that suggest an improving economy. The unemployment rate fell 0.2pp to 4.5%, its lowest level since May 2007.

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  • 05.04.2017 — SOLID PMIS FOR Q1 SHOW THE UK STARTED 2017 ON A FIRM FOOTING

    Growth is normalising after a temporary - above-trend - acceleration in H2 2016: The surprise surge in real GDP growth in the second half of 2016 probably moderated to more normal levels at the start of the year.

    Als PDF downloaden
  • 05.04.2017 — US NATIONAL BUSINESS SENTIMENT MIXED IN MARCH

    The Institute for Supply Management’s (ISM) measure of national non-manufacturing sentiment fell more than expected in March (-2.4pts to 55.2) but remained positive in the expansionary territory, while its manufacturing index remained elevated (-0.5pt to 57.2). Unlike other regional manufacturing surveys, the ISMs cover sentiment for the full month, so some reaction to the healthcare policy reform failure was at least partially captured in the surveys.

    Als PDF downloaden
  • 03.04.2017 — MONDAY MACRO UPDATE: THE BREXIT GAP, FRENCH AND GERMAN POLITICS

    Even in the best case, the uncertainty over the UK’s post-Brexit access to the EU27 market won’t be over when Britain leaves the EU on 29 March 2019. The two-year divorce process from the EU27 may be starting with a little misunderstanding as to what exactly the two sides can achieve until then. 

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  • 31.03.2017 — UK: HOUSEHOLD APPETITES FOR MAJOR PURCHASES HIGH DESPITE EXPECTED RISE IN INFLATION

    The risks to real household spending from rising inflation are grossly overstated. The latest GfK survey for March chimes with our key view, that rising inflation will not do too much damage to household spending appetites over the medium-term.

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  • 31.03.2017 — EUROZONE INFLATION SLIPPING AGAIN AS OIL PRICE EFFECTS FADE

    Not there yet: The market’s recent excitement about inflation risks in the Eurozone were premature. In March, headline inflation dropped from 2.0% yoy in February to 1.5% as past changes in costs of energy and food dropped out of the headline measure.

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  • 31.03.2017 — US PCE DEFLATOR EXCEEDS FED’S TARGET, BUT PRIVATE CONSUMPTION SOFT

    The US PCE deflator rose to 2.1% yr/yr in February, exceeding the Fed’s 2% target for the first time since April 2012, while the core PCE deflator is now up 1.8% yr/yr; the upward drift in inflation suggests continued Fed rate increases are appropriate. US private consumption rose only 0.1% in February and declined by 0.1% in real terms, likely due to transitory factors. Expect a bounce back in March and upcoming months: fundamentals such as improving incomes, solid job growth, buoyant confidence and rising household net worth are positive.

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  • 30.03.2017 — EUROZONE SENTIMENT IN Q1 HITS SIX YEAR HIGH

    Momentum is on the rise. Despite marginal slippage in March, economic sentiment in the Eurozone remains well above its long-term average. 

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  • 30.03.2017 — US CORPORATE PROFITS ROSE MODESTLY IN 2016Q4

    US corporate profits rose modestly in 2016 Q4 capping a strong year with a moderation in momentum. Before taxes and adjusted for inventory valuation adjustment (IVA) and capital consumption allowance (CCA) adjustments, operating profits rose an annualized 2.1% in Q4, following a more robust rise of annualized 25.4% q/q in Q3.  Yr/yr, operating profits rose a strong 8.8%.

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  • 29.03.2017 — THE BREXIT BRIEF

    Today, the UK will file for divorce from the European Union. This is the worst setback ever for the process of European integration that started with a six-nation coal and steel community in 1952. 

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  • 28.03.2017 — US CONSUMER CONFIDENCE SURGED IN EARLY MARCH (PRE-HEALTHCARE REFORM FAILURE)

    The Conference Board’s US Consumer Confidence Index jumped by 9.5pts in early March to 125.6 – a 16yr high. The cutoff date for this survey was March 16th, before the Trump administration and Congress’ failure to enact healthcare reform. Consumers held a very optimistic view about labor market conditions, future income and upgraded their buying plans for durables and autos.

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  • 24.03.2017 — EUROZONE PMIS SUGGEST GROWTH ACCELERATED IN Q1

    Spring is coming and Eurozone firms are cheerful – despite the political risks. The preliminary PMI composite improved from 56.0 in February to 56.7 in March. 

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  • 23.03.2017 — UK: STRONG REBOUND IN RETAIL SALES IN FEBRUARY, RISKS FROM INFLATION ARE EXAGGERATED

    The oil and employment boost is fading: The 4.4% average annual growth in retail sales ex. autos during 2015 and 2016, and the surge to 5.8% yoy in H2 2016, was totally unsustainable. Now that the boost from cheap oil is over and employment gains slow as the labour market reaches full employment, household spending will return to more normal patterns. 

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  • 23.03.2017 — EUROZONE CONSUMERS SHRUG OFF INFLATION CONCERNS

    Mood among Eurozone consumers in March recovers from its February dip. Consumer confidence rose to -5.0 in March, after -6.2 in February and -4.8 in January. Taken the three months together, the average for Q1 2017 advanced to the highest level since Q2 2007. 

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  • 22.03.2017 — US: TIGHT SUPPLY OF HOMES POINTS TO NEED FOR ROBUST CONSTRUCTION

    Sales of US existing homes fell by 3.7% to an annualized 5.48mn in February after reaching a post-recession high of 5.69mn in January. The very tight supply of for-sale homes is placing upward pressure on prices and constraining sales. On the other hand, the tight supply and favorable demographics both point to the need for an acceleration in residential construction which is still low.

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  • 21.03.2017 — UK: UPSIDE SURPRISE ON HEADLINE AND CORE INFLATION INCREASES PRESSURE ON BOE TO HIKE

    The price of Brexit: Even before Brexit creates any barriers to trade – at least two years away – UK households are already forking out more for German cars, Italian cheese and French wine. Thanks to the 13% fall in trade-weighted sterling since the Brexit vote (down 12% versus the euro), prices of imported goods are rising sharply. In February, headline inflation (CPI) hit its highest rate – 2.3% yoy - since September 2013, increasing from 1.8% in January, and beating expectations of 2.1%.

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  • 17.03.2017 — FRANCE AND ITALY: RISK UPDATE

    Jointly with a select group of investors, I’ve just spent almost three days discussing the economic and political outlook for France and Italy with senior officials from both countries in London, Paris and Rome. We visited the finance ministries, Banca d'Italia, the OECD, industry and banking associations, and the Italian parliament. We also spoke to a number of senior consultants including a French professor specialising on constitutional law. 

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  • 16.03.2017 — DUTCH RELIEF: THE IMPACT OF THE VOTE

    A victory for common sense and a great start for Europe's election season. Unlike the voters in the US and the UK, who fell for Donald Trump and the Brexiteers last year, a vast majority of Dutch voters opted for the pro-European mainstream yesterday.

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  • 16.03.2017 — UK: MPC MARCH MINUTES SHOW THE BOE SHIFTING FROM NEUTRAL TO HAWKISH

    Hawkishness creeping into the MPC: While the BoE’s policy stance did not change today, there was a notable shift in the guidance for future policy amid continued strong growth and rising inflation. Kristen Forbes, a known hawk, voted for a 25bps rate hike. Meanwhile ‘some’ committee members noted that given the resilient economic performance since the Brexit vote it would ‘take very little further upside news on the prospects for activity or inflation to consider that a more immediate reduction in policy support might be warranted’.

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  • 16.03.2017 — INDICATORS ON US OUTLOOK REMAIN STRONG

    Key US economic data on the outlook continue to come in strong. Although readings on some aspects of current economic activity are mixed, and some transitory factors likely will hold down Q1 GDP growth, the outlook for stronger growth is favorable. Two key manufacturing surveys received for the first half of March – Philly Fed and Empire State – suggest that firms continue to be exceedingly optimistic about the US economy. Housing starts have exceeded an annualized 1.25 million units for the last three months after averaging under 1.2million in 2016. 

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  • 15.03.2017 — UK LABOUR MARKET: UNEMPLOYMENT HEADS LOWER WHILE WAGE GROWTH DIPS

    Solid labour market in January despite a little disappointment on wage growth. The headline unemployment rate declined to 4.7% in January from 4.8% in December, driven by strong gains in employment (92k 3m/3m). Meanwhile, average weekly earnings growth ex. bonus surprised on the downside, falling to 2.3% yoy from 2.6% yoy in December.

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  • 15.03.2017 — US: HIGHER INFLATION, OPTIMISTIC SENTIMENT, SPARKLESS ACTIVITY DATA

    The economic data continue to reflect better sentiment and an acceleration in inflation, but unimpressive improvement in the activity/“hard” data. The Fed is on track to increase rates at its meeting later today and there is some upside risk on its future policy rate path. Even if activity data remain sluggish, as long as employment and inflation continue to improve at a robust pace, the Fed will be forced to act.

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  • 14.03.2017 — UK: HEADING FOR A HARD BREXIT AND SCOTTISH EXIT?

    No strings attached: That parliament has passed the Article 50 bill giving government unconditional permission to kick off the two-year divorce proceedings with the EU is a major victory for Prime Minister Theresa May. 

    Sturgeon versus May: SNP leader Nicola Sturgeon has announced that she wants to hold a second referendum on Scottish independence between autumn 2018 and spring 2019. 

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  • 13.03.2017 — UK WEEK AHEAD: ARTICLE 50, LABOUR MARKET, BOE MARCH MEETING

    UK Prime Minister Theresa May should have parliamentary approval to trigger Article 50 – the EU divorce notice - by the end of the week.

    With the labour market at close to full employment – unemployment below 5% and employment at a record high – job gains are starting to slow. 

    The BoE will publish the policy decision and minutes from the March MPC meeting on Thursday at midday.

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  • 10.03.2017 — UK INDUSTRIAL PRODUCTION: UPTURN CONTINUES DESPITE SMALL DIP IN JANUARY

    Two steps forward, one step back - but that’s the way it goes: The little monthly correction in industrial production in January doesn’t change the broad based upward trend. 

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  • 10.03.2017 — US: SOLID FEBRUARY JOBS REPORT

    US establishments added 235k jobs in February, lowering the unemployment rate to 4.7% and increasing pay for their employees 0.2% m/m, lifting the yr/yr rise to 2.8%. This solid employment report keeps the Fed on track to hike rates at its March meeting, but adds no additional clues on the future path of policy. Two additional hikes in 2017 – in September and December - continue to seem most likely. 

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  • 09.03.2017 — ECB: FIRMER RECOVERY BUT NO NEED TO CHANGE POLICY

    On behalf of Holger Schmieding: 

    Spring is coming and the ECB is celebrating. The European Central Bank today upgraded its assessment of the economic outlook, attributing the firming recovery and the fading of deflation risks partly to the success of its policies.

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  • 08.03.2017 — US: FEBRUARY ADP JOBS REPORT SHOWS OPTIMISM FEEDING THROUGH TO HIRING

    ADP/Moody’s estimate that US private payrolls increased by 298k in February, suggesting that the BLS will report similarly strong gains in its monthly jobs report on Friday. Optimistic sentiment is feeding through to hiring with small businesses, manufacturers and construction firms all increasing payrolls at a robust pace in recent months. With labor markets tightening, continued job gains of this magnitude will fuel fears of an overheating economy and force the Fed to hike more than currently expected.

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  • 08.03.2017 — UK BUDGET 2017: PUBLIC FINANCES HEADING IN THE RIGHT DIRECTION, BUT LACK EMPHASIS ON INVESTMENT

    From a macroeconomic point of view, Budget 2017 provides us with very little to get excited about. Capital spending continues to fall short of what the economy needs as it faces slower long-term growth from Brexit.

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  • 06.03.2017 — UK BUDGET 2017 PREVIEW – POLICY CHANGES UNLIKELY TO ALTER ECONOMIC OUTLOOK

    Since 2010 UK fiscal policy has been neither here nor there. The economy is in its 8th year of expansion, yet the cyclical adjusted deficit is still close to 3%.

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  • 02.03.2017 — EUROZONE INFLATION HITS 2%, UNDERLYING PRESSURES REMAIN SUBDUED

    Mind the gap. It’s the labour market, stupid. The ECB will not have to rethink the thrust of its policies.

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  • 01.03.2017 — US PCE DEFLATOR ADVANCES 1.9% IN JANUARY PLACING PRESSURE ON FED TO ACT

    The Fed’s preferred measure of consumer inflation, the PCE deflator advanced 0.4% m/m and 1.9% yr/yr in January, the highest annual pace since October 2012, putting it right at the Fed’s 2% inflation target. The PCE deflator has made significant progress over the last year (from +1.1% in January 2016 to +1.9% in January 2017) with energy prices finally making a positive contribution (+11.8% in January).

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  • 01.03.2017 — UK PMI MANUFACTURING SIGNALS SOLID GROWTH IN FEBRUARY DESPITE SMALL SLIP

    A rising tide lifts all boats: The UK manufacturing PMI slipped a little in February to 54.6 (exp. 55) after hitting a two and a half year high in December (55.9). Nonetheless, the data were strong across the board. Output and orders rose solidly as UK producers benefitted from growing demand at home, and critically, from abroad, as new export orders rose for the ninth consecutive month – a signal that the cyclical upturn in global demand is building momentum. The headline number was well above the long-term average of 51.6. The survey reported solid demand for labour and increased capital investment. While input costs remained at a high level, they dipped from the January high. 

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  • 28.02.2017 — US: MORE POSITIVE NEWS ON CONSUMER CONFIDENCE, REGIONAL MANUFACTURING

    The MNI Chicago Business Barometer, up 7.1pts to 57.4 in February, joined other regional business surveys that showed continued optimistic sentiment this month. The Conference Board consumer confidence index jumped 3.2pts to 114.8 in February – the highest since July 2001. With sentiment continuing to run high for both consumers and businesses, it is important for policy expectations to be met, lest a deterioration in economic activity.

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  • 28.02.2017 — UK UPDATE: SCOTTISH INDEPENDENCE, ARTICLE 50, SOLID NEAR-TERM OUTLOOK

    Support for Scottish independence has fallen since the Brexit vote: Could Scotland leave the UK in order to stay in the EU upon Brexit? According to some media reports, PM Theresa May is readying for a possible second Scottish independence referendum.

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  • 27.02.2017 — US: PAUSE IN DURABLE GOODS SECTOR ACTIVITY AT START OF 2017

    Beyond the strong 1.8% gain in total durable goods orders, the January report on durable goods was generally weak. Core shipments, which matters for GDP declined in January, outweighing the upward revision to the prior month. Important to not overreact to monthly activity data given high volatility. Moreover, the very optimistic business sentiment suggests a rebound in coming months is more likely than not.

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  • 22.02.2017 — GERMAN IFO: SHRUGGING OFF THE TRUMP EFFECT

    The German industry may be concerned, but definitely not scared. When less optimistic expectations weighed on the German Ifo business confidence in January, we alluded to the possibility of a little Trump scare. Today’s reading for February shows that the sharp decline in forward-looking optimism in the previous month was just a blip.

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  • 21.02.2017 — EUROZONE PMIS SIGNAL STRONG START TO 2017

    More evidence for a strong start into 2017 as activity surges to near six year high: The composite PMI rose to 56.0 in February, after 54.4 in January. The pick-up in activity was driven by record-high levels in both the manufacturing and service sector (70-month and 69-month high, respectively). 

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  • 20.02.2017 — ONE MONTH OF TRUMP: A VIEW FROM ABROAD

    It’s Presidents' Day in the US. Reflecting on one month of Trump, Europe is breathing a small sigh of relief: it could have been worse.

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  • 20.02.2017 — MONDAY MACRO UPDATE: FRENCH, ITALIAN AND GERMAN POLITICS

    President Marine Le Pen? The only chance for the anti-EU right-winger to win the French election would be if she would face an equally unelectable candidate in the run-off round on 7 May. Fortunately, this remains unlikely.

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  • 17.02.2017 — UK OUTLOOK RESILIENT: FIRST RATE HIKE IN 2018

    Firm growth outlook despite clear risks: The UK economy has carried significant momentum into 2017. The second estimate of Q4 2016 GDP (to be published on 22 February) will likely show that growth accelerated to 0.7% qoq from 0.6% qoq in Q3.

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  • 16.02.2017 — ECB MINUTES: STEADY HAND, BUT RISKS MORE BALANCED

    After a rather uneventful meeting and press conference on 19 January, reading the tea leaves at the ECB minutes was unlikely to provide materially new information. Still, the minutes did shed some revealing light on the current monetary policy stance of Draghi and his Governing Council colleagues:

    1.The ECB may deviate from the capital key when it comes to purchases of sovereign bonds as part of QE

    2.Downside risks to economic outlook have receded

     

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  • 14.02.2017 — EUROZONE MACRO UPDATE: GROWTH AT TREND, OUTLOOK REMAINS POSITIVE

    Eurozone Q4 GDP (2nd reading) – encouraging, broad-based growth at trend
    German Q4 GDP (1st reading) – growth accelerates to 0.4% qoq, outlook solid
    German ZEW – sentiment softer, but at high level
    Italian Q4 GDP (1st reading) – sluggish growth, political uncertainty weighs on consumption

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  • 13.02.2017 — UK MACRO: ARTICLE 50, DATA FOR THE WEEK AHEAD

    After the prime minister easily won approval – without any amendments - from the House of Commons (lower house) to trigger Brexit by invoking Article 50 of the EU treaties, it seems unlikely that the unelected House of Lords (upper house) will introduce any significant changes to the bill that will enable the government to kick-off Brexit negotiations with the EU27. The House of Lords is set to debate the bill from 20 February onwards.

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  • 06.02.2017 — EUROPEAN POLITICAL UPDATE: MERKEL, MACRON, RENZI

    The economy is on the right track. We just raised our 2017 growth forecast for the Eurozone from 1.5% to 1.7%. Amid resilient economic growth, we need to watch the politics even more closely than usual this year. 

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  • 03.02.2017 — US: STRONG JOB GROWTH AND DATA SHOULD ENCOURAGE FED TO CONSIDER MARCH HIKE

    US nonfarm payrolls increased 227k in January, growing above its recent trend (nonfarm payroll growth averaged 148k in Q4), as the recent surge in sentiment appears to be feeding through to economic activity and hiring. The unemployment rate ticked up 0.1pp to 4.8%, rising for the right reason – an increase in the labor force participation rate. On the flip side, average hourly earnings disappointed in January, growing by a slight 0.1% m/m, placing the yr/yr gain lower at 2.5%.

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  • 02.02.2017 — UK: BOE AT RISK OF FALLING BEHIND THE CURVE AFTER MAJOR UPGRADES TO GROWTH OUTLOOK

    The Bank of England (BoE) is running the risk of falling behind the curve. The sharp falls in survey measures of economic activity immediately after the Brexit vote provided a strong and valid case for a monetary ease last August. But circumstances can change.

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  • 01.02.2017 — UK: BOE INFLATION REPORT PREVIEW - EARLY SIGNS OF HAWKISHNESS?

    With some words of Brexit-related caution, the Bank of England (BoE) may surprise with a more hawkish tone at tomorrow’s Inflation Report as it revises up its near-term growth forecast and highlights growing underlying inflationary risks.

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  • 01.02.2017 — UK: BOE INFLATION REPORT PREVIEW - EARLY SIGNS OF HAWKISHNESS?

    With some words of Brexit-related caution, the Bank of England (BoE) may surprise with a more hawkish tone at tomorrow’s Inflation Report as it revises up its near-term growth forecast and highlights growing underlying inflationary risks.

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  • 31.01.2017 — EUROZONE MACRO UPDATE: ENCOURAGING ACROSS THE BENCH

    Economic fundamentals are encouraging, output is expanding at around trend, labour market continues to improve and core inflation will follow suit, but remains well below target.

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  • 31.01.2017 — US: FED’S PREFERRED MEASURE OF WAGES IMPROVED ONLY SLIGHTLY IN 2016

    The US Employment Cost Index (ECI), a quarterly measure of wage compensation favored by the Fed, advanced 2.2% in 2016, barely above the 2.1% gain registered in both 2014 and 2015. The strong ECI gains were concentrated in mainly low-paying and less-productive jobs. The continued modest gains in the ECI support the Fed’s perception that it can take its time in normalizing monetary policy. However, anticipate that fiscal policy reforms and stronger economic growth raise the risk that the Fed falls behind the curve.

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  • 30.01.2017 — US CONSUMERS GAINING CONFIDENCE IN FINANCES, ENERGY FINALLY BOOSTING PRICES

    US nominal private consumption rose 0.5%m/m in December, outpacing the 0.3%m/m rise in personal income. The almost two-year low in the personal saving rate is consistent with growing consumer confidence. PCE inflation rose 1.6% yr/yr in December 2016, a full percentage point higher than its 0.6% yr/yr rise in December 2015 likely enabling the Fed to proceed with its rate normalization.

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  • 27.01.2017 — US DURABLE GOODS SECTOR FINALLY ESCAPING SLUMP

    The December durable goods report suggests improved business sentiment may be already feeding through to better capital spending. The durable goods sector stands to be one of the sectors that will benefit most from proposed fiscal reform. An acceleration in business investment is central to our forecast for a pickup in economic growth.

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  • 26.01.2017 — US: HIGHER RATES LIKELY TO HURT HOUSING IN FIRST HALF OF 2017

    Despite declines in sales of new and existing homes in December, residential fixed investment likely rebounded in Q4 after falling in the prior two quarters. This strong rebound may be somewhat short-lived due to the approximate 60bp jump in US mortgage interest rates since the US elections. Pick up in wage growth and a stronger economy should counter the negative impact from higher rates in the medium term.

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  • 25.01.2017 — EARLY ELECTIONS IN ITALY?

    Italian politics poses the biggest single tail risk to the stability of the Eurozone in 2017, as it did in the second half of last year.

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  • 25.01.2017 — GERMAN IFO SETBACK: A LITTLE TRUMP SCARE?

    Is Trump scaring German industry? Driven by less optimistic expectations, German Ifo business confidence fell back in January following a strong surge late last year.

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  • 24.01.2017 — EUROZONE PMIS SIGNAL SOLID START TO 2017

    Getting off to a good start: PMIs for the Eurozone and its major economies remained stable at a high level at the start of the year after strong gains in recent months.

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  • 24.01.2017 — GERMAN POLITICS: A CENTRE-LEFT ALTERNATIVE TO MERKEL?

    Merkel at risk? Germany’s major centre-left party SPD has started the campaign for the 24 September federal election with a sort-of surprise.

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  • 24.01.2017 — SUPREME COURT BACKS PARLIAMENTARY VOTE - HARD BREXIT RISK FALLS

    Supreme Court ruling nudges the Brexit pendulum slightly towards a softer Brexit. Since a majority of MPs are pro-EU, anything that raises the influence of parliament on the Brexit process boosts the prospects of a less hard exit from the EU. Today’s 8-3 vote by the 11 Supreme Court judges, backing the High Court ruling that parliament must take a vote on triggering Article 50, is a positive for the long-term UK economic outlook. By damaging trade, migration and investment with the EU, its biggest market, Brexit will reduce the UK’s long run potential growth rate to 1.8% pa from its current rate of 2.2% in our base case. Today’s judgement tilts the risk to our long-term outlook a little to the upside. The Supreme Court also ruled that government will not need the assent of the devolved parliaments of Scotland, Wales and N. Ireland before triggering Article 50. 

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  • 23.01.2017 — MONDAY MACRO UPDATE: TRUMP, BREXIT, FRENCH AND ITALIAN POLITICS

    TRUMP: A DIVISIVE START
    UK: SUPREME COURT RULING, MAY MEETS TRUMP
    FRANCE: ADVANTAGE MACRON?
    ITALY: MIND THE COURT

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  • 20.01.2017 — UK RETAIL SALES: SOLID TREND DESPITE DECEMBER CORRECTION

    THE CONSUMER IS KING

    UK consumers are enjoying life, helping the economy to cope with the Brexit shock. Unfortunately, this may not last much longer. The solid growth in retail sales of 1.4% qoq in Q4 (1.9% qoq in Q3) suggests the UK economy ended 2016 on a stable footing. The ten year average quarterly growth rate is 0.5%. Retail sales provide the timeliest official indicator of household demand and spending which makes up two-thirds of GDP.  The modest slowdown in the quarterly growth rate supports our call that GDP growth slowed to around its trend rate of 0.5% qoq in the final quarter of last year from 0.6% qoq in the third quarter. The first estimate of Q4 GDP will be published next Thursday. 

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  • 19.01.2017 — US REGIONAL MANUFACTURING OPTIMISM CONTINUES INTO 2017

    The post-election surge in sentiment is proving to be more than ephemeral, with euphoria continuing into 2017. The Philadelphia Fed headline manufacturing index, one of the earliest measures of business sentiment on the month, advanced almost 4 points to 23.6 in January.

     

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  • 19.01.2017 — ECB: STEADY AS SHE GOES

    No change, no news. Upon leaving all interest rates and the key parameters of its asset purchase programme unchanged, the ECB did not signal any need to rethink its policy soon.

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  • 19.01.2017 — PRESIDENT TRUMP - A VIEW FROM ABROAD

    The world is entering a period of heightened opportunities and risks. On balance, we expect the switch from political gridlock between the US Congress and the White House to results-oriented co-operation between a Republican majority in Congress and a Republican US President to yield serious pro-growth reforms that will outweigh the damage which Donald Trump’s protectionist inclinations, his “rule by Twitter” and his other unconventional traits may do.

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  • 18.01.2017 — US IP FALTERED IN 2016 BUT REFORM LIKELY TO CAUSE TURNAROUND IN COMING YEARS

    US industrial production ended 2016 on a positive note, posting its first yr/yr gain since August 2015. However, details suggest that underlying manufacturing demand is still weak and that it will take some time for better sentiment to feed through to actual activity. Pro-business fiscal reform and higher energy prices should lead to a rebound in industrial production in 2017.

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  • 18.01.2017 — US: PICK UP IN ENERGY PRICES PUSHES HEADLINE CPI UP TO CORE CPI AT END OF 2016

    The US headline Consumer Price Index (CPI) rose 2.1% yr/yr in December, climbing closer to the core CPI (excludes food and energy) as the drag from energy prices has diminished. Rents and medical care service prices pushed up core inflation in 2016. If the anticipated fiscal reforms generate an acceleration in economic growth, businesses will have greater pricing power, and wages will accelerate. The Fed will be on the lookout.

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  • 18.01.2017 — UK: SIGNS POINT TO FULL EMPLOYMENT AS WAGE GROWTH ACCELERATES

    Despite Brexit the UK labour market has remained strong so far. Headline unemployment remained unchanged in November at 4.8% while average weekly earnings growth ex. bonus accelerated to 2.7% yoy from 2.6% yoy in October. Total wages (incl. bonus) rose 2.8% yoy versus the consensus expectation of 2.6% yoy. Unemployment has not been lower since 2005. On a 3-month/3-month basis employment fell by less than expected, just 9k (exp. 35k) after declining 6k in October. Indicators available for the month of December, which give a good idea of where the main series are heading, show that the UK labour market finished 2016 on a strong footing. The December claimant count rate remained unchanged at 2.3% as jobless claims declined by 10.1k.  Vacancies in December held firm at 748k, close to an all time high.

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  • 17.01.2017 — ECONOMIC IMPLICATIONS OF MAY'S SPEECH: CRUCIAL DETAILS STILL UNKNOWN

    Besides offering a roundup of May and her Conservative government’s broad ambitions for Brexit, most of which had been leaked or announced much earlier, we learned nothing new today that adds any colour to our economic outlook for Brexit. Critical details on the government’s intended future rules for migration, or its ambitions for the length and nature of a transitional agreement for Brexit, are still missing. Such details are crucial in order to better estimate the level of access the UK will get to the EU market – think single market-migration trade-off – and the long terms consequences of Brexit.

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  • 16.01.2017 — UK macro: the week ahead

    THERESA MAY SPEAKS ON BREXIT STRATEGY – VEERING TOWARD A HARD(ISH) BREXIT (TUESDAY 17TH JANUARY)

     

    INFLATION – UP, UP, AND AWAY (TUESDAY 17TH JANUARY)

     

    LABOUR MARKET – STILL GOING STRONG (WEDNESDAY 18TH JANUARY)

     

    RETAIL SALES – HOW LONG CAN THE UPTURN IN CONSUMER SPENDING BE SUSTAINED? (FRIDAY 20TH JANUARY)

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  • 13.01.2017 — US DECEMBER RETAIL SALES EX-AUTOS TILT SOFT, BUT FUTURE LOOKS BRIGHT

    Total US retail sales ended the year at a fast pace, advancing 0.6% m/m in December, driven by motor vehicles and parts, elsewhere sales tilted soft with control retail sales up only 0.2% m/m. Holiday shopping season was likely strong, with nonstore retail sales (includes online sales) up a strong 1.3% m/m and up 12% qtr/qtr (annualized). Future household consumption is setting up to be robust with likely cuts in individual income tax rates and improving consumer fundamentals.

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  • 12.01.2017 — ECB DECEMBER MINUTES INDICATE DIVISION AND UNCERTAINTY FOR ROAD AHEAD

    The minutes of the December Governing Council meeting suggest a shift in the ECB’s assessment of the balance of risks. The shift led the ECB to send a balanced message of continued support for longer, at a reduced amount. As Draghi had stressed already in the press conference following the monetary policy decision there was no discussion of tapering.

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  • 06.01.2017 — US DECEMBER JOBS REPORT SOLID ON ALL FRONTS

    The Employment Report for December was solid.  New job gains slowed to 156k in December, below its recent average, but there were net upward revisions to previous months. Average wages jumped 0.4%, lifting its yr/yr rise to 2.9%. While the unemployment rate ticked up to 4.7%, partially reversing its prior decline, the unemployment rate remains near its natural rate. 

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  • 06.01.2017 — HAPPY NEW YEAR: EUROZONE SENTIMENT SURGES TO POST-CRISIS RECORD - BERENBERG MACRO FLASH

    The Eurozone is on course for a solid start into 2017 after a robust finish to 2016. Supported by resilient domestic demand, ongoing gains in employment and an improving export outlook, economic sentiment in the Eurozone surged to its strongest level since March 2011 in December, reaching 107.8 after 106.6 in November.

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  • 06.01.2017 — UPTURN IN GERMAN MANUFACTURING DESPITE NOVEMBER CORRECTION OF FACTORY ORDERS

    No reason to worry about the German industrial sector. A monthly decline of 2.5% in factory orders in No-vember partially corrects the previous month’s outlier when orders surged by a revised 5.0%.

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  • 19.12.2016 — GERMAN ECONOMY IN FESTIVE MOOD, AND IT’S HERE TO STAY

    Christmas is coming and Germany has good reasons to crack a bottle of champagne on New Year’s Eve.

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  • 16.12.2016 — US HOUSING MALAISE TO CONTINUE EARLY NEXT YEAR WITH JUMP IN RATES

    Housing starts declined 19% to an annualized 1090k in November, continuing on the extreme volatility of the last few months due to swings in the multifamily sector. Looking past these recent swings, the six-month moving average of housing starts is 1177k, only slightly better than a year ago as starts have moved sideways over the last year. The housing market has disappointed in 2016, but it is still well below potential with plenty of room for improvement.

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  • 15.12.2016 — US ENERGY AND RENTS PUSHING UP CONSUMER PRICES

    The US CPI advanced 1.7% yr/yr in November, an acceleration from October as energy prices contributed positively to year-on-year growth for the second consecutive month. The gap between core CPI and the Fed’s preferred measure of inflation, core PCE deflator, has narrowed after widening for more than a year due to an acceleration in healthcare prices this year. The likely large fiscal stimulus package expected to be proposed by the Trump Administration and enacted by Congress is expected to boost economic growth and put upward pressure on inflation.

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  • 14.12.2016 — WARM NOVEMBER WEIGHS ON US IP MASKING MODESTLY IMPROVING FACTORY ACTIVITY

    US industrial production declined 0.4% m/m (-0.7% yr/yr) in November primarily due to a drop in utilities production as warmer-than-usual weather reduced heating demand. Elsewhere, signs of better underlying trend in production with 15 of 23 industries recording increases from three months ago, a significant rise from less than half in prior months. Mining production has turned around and the recent surge in oil prices will continue to fuel activity in the sector.

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  • 14.12.2016 — US RETAIL ACTIVITY SLOW IN NOVEMBER BUT LIKELY SOLID FOR Q4 ON THE WHOLE

    US retail sales advanced only 0.1% m/m in November, but are still on pace to increase over 5% annualized in Q4. Nonstore retail sales (includes online shopping) were weaker than expected, posting a slight 0.1% m/m gain, but followed a strong gain in October and still up 12% on the year. Optimistic consumer sentiment and the rally in equity markets should support activity going forward.

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  • 08.12.2016 — ECB: TAPERING AIN'T THE WORD FOR IT

    Tapering is not the right word for it. Trying to avoid a taper tantrum, the ECB found a different way to start scaling back its asset purchases than the Fed had done three years ago.

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  • 07.12.2016 — Upturn in UK industrial production hits a bump in the road - weak sterling is double-edged sword

    The cyclical upturn in UK industrial production stalled again in October.

    Industrial production – circa 15% of GDP – unexpectedly declined by 1.3% mom compared to consensus expectations of growth of 0.2%. That followed a contraction of 0.4% in September. On a 3m/3m basis industrial production declined by 0.9%. Monthly data are volatile and should be interpreted with caution. There were a few temporary factors that played a significant part in the sharp downturn. 

     

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  • 05.12.2016 — AUSTRIA: NO RIGHT-WING PRESIDENT

    Not all risks materialise: in a repeat election for the ceremonial post of president, Austrians rejected the ultra-right candidate Norbert Hofer, choosing the pro-European Alexander Van der Bellen with 52% to 48% instead.

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  • 05.12.2016 — RENZI RESIGNS: ITALIAN RISKS AFTER THE "NO"

    Brexit, Trump, Italy. For the third time within six months, a major political risk has materialised as Italian voters rejected Renzi's constitutional reform by roughly 60% to 40%.

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  • 02.12.2016 — US NOVEMBER JOBS REPORT MIXED BUT LIKELY ENOUGH FOR FED HIKE THIS MONTH

    The November US employment report was mixed, but likely enough for the FOMC to hike at its December 13-14 meeting. Total US nonfarm payrolls increased a solid 178k into November (+1.6% yr/yr), in line with the Consensus forecast. Total personal incomes likely grew at a slower pace in November, as average hourly earnings fell 0.1% m/m and aggregate hours worked advanced by a slight 0.1% m/m. The household survey revealed a sizable 0.3pp decline in the unemployment rate to 4.6% which fell partly for the “wrong” reason as the labor force participation rate ticked down 0.1pp to 62.7%. Still, the decline in unemployment rate is impressive as the level of unemployment fell 387k and household employment increased 160k.

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  • 30.11.2016 — US: SLUGGISH GAINS IN OCTOBER PRIVATE CONSUMPTION LIKELY TEMPORARY

    US real private consumption moderated to a slight 0.1% gain in October after a robust finish to Q3. The slowdown was due to anomalous drop in services spending, fundamentals point to a solid rebound in coming months. Over the medium term, expectations for personal consumption have been revised up moderately due to likely cuts in marginal income tax rates. The 1.74% yr/yr increase in the core PCE deflator is enough for the Fed to increase rates at its December meeting.

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  • 22.11.2016 — US OCTOBER EXISTING HOME SALES STRONG BUT HIGHER RATES POSES DOWNSIDE RISKS

    US existing home sales advanced 2% m/m in October to an annualized 5.6mn, well above the Consensus forecast (5.44mn) and the highest pace since February 2007. The recent jump in mortgage interest rates could lead to a surge in home buying activity followed by subsequent declines. Despite the almost 50bp jump in mortgage rates over the last couple of weeks, they remain historically low around 4% so impact on activity may not be large or persistent.

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  • 21.11.2016 — POLITICAL UPDATE: ADVANTAGE FILLON, MERKEL RUNS AGAIN

    Good news for Europe. The risk that a widespread yearning for change in France could sweep far-right Marine Le Pen to power next year has receded a little further. Instead, chances are that France may finally get some overdue economic reforms under a centre-right president. Following a late surge in support, ex-prime minister Francois Fillon has won the first round of the centre-right primaries.

    Ending months of nagging uncertainty, German chancellor Angela Merkel confirmed this evening that she will seek a fourth term at the national election in September 2017. No surprise. While she had kept observers guessing, Berlin has worked for weeks on the assumption that she would run again. According to Merkel, the decision was “far from trivial” for her. 

     

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  • 18.11.2016 — UK FISCAL POLICY: AUTUMN STATEMENT COULD UNDERWHELM MARKETS

    With no immediate economic crisis to deal with, the new chancellor Phillip Hammond is unlikely to pander to markets’ desires and announce a major fiscal stimulus at next week’s Autumn Statement. Hammond may temporarily delay reducing the cyclically-adjusted deficit for a year or two but, ultimately, he will look to complete his predecessor’s job of rebalancing the government’s books, eventually. On balance, the long-term macro-economic effects of the Brexit-vote have further steepened the UK’s fiscal hill. Hammond will thus target an even more gradual pace of fiscal consolidation than previously planned with some potential for extra borrowing to fund some modest tax cuts and infrastructure spending – but it will be restrained.

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  • 15.11.2016 — STEADY GROWTH IN EUROZONE, NO IMMEDIATE TRUMP IMPACT ON OUTLOOK

    The Eurozone accelerated slightly, to 0.35% qoq in Q3, in line with a flash estimate and slightly above the second quarter of 0.29% qoq. The breakdown by country shows some erratic moves.

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  • 14.11.2016 — UK update: economic outlook, Supreme Court hearing and infrastructure spending

    Since the UK voted to leave the EU five months ago, the economy has held up much better than expected, probably owing to the healthy household fundamentals heading into the vote. As we have argued before, it is the long-run risks that need to be watched closely. Through less trade, investment and migration with its biggest market, the EU, Brexit represents a long-term supply-side shock for the UK. On the political side, the apparent lack of progress on a Brexit strategy and the unforeseen hurdles before triggering Article 50 are concerning. They reflect a complacency and lack of planning by the government before the referendum and do not bode well heading into the Brexit-negotiations with an increasingly frustrated EU-27. The stark difference between how the currency market has reacted compared to UK households reflects this economic and political divergence since the vote – see Chart 1.

    In this update, we cover the three key themes for the coming months: (1) the economic outlook, (2) the Supreme Court hearing on Article 50, and (3) what to expect in terms of infrastructure spending at the 23 November Autumn Statement.

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  • 11.11.2016 — Prospects under Trump: potential positives and negatives

    Markets have responded to the Trump victory with the expectation that the economy will benefit.  The stock market has risen.  Bond yields have spiked up and the US dollar has appreciated.  Will these market expectations be realized? 

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  • 11.11.2016 — Macro update: What President Trump means for the European economy

    US economic policy matters for Europe: US households are the global consumers of last resort. They can shape global trends for the better or for the worse, as the US boom until 2007 and the subsequent burst have shown. Trade-dependent Europe benefits from a strong and open US economy. On 20 January 2017, Donald Trump will enter the White House. While markets have, at least so far, taken his victory in their stride, it remains to be seen just what his presidency will mean for US economic policy and global economic trends. What parts of the mandate that got him elected will see the light of day? What parts will be watered down, decontaminated or even pronounced dead on arrival by the checks and balances of Washington?

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  • 09.11.2016 — TRUMP IN THE LEAD: SERIOUS UNCERTAINTY AHEAD

    Donald Trump will be the next US president. Republicans have also won the Congressional elections, keeping a significant majority in the House of Representatives and winning the Senate as well.

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  • 08.11.2016 — GERMAN PRODUCTION: CORRECTION, BUT TREND REMAINS UPWARDS

    Despite a significant correction in September after an even stronger rise in August, German industrial output continues to trend up.

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  • 04.11.2016 — ALWAYS READ THE SMALL PRINT: BOE INFLATION FORECAST IS HIGHLY SENSITIVE TO FX RISK

    Some underlying assumptions about the future are required for any type of economic forecast. But they need to be understood in order to properly interpret the forecasts.

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  • 04.11.2016 — SOLID US OCTOBER JOBS REPORT

    The September employment report was all-round solid, with net new 161k jobs and revisions to August and September adding +44k. Average hourly wage growth picked up to 0.4% on the month (+2.8% yr/yr) and aggregate hours worked advanced 0.2%. Both point to solid gains in total personal incomes in October which should support private consumption. The solid improvement in wages and employment gains point decidedly toward a hike by the FOMC in December. 

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  • 03.11.2016 — BOE ON HOLD AS NEAR-TERM GROWTH OUTLOOK RAISED - CAUTIONS ON TOLERANCE TO HIGHER INFLATION

    The better-than-expected near-term economic performance kept the BoE on hold its November meeting. The BoE also removed its previous signal for a second rate cut in 2016 - in line with expectations.

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  • 03.11.2016 — US PRODUCTIVITY SHOWS SOLID GAINS IN Q3 BUT LONGER TREND REMAINS WEAK

    US real nonfarm business productivity rose by 3.1% q/q in Q3 due to strong Q3 GDP growth, but was flat on a year-on-year basis.Productivity has been an enigma in this economic recovery, growing well below long-term trend. Low productivity growth will lead to shallow path of Fed interest rate increases.

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  • 03.11.2016 — HIGH COURT RULING COULD MATERIALLY CHANGE BREXIT CALCULUS - PLUS ECONOMIC IMPLICATIONS

    It’s not over yet. Today’s High Court ruling that the British government requires parliamentary approval to begin the UK’s exit from the EU – trigger Article 50 – has the potential to materially change the calculus of Brexit.

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  • 02.11.2016 — BOE INFLATION REPORT PREVIEW – AN OPPORTUNITY TO TAKE STOCK

    Better safe than sorry: Who knows what might have happened if the Bank of England (BoE) had not eased monetary policy so aggressively some three months ago at the August Inflation Report.  But it’s probably safe to say, given that the economy has weathered the near-term confidence shock well and markets have largely taken the Brexit-vote in their stride, that the BoE’s actions have probably done some good.

     

    But the UK’s better-than-expected economic performance since the vote has removed the need for the BoE to act again .

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  • 31.10.2016 — US: DECENT END TO Q3 PERSONAL SPENDING SETS FAVORABLE Q4 STARTING POINT

    The 0.3% rise in real consumption in September implies a pick-up in momentum at the end of Q3 and sets a decent starting point for private consumption in Q4.  Expect real consumption to grow near 2.0% again in Q4. The Fed’s preferred measure of consumer inflation, the core PCE deflator rose 0.1% m/m, maintaining the 1.7% yr/yr rise, very close to the Fed’s 2% target.

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  • 31.10.2016 — EUROZONE GDP: STEADY GROWTH AT A SATISFACTORY PACE

    Steady as she goes. Largely shrugging off concerns about Brexit and other political risks, the Eurozone economy expanded by 0.34% qoq in Q3, roughly in line with the 0.3% qoq consensus and slightly above the 0.29% qoq pace of Q2.

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  • 27.10.2016 — UK Q3 GDP: BREXIT VOTE IMPACT - NO DOOM, SOME GLOOM INSTEAD OF A BOOM

    The first estimate of Q3 GDP showed that the economy expanded by 0.5% qoq – at a faster rate than our own above consensus call of 0.4% qoq.

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  • 25.10.2016 — GERMAN UPSWING GAINS MOMENTUM AS IFO IMPROVES FURTHER

    Shrugging off earlier concerns about emerging markets and Brexit, Germany’s economic upturn looks set to gain momentum in coming months.

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  • 24.10.2016 — EUROZONE PMIS POINT TO STRONGEST GROWTH SO FAR IN 2016

    Economic growth in the Eurozone accelerated at the start of Q4 according PMI data. The October flash reading of the PMI composite – a good measure of the current state of the economy – reached its highest level so far this year, led by an uptick in Germany.

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  • 20.10.2016 — October ECB press conference: Come back in December

    At today’s press conference, ECB President Mario Draghi said that the Governing Council will ‘define’ its medium-term monetary policy at the December meeting. Draghi responded to questions on any aspect of what the ECB could do in December with ‘it wasn’t discussed’. This decidedly neutral response means that the ECB, as in September, had no intention of changing or redirecting current market expectations. Markets expect the ECB to announce an extension its current QE program at the December meeting. The potential for market dislocations and volatility if the ECB didn’t meet market expectations come December would be high. That the ECB didn’t look to alter market expectations is significant - an extension of QE beyond March 2017 therefore is very likely.

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  • 19.10.2016 — US: SHARP DROP IN HOUSING STARTS IN SEPTEMBER, Q4 REBOUND EXPECTED

    US housing starts fell sharply in September due to an anomalous decline in multifamily starts as single family starts rose. Multifamily building permits rose to their highest level in almost a year and suggest that September’s drop-off was temporary. The outlook remains constructive on housing as fundamentals are solid.

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  • 18.10.2016 — UK INFLATION REACHES HIGHEST LEVEL SINCE NOVEMBER 2014

    Headline inflation increased to 1.0% yoy in September, the highest rate since November 2014, up from 0.6% in August, and above expectations of 0.9%.

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  • 17.10.2016 — US: SLIGHT IMPROVEMENT IN SEPTEMBER'S INDUSTRIAL PRODUCTION BUT SECTOR REMAINS FRAGILE

    US Industrial Production advanced slightly by 0.1% m/m in September, with only one major category (utilities) declining. Manufacturing production, excluding autos, rose by 0.2% m/m in September but was down slightly on the quarter, reflecting continued weakness in broader factory activity.

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  • 12.10.2016 — EUROZONE OUTPUT: SHRUGGING OFF BREXIT

    No serious damage from the Brexit vote. After a revised 0.7% monthly drop in July, Eurozone industrial output rebounded strongly by 1.6% mom in August.

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  • 11.10.2016 — GERMAN ZEW JUMPS IN OCTOBER SUGGESTING AN ENCOURAGING Q4 START

    The German economic expansion accelerated heading into the final quarter of the year according to the October ZEW survey.

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  • 07.10.2016 — US: SOLID SEPTEMBER JOBS REPORT

    A 156k new jobs (net) were added to US nonfarm payrolls in September - a deceleration from the prior month’s revised 167k gain (+151k previous). Average hourly wages advanced 0.2% m/m and aggregate hours worked rebounded by 0.4% suggesting faster total personal income growth and better private consumption in September. The household survey was solid with the labor force increasing by 444k, most since February, and a sign of more confidence in job-finding prospects .

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  • 06.10.2016 — GERMAN FACTORY ORDERS POSITIVE POSE UPSIDE RISK FOR ECONOMY IN Q3

    German factory orders growth accelerated to 1.0% mom from 0.3% in July. The expansion was much stronger than anticipated (0.3% mom) in August as domestic demand rebounded (2.6% mom after -3.2% in July).

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  • 05.10.2016 — US: ISM NON-MANUFACTURING SENTIMENT CLIMBS OUT OF GLOOM IN SEPTEMBER

    The ISM non-manufacturing index advanced 5.7pts to 57.1 in September after souring to a 6.5 year low in August. Given that the index measures businesses’ assessment of conditions relative to the prior month, the high reading in September reflects a rebound from the anomalous weakness in August and should not be taken at face value.

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  • 03.10.2016 — EUROPEAN UPDATE: BREXIT, SPAIN, GERMAN POLITICS

    THERESA MAY’S BREXIT PLAN COULD MEAN HARD BREXIT

    SPAIN: CLOSER TO A NEW GOVERNMENT

    GERMANY: SHARP DROP IN NUMBER OF ASYLUM SEEKERS

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  • 30.09.2016 — UK: DEFYING EXPECTATIONS - GDP EXPANDED STRONGLY IN Q2, SERVICES SECTOR GROWTH BETTER

    No signs of Brexit in Q2: The UK economic expansion accelerated to 0.7% qoq in Q2, up from 0.4% in Q1, driven by robust quarterly gains in private consumption (0.9%) and a recovery in gross fixed capital investment (1.6%) following two consecutive quarters of decline.

    The UK service sector expanded at its fastest pace in four months in July: Output grew by 0.4% mom versus expectations of 0.1%.

     

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  • 26.09.2016 — GERMAN IFO REBOUNDS AFTER BREXIT DIP

    Business confidence in Germany recovered strongly from its post-Brexit dip in July and August. The better-than-expected September reading takes the quarterly average for the third quarter above that of Q2.

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  • 26.09.2016 — GERMAN IFO REBOUNDS AFTER BREXIT DIP

    Business confidence in Germany recovered strongly from its post-Brexit dip in July and August. The better-than-expected September reading takes the quarterly average for the third quarter above that of Q2.

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  • 24.09.2016 — UK POLITICAL UPDATE: CORBYN VICTORY PUSHES LABOUR EVEN FURTHER LEFT

    Sometimes political gambles backfire. A leadership contest that was intended to unseat Labour leader Jeremy Corbyn has done quite the opposite. With 61.8% of the vote (313,209 votes) Jeremy Corbyn handsomely beat his rival Owen Smith. The second landslide victory for Corbyn in a Labour leadership contest after he won last year with 59.5% of the votes has strengthened his position and popular mandate with the party. But Corbyn’s appeal does not stretch much beyond party members.

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  • 23.09.2016 — EUROZONE PMI AT 20-MONTH LOW POINTS TO DENT IN GROWTH

    Mediocre growth ahead: The Eurozone PMI composite dipped to a 20-month low of 52.6 in today’s prelim-inary reading, after 52.9 in July and versus expectations of 52.8.

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  • 21.09.2016 — US: FED STANDS PAT BUT SAYS CASE FOR HIKE HAS STRENGTHENED

    The FOMC’s vote to keep the policy rate unchanged was highlighted by three official dissents, reflecting the growing split within the FOMC and the growing concerns that its sustained monetary ease is creating mounting financial and economic distortions. Based on the FOMC’s upgrading of both the description of current economic conditions and assessment of risks, and acknowledgment that the case for a rate increase has strengthened, a hike is possible by year-end. On forecasts, the median estimate of potential growth was lowered by 0.2pp to 1.8%, consistent with the decline in the median longer run federal funds rate to 2.9%.

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  • 20.09.2016 — US: HOUSING STARTS HIT SOFT PATCH IN AUGUST

    US housing starts declined more than expected in August. This is likely a weather story, as starts gained in all regions except the South where Louisiana was impacted by serious floods. Though starts may not provide a boost to growth in the near-term, fundamentals point to a gradual recovery in coming quarters.

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  • 15.09.2016 — US Industrial Data Shows Further Weakness

    *US industrial production declined by 0.4% m/m (-1.1% yr/yr) as the gains in June and July proved fleeting. *Manufacturing production excluding motor vehicles – a gauge for the underlying trend in demand - declined by 0.5%. *Early readings on manufacturing sentiment for September suggest that sluggish activity continued through the end of the quarter

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  • 15.09.2016 — US: Sluggish Retail Sales Raises Doubt on H2 Rebound

    *Control retail sales are on track to rise by an annualized 1% this quarter, well below the 7% increase in Q2. *Weak consumer activity suggests economic slowdown is broad-based, placing doubt on H2 rebound. *If soft economic data continue, policy expectations for later in the year will change

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  • 15.09.2016 — UK: BOE MAINTAINS GUIDANCE FOR A FURTHER RATE CUT IN 2016

    This month’s Monetary Policy Committee meeting follows on from the August Inflation Report where the BoE sharply downgraded its forecast for GDP growth and announced a broad expansion of monetary policy.

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  • 15.09.2016 — EUROZONE INFLATION INERTIA POINTS TO QE EXTENSION

    Eurozone headline inflation remains well below the ECB’s target of ‘close to but below 2.0%’. While the headline rate should increase over the medium-term, to gradually converge with core inflation, both headline and core inflation will likely still be subdued by the end of the year.

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  • 15.09.2016 — UK: retail sales continue to beat expectations - good news for Q3 GDP

    Despite the small contraction on a monthly basis, UK retail sales continued to perform strongly in August, adding further signs that the UK economy is holding up better than expected following the June 23 Brexit vote. Retail sales ex. auto fuel declined by 0.3% mom (versus est. -0.4%). This follows a sizeable upward revision to the already strong July data when retail sales ex. auto fuel expanded by 2.1% mom (1.5% first est.) - the strongest monthly growth rate since December 2013. Following the slight dip in August, the 3M/3M growth rate eased a little to 1.7% compared to 2.1% in July, but remained above the long-term average of 0.7%. Growth in retail sales ex. auto fuel accelerated to 5.9% on an annual basis compared to an upwardly revised 5.8% expansion in July.

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  • 08.09.2016 — ECB: WAIT AND SEE AS POLICY IS EFFECTIVE

    Contrary to widespread expectations that the ECB may announce an extension of its €80bn asset purchase programme beyond the end of March 2017, the ECB did not do so today.

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  • 07.09.2016 — UPTURN IN UK INDUSTRIAL CONTINUES IN JULY

    The ONS industrial production report for July provides the first glimpse of economic data that will be included in the Q3 GDP estimate (preliminary). While industrial production makes up just 16% of GDP, the few tenths of a percentage point that a strong quarter can add to overall growth could prove significant in the coming quarters as the UK absorbs the shock of the Brexit vote. 

    Industrial output expanded in July by 0.1% on a monthly basis (exp. -0.2%) and by 1.0% on a 3M/3M basis. While output dipped by 0.9% mom in the largest sub-sector, manufacturing, on a 3M/3M basis, output increased by 0.5%. We would caution on attributing the manufacturing dip to Brexit. As the ONS point out in the report ‘since July 2015, manufacturing…has been volatile with no obvious underlying pattern’. There was a broad-based expansion across all other sub-sectors. This included strong expansions in mining & quarrying (+4.7% mom) and oil and gas (+5.6% mom).

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  • 06.09.2016 — GERMAN FACTORY ORDERS INCREASE ON STRONGER EUROZONE DEMAND

    German factory orders rose 0.2% mom in July, recovering from the 0.3% mom drop in June. While orders came in below the consensus estimate for the fourth consecutive month, the outlook for the German goods-producing sector looks promising given the stronger export orders from its Eurozone trading partners.

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  • 05.09.2016 — UK: August services PMI adds to signs of post-Brexit resilience

    The services PMI recovered strongly to 52.9 in August (exp. 50.0). This followed the sharp drop to 47.4 in July after the Brexit vote. The 5.5 monthly gain is the largest in the survey’s 20 year history. Companies linked the improvement to a recovery in confidence, higher tourism and a pick-up in exports from the weaker sterling. On the downside from the weaker sterling, firms reported the sharpest rise in input price inflation for 33 months - in line with our - and the market’s - expectation that UK inflation is set to rise sharply in the coming months. 

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  • 02.09.2016 — US AUGUST JOBS REPORT SOFT

    The US employment report for August was soft. A net new 151k jobs were added to nonfarm payrolls, 29k below the Consensus expectation, and a sizable slowdown from the +270k gains in July and June which represented bounce backs from the anomalous low gain in May.

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  • 01.09.2016 — US ISM POINTS TO FURTHER WEAKNESS IN MANUFACTURING SECTOR IN AUGUST

    ISM manufacturing headline index returns below 50 for the first time since February. The magnitude of the monthly decline (-3.2) is the largest since January 2014.

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  • 31.08.2016 — LOW EUROZONE INFLATION REMAINS SOURCE OF CONCERN FOR ECB

    Underlying price pressures in the Eurozone continue to lack a convincing upward trend. Eurozone inflation disappointed in August falling short of an expected acceleration.

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  • 30.08.2016 — EUROZONE CONFIDENCE FALLS, BUT FROM HIGH LEVEL

    Eurozone confidence dropped in August. After the surprisingly resilient July reading which implied a broadly stable growth outlook for the Eurozone, today’s results provide more evidence that the Eurozone economy will lose some momentum in the second half of 2016.

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  • 26.08.2016 — US NEW RESIDENTIAL CONSTRUCTION INCREASES AS EXISTING SUPPLY REMAINS LOW

    New home sales jumped by 12.4% to an annualized 654k in July, the highest pace since October 2007, as sales are being buoyed by robust demand, low mortgage rates, solid job and income gains, and the short supply of for-sale existing homes. Despite the recent improvement, new home sales are still well off their pre-recession pace as there is still plenty of room for improvement in the new residential construction sector.

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  • 26.08.2016 — US DURABLE GOODS REPORT DIM ON CURRENT ACTIVITY BUT BRIGHTER ON THE FUTURE

    Core durable goods shipments declined by 0.4% in July raising doubt about a rebound in business investment this quarter. However, the robust 1.6% m/m increase in core durable goods orders suggest that a turnaround in factory activity may be near.

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  • 26.08.2016 — UK: STRONG Q2 GDP - ROBUST DOMESTIC DEMAND PLUS UPSIDE SURPRISE ON INVESTMENT

    UK economic growth accelerated to 0.6% qoq in Q2 from 0.4% in Q1. As expected, the more detailed data today confirmed the first estimate published 27 July. Remarkably, the cyclical performance of the UK economy improved in the second quarter despite widespread signs in the soft data that economic growth was slowing, weighed down by the uncertainty related to the June 23 Brexit vote. Early signs suggest that this disparity between the hard and soft data has continued after the vote. July data for the labour market and retail spending improved despite the falls in reported consumer and business confidence.

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  • 26.08.2016 — UK: STRONG Q2 GDP - ROBUST DOMESTIC DEMAND PLUS UPSIDE SURPRISE ON INVESTMENT

    UK economic growth accelerated to 0.6% qoq in Q2 from 0.4% in Q1. As expected, the more detailed data today confirmed the first estimate published 27 July. Remarkably, the cyclical performance of the UK economy improved in the second quarter despite widespread signs in the soft data that economic growth was slowing, weighed down by the uncertainty related to the June 23 Brexit vote. Early signs suggest that this disparity between the hard and soft data has continued after the vote. July data for the labour market and retail spending improved despite the falls in reported consumer and business confidence.

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  • 26.08.2016 — ECB POLICY: LESS EFFECTIVE BUT STILL WORKING

    Monetary policy is still working in the Eurozone. While less effective than in previous cycles, the ECB’s stimulus is yielding some results. In July, credit growth in the Eurozone strengthened slightly further. The monetary and credit dynamics are compatible with trend growth in GDP, which we put at roughly 1.6%. Although the impact of Brexit, political uncertainty and possibly renewed concerns about China will likely push actual Eurozone growth slightly below its trend rate in Q3 and Q4, we expect the region to return to trend growth in early 2017.

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  • 25.08.2016 — GERMAN IFO SIGNALS DENT TO GROWTH IN Q3

    After a strong first half of the year, the German economy will probably lose some momentum in this and the next quarter. The business climate fell to 106.2 in August after 108.3 in July and well below consensus of 108.5.

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  • 24.08.2016 — BREXIT? WHAT BREXIT? TAKING STOCK TWO MONTHS AFTER THE VOTE

    Two months ago, the world woke up to learn that the UK had voted to leave the European Union. For two major reasons, the initial shock has subsided fast: 
    •        Instead of taking charge, the leading Brexiteers lost the ensuing power struggle within the Conservative party as the mildly pro-EU Theresa May prevailed within just three weeks.
    •        May’s calm and slow approach to Brexit issues has fostered the impression that she will seek realistic co-operation rather than ideological confrontation with the EU27.
     
    While nothing has been settled and the uncertainty about the UK’s future access to its major market seems to be weighing on investment and parts of the real estate market in the UK, the country did not fall into an escalating economic and political crisis. Financial markets re-priced UK assets in an orderly fashion through the exchange rate. Although a weaker Sterling does little to ease concerns about the future of Greater London as the services centre for Europe, it helped to lure more tourists to the UK.‎ In the EU27, the repercussions of the Brexit vote have been rather mild.

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  • 24.08.2016 — UK HOUSING MARKET RESILIENT IN JUL

    Loans for house purchase resilient in July. According to the British Bankers’ Association, the number of loans for house purchase dropped only slightly to 37,662 in July, from 39,763 in June. While the number of loans for house purchase has fallen in recent months after peaking at 46,386 in January, they remain far above the lows of the financial crisis (17,087 in Nov 2008) and the euro crisis (27,752 in Dec 2010). The fall in loans for house purchase is in part due to the heightened uncertainty and lower confidence since the Brexit-vote. The higher rate of stamp duty on second homes since April is also a significant factor. Separate data for July from HM Revenue and Customs (HMRC) showed that residential property transactions remained stable after the vote. There were 94,550 transactions in July according to HMRC compared to 95,430 in June -  up from the April low of 80,090 when stamp duty changes came into effect.

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  • 23.08.2016 — FED'S JACKSON HOLE SYMPOSIUM: WHAT IT'S ALL ABOUT AND WHAT TO LOOK FOR

    The Fed’s Jackson Hole Symposium will focus on very important large macro topics that are critically important to financial market participants, including the historically low interest rates and the unprecedented monetary policies of global central banks.  However, besides acknowledging the challenges of the current environment, Yellen’s presentation and any remarks by other Fed members at the symposium are not expected to yield any new insights about either the near-term path of US Fed monetary policy or any new thinking about what the Fed can or should do to improve economic performance.

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  • 18.08.2016 — WHAT BREXIT? UK RETAIL SALES ACCELERATE STRONGLY FOLLOWING BREXIT VOTE

    UK retail sales growth accelerated strongly after the Brexit vote despite soft data for July showing a sharp negative shock to consumer confidence. Retail sales volumes ex. auto fuel beat expectations, growing by 1.5% mom (exp. 0.3%) and 5.4% yoy (exp. 3.9%) – the fastest annual growth rate since September 2015. While monthly data are volatile, the 3M/3M change paints a clear picture of improving household demand in the period before and after the June 23 EU referendum. In the three months to July, retail sales ex. auto fuel increased by 1.9%, almost three times the average of 0.7% since 2000 and the fastest rate since December 2014.

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  • 17.08.2016 — UK: LABOUR MARKET STRONG IN JUNE BEFORE THE BREXIT VOTE WHILE JOBLESS CLAIMS FELL IN JULY

    Today’s labour market data is mainly for the month of June, before the Brexit vote. The data shows no evidence of Brexit-jitters and instead reflects the strong economic conditions that preceded the referendum.  Unemployment remained stable at 4.9% in the three months to June, in line with consensus expectations, while 3m/3m employment increased by 172k (exp. 150K). The UK employment rate for 16-64 year olds was 74.5%, the highest on record. Weekly earnings growth including and excluding bonuses remained sluggish but improved by 0.1ppt compared to May, increasing by 2.4% and 2.3% respectively.

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  • 16.08.2016 — GERMAN ZEW REBOUNDS FROM INITIAL SHOCK

    German ZEW surveys rebounded in July to pre-Brexit vote levels. While the expectations indicator (+6 months) recovered to 0.5 from -6.8 in July, it was below expectations of 2.0. Current assessment, the more reliable indicator of underlying conditions, rose to 57.6 (vs. 49.8 in July and 50.2 expected).

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  • 16.08.2016 — UK INFLATION INCREASES IN JULY - NO SIGNS OF BREXIT EFFECT JUST YET

    Headline inflation in the UK increased to 0.6% yoy in July from 0.5% in June, in line with our expectations. Core inflation, a measure of underlying inflation that subtracts volatile components such as food and energy, slowed to 1.3% yoy in July compared to 1.4% yoy the previous month. The impact of the Brexit vote will take time to feed through into inflation. The changes in the components of July inflation reflected the improving underlying economic conditions pre-vote. Prices continued to fall for food and non-alcoholic beverages, due to strong competition in the supermarket sector. Most of the upward pressure came from components linked to growth in discretionary spending such as (1) restaurants and hotels and (2) recreation and culture.

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  • 12.08.2016 — EUROZONE Q2 GDP SLOWS, GERMANY SURPRISES, ITALY DISAPPOINTS

    Boosted by strong results from Germany, Spain and the Netherlands, the Eurozone economy continued to expand at a satisfactory pace in Q2. Although growth slowed from an unusually strong 0.6% qoq gain in Q1 to 0.3% qoq in Q2 as the unusually mild winter gave way to ‎a more normal spring, the underlying trend remains encouraging.

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  • 12.08.2016 — HAS THE BOE STARTED A CURRENCY WAR? NOT AT ALL

    A weaker currency during a downturn can limit the downside for a flagging economy. Higher import costs and more competitively priced exports often improve the trade balance as imports decline while exports rise, resulting in a plus for GDP. After last week’s rate cuts and new asset purchases (QE), the BoE has been accused of entering a ‘currency war’. This is a little odd. The notion ignores historical evidence for the UK and elsewhere.

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  • 12.08.2016 — GERMAN UPSWING TAKES ONLY A SMALL BREATHER

    After a bounce in early 2016, the German upswing took less of a breather than expected  in Q2. Despite a drag from a weather-related drop in construction, gains in private and public consumption and a further rise in exports raised German GDP by 0.4% qoq, well ahead of the 0.2% qoq consensus. The downside risk to our own 0.3% qoq call did not materialise.

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  • 11.08.2016 — AFTER THE SUMMER BREAK: NO NEWS IS GOOD NEWS

    Back in the office after a few weeks spent near the Arctic circle, a first glance suggests that not much has changed. Except for unexpectedly weak US GDP in Q2, most data and developments seem to be roughly in line with our expectations. By and large, markets are behaving accordingly. Valuations still reflect a fundamental caution signalled for instance by the huge yield gap between “safe haven” bonds and equity dividends. In such an environment, markets are inclined to stabilise or move up in the absence of major news, that is if no major risk materialises. That seems to have been the case in the last few weeks.

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  • 05.08.2016 — BOE GETS CREATIVE IN RESPONSE TO BREXIT SHOCK

    Here are the key points from the August Inflation Report.
    ● A 25bp rate cut, £60bn increase in quantitative easing (QE), £10bn corporate bond purchases and new Term Funding Scheme.
    ● More easing likely: A “majority of members expected to support a further cut in the bank rate…during the course of the year”.
    ● The MPC unanamously voted for a rate cut, voted 8-1 on corporate bond purchases and voted 6-3 on expanding QE.
    ● There is no recession in the Bank of England’s (BoE) central forecast, but the Monetary Policy Committee (MPC) sees “little growth in GDP during the second half of year”.

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  • 01.08.2016 — BoE preview: going for a goldilocks stimulus

    Soft data for the month of July indicate that the UK economy has slowed abruptly following the Brexit vote, with a risk of recession in the second half of 2016. In light of the comments made in the past month by the BoE governor Mark Carney ‘easing over the summer’, plus explicit guidance in the July meeting minutes that ‘most members of the Committee expect monetary policy to be loosened in August’, it is not a question of if the BoE will ease policy later this week, but by how much.

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  • 29.07.2016 — BREXIT UPDATE: REFERENDUM IMPACT ON UK HOUSEHOLDS IN 4 CHARTS

    Households are the main engine of growth for the UK economy. 2/3 of GDP is private consumption. Brexit uncertainty started to weigh on consumer confidence in the run up to the referendum. Data for household conditions has deteriorated further in July. While gains in net trade from the weaker sterling may offset drops in business investment, the evolution of private consumption over the coming quarters will determine by how much GDP growth slows, or indeed, if the UK enters a recession.Today, GfK published household survey data for the month of July. Key points are as follows: 

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  • 27.07.2016 — UK GDP - RESILIENT TO BREXIT RISK IN Q2

    The UK economy accelerated in the second quarter of the year despite the notable weakness in soft data in the months before the EU referendum. GDP expanded by 0.6% qoq compared to 0.4% in Q1 and versus expectations of 0.5%. The acceleration in the second quarter is in sharp contrast to Q2 PMI data that suggested growth of 0.3-0.4% qoq, indicating that soft data somewhat exaggerated the impact of Brexit uncertainty.  If this trend continues, it supports our call that the UK will stagnate and avoid recession in the near-term in reference to the sharp weakness soft data since the Brexit vote on June 23.

     

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  • 27.07.2016 — Economic and political consequences of attacks in Europe

    Our core theme for Europe in 2016 is that we need to watch politics first, then economics. Brexit has been a realisation of such political risk.  As European nations debate how to move forward, including how to negotiate with the UK on the details of its exit from the EU, the spate of attacks may contribute to the changed political environment.  While the attacks could strengthen the ties between European nations, increasing cooperation on security and foreign policy issues to present a united front to the challenges, the opposite may occur.  Right-wing populists could heighten their arguments to limit migration and encourage retreat from European co-operation.  At a minimum, there will be more pressure on European leaders who are striving to maintain cohesion in the face of rising concerns among citizens. The attacks also carry economic risks.

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  • 25.07.2016 — BREXIT UPDATE: UK ECONOMY HIT HARD, EUROZONE RESILIENT SO FAR

    UK – stagnation ahead, significant downside risks: Data released today from the Confederation of British Industry (CBI) showed that industrial orders remained resilient following the Brexit vote while the level of optimism in the UK industrial sector fell to its lowest level since 2009. Eurozone – withstanding the Brexit shock – some risks to the outlook: In contrast to data for the UK in the month of July which has sharply deteriorated, Eurozone data remains modestly positive on-balance.

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  • 25.07.2016 — GERMAN IFO AFTER BREXIT: ENCOURAGINGLY RESILIENT

    Ifo survey data for July beat expectations across the board – showing no real signs of an impact from the Brexit vote. This is more evidence, along with the PMI data published last Friday, that the EU’s largest economy is weathering the Brexit storm. 

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  • 22.07.2016 — UK JULY PMIS - KNEE-JERK REACTION TO BREXIT VOTE

    The Brexit vote and the short but messy period in British politics immediately after June 23 present serious downside risks to the near-term outlook. The limited soft data for the period since the UK voted to leave the EU has been mixed so far. Confidence indicators and Bank of England field work point to resilient demand, and stagnation rather than recession in the coming quarters. But the PMI data for July released today point to a sharp drop in economic activity. The risk of a recession in H2 2016 is significant. We expect the Bank of England to respond to this threat with a fairly aggressive stimulus package at the upcoming Inflation Report on the 4 August. We look for a 25bps rate cut with a 60% chance of QE – circa £100bn.

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  • 21.07.2016 — ECB WILL BE DATA-DEPENDENT IN CONSIDERING POTENTIAL RESPONSE TO BREXIT

    Despite the potential risks the Brexit vote presents to the near-term growth outlook for Eurozone economy, the ECB was decidedly neutral in their first opportunity to address market concerns since June 23. While the ECB reiterated previous guidance of being “ready, willing and able” to expand the current stimulus, if required, they did not provide a significant advance on their pre-referendum guidance.

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  • 21.07.2016 — ECB PREVIEW: KEEPING ITS OPTIONS OPEN

    The ECB’s Governing Council will come together today for its first monetary policy meeting since the Brexit vote on 23 June. While Eurozone growth looks set to slow in the coming quarters, we expect the ECB to keep its policy setting unchanged, for now (main policy rate at 0.0%, deposit rate at -0.4% and total monthly asset purchases at €80 bn).

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  • 20.07.2016 — Brexit update: can the UK avoid a recession?

    Following the UK’s vote to leave the EU on June 23 uncertainty about the long-term outlook has risen. But so far, the limited information on the economy for the period since the referendum is consistent with a stagnation in the near-term rather than an outright recession.

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  • 14.07.2016 — BOE HOLDS FOR NOW – SIGNALS EASING IN AUGUST

    The jump in sterling and gilt yields immediately after the BoE published its decision to keep policy unchanged in July gives the impression that the MPC minutes were hawkish. This is not the case.

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  • 13.07.2016 — SPAIN: END OF POLITICAL STALEMATE?

    After seven months of stalemate, Spain may be one step closer to the end of its political paralysis. The liberal Ciudadanos party will likely decide today to allow Mariano Rajoy to form a minority government by abstaining in the decisive vote in parliament.

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  • 12.07.2016 — UK: ECONOMIC IMPLICATIONS OF PRIME MINISTER MAY

    Theresa May will replace David Cameron as UK Prime Minister on Wednesday. In this flash we discuss the key economic implications relating to her appointment.

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  • 11.07.2016 — JULY MPC MEETING PREVIEW: READY TO ACT, CHANCE OF RATE CUT

    The Bank of England’s (BoE) rate setting committee will meet on Thursday for the first Monetary Policy Committee (MPC) meeting since the UK voted to leave the EU on June 23.  The minutes released at midday will detail the MPC’s assessment of the economy since the Brexit vote as well as any policy changes. We see a 60% chance that the nine member MPC votes to cut the bank rate, if so, probably by 25bps. However, there is a chance that the MPC holds for now, and instead opts to send a dovish signal that the bank will ease monetary policy three weeks later at the August Inflation Report when it is due to publish its revised economic forecasts.

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  • 07.07.2016 — GERMAN PRODUCTION: CORRECTION AFTER STRONG Q1

    Industrial production in Germany unexpectedly dropped in May with political uncertainty in Europe ahead of the British vote on EU membership likely weighing on activity.

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  • 05.07.2016 — UK: CONFIDENCE CRISIS BUT NO EVIDENCE OF RECESSION YET

    The uncertain business environment and economic outlook ahead of the Brexit vote weighed on GDP growth in the second quarter. The full set of PMIs for Q2 is in line with our call that the economy expanded by 0.3% qoq.

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  • 05.07.2016 — EUROZONE PMI HOLDS STEADY BEFORE BREXIT

    The final reading of June’s PMI composite of 53.1 was unchanged from May and stable at a level in line with trend growth. This is the 19th consecutive expansion of the index (a level of 50 indicates neutral).

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  • 29.06.2016 — BREXIT IMPACT ON EU: CONTAGION OR SALUTARY LESSON?

    From an EU-27 perspective, the big British question is largely settled. Sadly, the UK has voted to leave. Unless the UK relents, which I consider as unlikely but not impossible, the UK will be out. For the sake of its own cohesion, the EU-27 cannot offer better terms than before to keep the UK in.

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  • 29.06.2016 — EURO AREA CONFIDENCE SOFTENS ON EVE OF BREXIT VOTE

    Euro area economic confidence weakened slightly in June in anticipation of a UK referendum that unex-pectedly saw Britons choosing to leave the European Union. The broad-based economic sentiment somewhat confirms the risks the narrower PMIs signalled already last weak.

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  • 28.06.2016 — BREXBACK? PROBABLY NOT

    Political turmoil in the UK, some soul-searching in the EU-27, a major but largely orderly re-pricing of fi-nancial assets, a plunge in Sterling, rating downgrades for the UK: so far, the impact of the UK vote to leave the EU is playing out like many observers including us had predicted in our “what if” risk scenarios ahead of the vote.

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  • 28.06.2016 — AFTER THE BREXIT SHOCK

    British regret? Over 3 million people sign an online petition to the UK parliament to discuss a second referendum. UK Labour Party leader Jeremy Corbyn faces a leadership challenge after his particularly lacklustre pro-EU campaign.

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  • 28.06.2016 — SPAIN: POPULISTS LOSE VOTES BUT STALEMATE CONTINUES

    Will Britain's shock vote to leave the UK embolden populists elsewhere in Europe? That has become the key question for Europe. The result of Spain's repeat election on Sunday shows no trace of such contagion effects.

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  • 27.06.2016 — BREXIT UPDATE: 5 QUESTIONS FOR THE COMING MONTHS

    UK politics has fallen into crisis following the vote for Brexit last Thursday. The resulting uncertainty and market tensions could further dampen activity in the domestic economy in the near-term. Currently, there are more questions than answers. To discuss likely outcomes amid unprecedented uncertainty we focus on five key areas:

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  • 21.06.2016 — GERMAN COURT LEAVES EUROPE'S SAFETY NET INTACT

    Europe dodges another bullet. In its final verdict on the ECB’s “all it takes“ OMT programme, Germany’s Constitutional Court today rejected the legal challenges against the Eurozone’s premier safety net. Although the court did so with some unease and placed some limits on potential Bundesbank participation, the verdict allows the OMT to serve its purpose if it ever has to be activated.

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  • 08.06.2016 — UK INDUSTRIAL PRODUCTION: FASTEST GROWTH IN ALMOST 4 YEARS

    Total production increased by 2.0% mom in April, the biggest increase since July 2012. Growth was significantly above estimates of 0.0% and followed a 0.3% rise in March. On a 3m/3m basis, industrial production grew for the first time since last November, up by 0.7% in April. Manufacturing - the largest industrial sector - increased by 2.3% between March and April, its fastest rate of growth since July 2012.

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  • 06.06.2016 — BREXIT UPDATE: PUTTING RECENT POLL SHIFTS INTO CONTEXT

    Has the Brexit risk risen? Probably not much. Opinion polls can be volatile. Even though our weighted average of online and telephone polls indicates the lowest level of support for ‘remain’ all year, analysis of the underlying poll trends does not point conclusively to a significantly higher Brexit risk.

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  • 03.06.2016 — BREXIT UPDATE: THE ECONOMIC MYTHS THAT CONCEAL REALITY (CONTINUED)

    Ahead of the UK’s ‘in or out’ European Union (EU) referendum on 23 June 2016, the debate about the costs and benefits of EU membership is often shrouded in myths rather than driven by facts. In a series of brief reports, we contrast such myths with reality.

    In this analysis, we focus on the myths to which the debate has recently shifted: (1) the staple argument of the Leave campaign, EU migration and its effect on public services and housing, (2) Britain’s understanding of the European project, and (3) potential post-Brexit opportunities with the Commonwealth.

     

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  • 03.06.2016 — UK UPDATE: CONSUMERS RESILIENT AMID SHARP RISE IN UNCERTAINTY AHEAD OF EU REFERENDUM

    There are widespread signs across the UK economy that Brexit jitters are starting to bite and that growth has slowed in the run up to the EU referendum on 23 June. While consumers remain relatively upbeat, political uncertainty has risen to the highest level on record. Short of a Brexit, we expect growth to snap back in the second half of the year.

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  • 02.06.2016 — ECB MAINTAINS DOVISH BIAS

    Upon raising its projections for growth and inflation in 2016, the ECB maintained a decidedly dovish bias. While the ECB did not suggest at its press conference today that it may need to ease policy again, the ECB emphasised that it ‎is "willing, able and ready" to act if financial turmoil were to impair the transmission mechanism of monetary policy or if ultra-low inflation became too entrenched in inflation expectations.

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  • 31.05.2016 — ECB PREVIEW: A TASTE OF SUCCESS

    The economy is expanding at a satisfactory clip, the hypothetical deflation threat has receded and none of the risks that had roiled markets early this year has materialised. At its meeting in Vienna this Thursday, the ECB Council will not need to take any major decision.

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  • 30.05.2016 — EUROZONE: DOMESTIC DEMAND DRIVES THE RECOVERY

    Steady growth, more jobs, neither inflation nor deflation. While not exactly splendid, the outlook for the Eurozone economy is quite satisfactory. Supported by domestic demand, the Eurozone economy looks set to expand at a pace around its 1.6% trend rate later this year, in line with growth over the last five quarters.

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  • 27.05.2016 — "Remain" edging ahead: Brexit risk falls to 30%

    Recent trends indicate that the risk of the UK voting to leave the European Union on 23 June has fallen. We thus reduce our probability of a Brexit from 35% to 30%.

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  • 26.05.2016 — UK: MARKET TURMOIL AND BREXIT JITTERS HIT Q1 GDP GROWTH

    The worst start to a year in financial markets since 2008 and heightened uncertainty over the UK’s fate in the EU damped growth momentum at the start of the year. Domestic demand provided all of the growth while trade dragged. The quarterly growth rate slowed to 0.4% in Q1 from 0.6% in Q4, in line with expectations.

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  • 25.05.2016 — GERMAN IFO SHOWS CONTINUED EXPANSION

    May’s Ifo business climate reading suggests the German economy continues its growth path at a robust pace. After stronger-than-expected growth in the first quarter of 2016, the expansion is likely to slow in Q2. The risk of a sharp drop-off in Q2, and the rest of the year, is limited, provided that the subdued growth of economic activity in the rest of the Eurozone does not weaken further.

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  • 18.05.2016 — UK: LABOUR MARKET ADDS JOBS, WAGE GROWTH DIPS

    The UK employment machine keeps on humming. Despite the market turmoil in Q1 and concerns about the Brexit referendum in Q2, UK firms continued to hire. The employment rate reached a record 74.2% in March after the economy added a further 44k jobs. The unemployment rate remained unchanged at 5.1% in March, in line with expectations and stable for the fourth consecutive month. Frustratingly, wage growth slowed despite the continued expansion in labour demand. Wage growth (ex bonuses) dipped to 2.1% yoy versus expectations of an acceleration to 2.3%, following growth of 2.2% in February.

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  • 17.05.2016 — UK INFLATION – DROP IN AIR FARES REVERSES MARCH GAINS

    Inflation unexpectedly slowed to 0.3% in April from 0.5% in March. A 14.2% mom decline in air fares stripped away the 0.1 ppt air fares added in March - when they jumped temporarily due to the early Easter.  Declines in the prices of clothing, vehicles and social housing rent also contributed to the drop in the headline rate. Core inflation, which strips out the volatile energy and food components dropped to 1.2% in April from 1.5% in March - versus expectations of 1.4%.

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  • 12.05.2016 — UK: BOE CAUTIOUS OF BREXIT RISKS – NEXT MOVE LIKELY UP

    The MPC made no policy changes at its May meeting. The nine member committee voted unanimously in favour of keeping the bank rate at 0.5% and maintaining the stock of QE assets at £375 billion. 

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  • 11.05.2016 — UK INDUSTRIAL OUTPUT: THIRD SLUMP IN 8 YEARS

    Hard times for UK production industries: Industrial output contracted by 0.4% qoq in Q1 2016. This follows a quarterly decline of 0.4% in Q4 2016. Manufacturing – the largest industrial sector - contracted by 0.5% qoq.

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  • 11.05.2016 — THE ECONOMICS OF BREXIT: A GERMAN VIEW

    We see a 35% risk of Brexit. The British ‘in or out’ EU referendum on 23 June poses the top economic and political risk for Europe this year. Germany would love the UK to stay in the European Union. The UK is simply part of Europe. Managing relations with the UK is much easier in the established framework of the EU than it would be on an awkward bilateral basis.

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  • 09.05.2016 — MACRO UPDATE: GREECE, FED, BREXIT CONTAGION RISKS, EUROZONE AND UK GDP

    Last night, the Greek parliament approved a package of pension reforms and tax increases. The government managed to mobilise its majority of 153 out of 300 seats in parliament. 

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  • 09.05.2016 — UK: MAY INFLATION PREVIEW - LOOKING THROUGH THE BREXIT JITTERS

    Whilst we expect some downward revisions to the current assessment of growth and some wariness by the MPC about the impact of Brexit uncertainty on domestic demand, we would not read too much into a dovish tone. We address these issues one by one as we discuss what to look for in the May Inflation Report on Thursday.

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  • 05.05.2016 — UK UPDATE: SERVICES PMI AT 3 YEAR LOW ON BREXIT JITTERS, NO NEED TO PANIC

    The lowest reading for the UK services PMI since February 2013 makes for three in a row after construction and manufacturing indices also came in below expectations earlier in the week. The headline index for services was 52.3 in April, below the consensus of 53.5.

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  • 29.04.2016 — EUROZONE OUTLOOK: A FIRMER RECOVERY

    Good news from the Eurozone. One by one, the pieces are falling into place. After a soft patch in the second half of 2015, the Eurozone is returning to trend growth of roughly 1.6% yoy.

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  • 28.04.2016 — GERMAN LABOUR MARKET: SOLID TREND

    Despite the recent drop in exports to China and other emerging markets, Germany continues to create ever more jobs. Strong gains in real disposable incomes and a fiscal stimulus of at least 0.5% of GDP for 2016 point to further gains ahead. In turn, solid employment growth will underpin consumer spending, helping to cushion the German economy somewhat against external shocks.

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  • 28.04.2016 — THE POLITICS OF BREXIT: A GERMAN VIEW

    For once, let me start with the disclaimer: I am a German who has spent half of his adult life in London. That may colour my perspective. I am amazed by the current German backlash against the ECB, the only central bank that has ever‎ delivered a prolonged period of price stability for Germany. In the same way, I am amazed by some English views of the European Union which also seem to be partly based on a somewhat peculiar interpretation of European facts. Let me offer a German-inspired view of the Brexit debate.

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  • 27.04.2016 — ECB POLICY IS WORKING AS CREDIT CYCLE TURNS UP GRADUALLY

    Monetary policy is working in the Eurozone. While less effective than in the past, the ECB’s stimulus is yielding results. In March, credit growth in the Eurozone strengthened slightly further.

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  • 27.04.2016 — UK GDP SLOWDOWN - NO CAUSE FOR CONCERN

    GDP growth slowed from 0.6% qoq in Q4 to 0.4% qoq in Q1, in line with estimates. This is not a cause for concern. The slowdown was caused by largely idiosyncratic and transitory risks, namely the financial market rout at the start of the year and the forthcoming EU referendum on June 23.

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  • 25.04.2016 — UK: Obama signals Brexit could change the 'special relationship'

    Pro-EU Prime Minister Cameron couldn’t have asked for more. On his visit to London, US President Obama plainly stated that he thought the UK should vote to stay in the EU, and that it would be in the interests of the UK, the EU and the US for the UK to do so.

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  • 22.04.2016 — BREXIT UPDATE: THE ECONOMIC MYTHS THAT CONCEAL REALITY

    Ahead of the UK referendum about staying in or leaving the European Union (EU) on 23 June 2016, the debate about the costs and benefits of EU membership is often shrouded in myths rather than driven by facts or reasonable arguments. In a series of brief reports, we will contrast such myths with reality in the coming eight weeks.

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  • 21.04.2016 — ECB KEEPING ITS OPTIONS OPEN

    No surprises today from the ECB. All key rates and policy measures remain unchanged following the vast expansion the ECB delivered on the 10th of March. Draghi said that rates will need to stay at current levels ‘or lower’ beyond the specified horizon for QE (March 2017), adding that QE will run until the ECB sees a ‘sustained inflation adjustment’.

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  • 20.04.2016 — GERMANY VERSUS ECB: HOW DANGEROUS IS THE DISPUTE?

    Careful what you wish for. For decades, Germans strongly believed in price stability and an independent central bank. Fate and the European Central Bank (ECB) have granted them both wishes. Prices are more stable than ever before. And the ECB is so stubbornly independent and focussed on its price stability mandate that it rejects all suggestions to gear its monetary policy towards other objectives such as creating more jobs in France or guaranteeing a risk-free interest income for savers in Germany.

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  • 20.04.2016 — UK: LABOUR MARKET COOLS AHEAD OF EU REFERENDUM

    The headline rate of unemployment was 5.1% in the three months to February, in line with estimates and stable for a fourth consecutive month. Although data showed that the number of people looking for work rose modestly (21k) compared to the three months to November, the number was down by 142k compared to a year ago.

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  • 18.04.2016 — EU referendum: Panama scandal hits polls - Obama to the rescue

    The recent terror attacks in Brussels and David Cameron's hesitant reaction to the Panama leaks have led to a rise in support for a Brexit. Should we be worried? Probably not much. Firstly, this is not the first time negative news have affected the polls (see chart). Secondly, recent history tells us that these shifts usually prove to be temporary. On this occasion, we expect history to repeat itself.

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  • 18.04.2016 — EUROPEAN POLITICAL UPDATE: BREXIT, POPULISM AND OTHER RISKS

    Although the migrant crisis is receding from the headlines as the flow of migrants from Turkey into Greece has slowed to daily trickle of around 100 from a peak of 7000 last October, political risks continue to loom large in Europe. Rampant populism and potential policy mistakes may still jeopardise the cohesion of Europe that underpins the region’s prosperity.

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  • 14.04.2016 — BOE IN ‘WAIT AND SEE’ MODE UNTIL BREXIT RISKS PASS

    With a little over two months to go before the EU referendum (23 June), minutes from the April meeting show that Britain’s MPC is firmly in ‘wait and see’ mode until the outcome of the vote is clear. Expectedly, the MPC voted unanimously in favour of keeping the policy rate on hold at 0.5% and in favour of maintaining the stock of QE assets at £375 billion.

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  • 12.04.2016 — UK INFLATION RECOVERING - FIRST HIKE LIKELY IN NOVEMBER

    In March, inflation increased by 0.2 ppt mom to 0.5%, above estimates of 0.4%. The headline rate has now increased by 0.6 ppt from a low of -0.1 ppt last October. Core inflation, which excludes volatile components like energy and food, surprised on the upside too. Core inflation increased to 1.5% yoy, 0.2 ppt higher than in February and 0.1 ppt above estimates. 

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  • 08.04.2016 — TRADE AND INDUSTRIAL DATA HIGHLIGHT WEAKSPOTS IN UK ECONOMY

    Industrial weakness could present some downside risk to first quarter growth. Industrial output declined by 0.3% mom in February, against consensus expectations of a modest rise of 0.1%. Comparing the first two months of the year to the final quarter of 2015 shows industrial output declined by 1.0%.

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  • 04.04.2016 — UK UPDATE: BEYOND THE BREXIT RISK - FIRST RATE HIKE IN NOVEMBER

    When considering the upcoming EU referendum on June 23 we need to remember two things: (1) To subtract the noise and instead focus on the underlying trend when assessing the real risk of a Brexit – the UK remaining in the EU is still the most likely outcome. (2) To still pay attention to the other key risks and trends for the UK economy in 2016.

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  • 31.03.2016 — UK GDP- NICE RECOVERY BUILT ON SAND

    2015 UK GDP growth revised up 0.1ppt to 2.3% in 2015 - driven by domestic forces while trade dragged. The UK economy expanded by 0.6% qoq in the final quarter, revised up from the previous estimate of 0.5%. On an annual basis, total output increased by 2.1% in Q4 (up from 1.9%). Following on the general trend for the year, consumption - this accounts for 65% of GDP - increased by 0.6% qoq, boosted by labour market gains and a tailwind from cheap oil.

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  • 31.03.2016 — GOOD FOR EUROPE: GERMANY'S JOBS MACHINE KEEPS HUMMING

    Despite a temporary slowdown in growth caused by China and the crisis in some other emerging markets, Germany continues to create ever more jobs. Strong gains in real disposable incomes and a fiscal stimulus of at least 0.5% of GDP for 2016 point to further strength ahead. In turn, solid employment growth will underpin consumer spending, helping to cushion the German economy somewhat against external shocks. The robust labour market is largely the result of Germany’s sweeping “Agenda 2010” labour market reforms of 2004. German domestic demand looks set to remain a pillar of strength at the core of Europe.

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  • 30.03.2016 — EUROZONE CONFIDENCE: NO SPRING YET

    Spring has not come to the Eurozone economy yet. Instead, economic sentiment fell modestly again in March for the third time in a row, from 103.9 in February to 103.0 now. This most encompassing survey of current economic conditions suggests that GDP growth remains below its 1.6% trend rate. We expect lessening concerns about China and oil as well as the tailwinds from modest fiscal easing and the additional ECB stimulus to lift growth back to its trend by mid-year. But this process has not started yet. As a small consolation for the ECB, selling-price expectations edged up slightly in industry and the services sector following the rebound in oil prices.

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  • 29.03.2016 — ECB: MONETARY POLICY IS STILL WORKING

    “Monetary policy is no longer working. Instead, ECB attempts to support demand and nudge inflation gradually back to the desired rate of close to 2% are merely creating dangerous distortions.” These assertions have turned into the standard refrain of many observers, sung most loudly in the German debate. The facts including today’s money and credit data show that the refrain is wrong. ECB policies are still working.

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  • 22.03.2016 — Notes on the consequences of terror attacks

    Not for the first time, we have to consider the potential economic and political effects of terror. Resilience is part of human nature. Individual ‎terror attacks usually do not change underlying economic trends. That at least was the clear lesson of the terror attacks on Madrid and London in 2004 and 2005.

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  • 18.03.2016 — EU DEAL WITH TURKEY: CONTAINING THE MIGRANT CRISIS

    The EU and Turkey strike a deal: Turkey agrees to take back “all new irregular migrants” crossing from Turkey into Greek islands as of 20 March; the EU offers Turkey the chance to get visa-free travel for Turks to the EU by the end of June if Turkey meets the required conditions. The EU will also pay Turkey up to €6bn by 2018 to sustain the roughly 2.7 million Syrian refugees in Turkey and will take (initially) up to 72k Syrian refugees from Turkey in an orderly resettlement procedure. What does the deal mean?

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  • 16.03.2016 — UK BUDGET 2016 - NO GAME CHANGERS FOR GROWTH

    No gamer changer: Osborne delivered some nice reforms to boost businesses and help households. However, the cash shortage was also plain to see. The Chancellor announced a package of measures aimed at making the UK a better place for business, helping households save more, accelerating devolution within the UK and boosting productivity. But overall, the economic downgrades severely constrained the Chancellor’s capacity to make significant changes. All in all, today’s announcements probably do not mean much for the economic outlook.

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  • 16.03.2016 — POLITICAL UPDATE: US RISKS, EUROPEAN MIGRANT CRISIS, PUTIN, MERKEL

    Clinton extends her lead over Sanders and looks set to be the Democratic nominee; Trump wins four of five primaries and edges closer to the Republication nomination despite losing Ohio to Kasich. Bookmakers and electronic markets suggest that Clinton is the clear favourite to be the next US president.

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  • 15.03.2016 — UK BUDGET 2016 - WHAT TO EXPECT

    When a government needs to cut spending, the first budget after the election is the most important one. Announcing the big cuts as early as possible provides the most time before the next election to win back the favour of voters. But what do we know going into this year’s budget?

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  • 14.03.2016 — GERMAN STATE ELECTIONS: SERIOUS SETBACK FOR MERKEL

    A serious setback for Merkel as many voters reject her migration policies. At the "Super Sunday" elections in three of Germany's 16 federal states, Merkel’s CDU fared even worse and the anti-foreigner AfD garnered even significantly more votes than most opinion polls had projected‎. The result will add to the unease within Merkel's centre-right party about her migration policies. But even this protest vote is unlikely to put her job as chancellor at risk.

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  • 11.03.2016 — GERMAN POLITICS: SUPER SUNDAY PREVIEW

    If opinion polls are any guide, chancellor Merkel’s CDU could suffer a major setback at elections in three of Germany’s 16 federal states this Sunday. If so, this will trigger some unsettling headlines and possibly even speculation that her position may be at risk. As she has once been dubbed “the indispensable European” even by the comparatively well informed and usually sober “Economist” magazine, that could cause concerns well beyond Germany.

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  • 11.03.2016 — UK TRADE: WIDENING EU GOODS DEFICIT WILL ADD FUEL TO THE BREXIT CAMP

    Trade deficit may ease further in coming months before widening in H2: After sharp downward revisions to back data, the UK trade deficit in goods and services narrowed to a five month low of £3.5b in January from £3.7bn in December, mostly due to a reduction in imports. Comparing January to the average monthly balance for the final quarter of last year, the trade balance improved by £700m with imports down by around £1b.

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  • 10.03.2016 — ECB: GOING ALMOST TO THE LIMIT

    Wow. In almost every respect, the ECB went beyond expectations today. That holds for the scope and breadth of its monetary policy measures as well as for the generous details of its LTRO liquidity injections and its forward guidance on interest rates. According to ECB president Draghi, the Governing Council adopted the comprehensive package with “an overwhelming majority”.

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  • 09.03.2016 — CENTRAL BANKS: WHAT THEY CAN AND CANNOT DO

    As the European Central Bank (ECB) looks set to ease its monetary policy even further on 10 March, ‎the discussion about what central banks can and cannot achieve is veering into ever wilder directions. Some pundits claim that central banks have lost much of their erstwhile power; others accuse them of expropriating hapless savers. Some observers even suggest that it would take a tighter rather than looser policy to support demand. To assess these claims, we need to recall some basic points about monetary policy.

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  • 09.03.2016 — UK UPDATE: MANUFACTURING WEAKNESS NOT A SERIOUS RISK

    Industrial output turns positive after a two month dip but it won’t last: Industrial output grew by 0.3% yoy in January after contracting by 1.1% in December and 0.8% in November. Growth was slightly below expectations and comparing January to the Q4, industrial output contracted by 0.8%.

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  • 07.03.2016 — MONDAY MACRO UPDATE: EU-TURKEY SUMMIT, ECB, US AND EUROPEAN DATA

    Europe has started to tackle the migrant crisis in earnest. With luck, the EU and Turkey may strike a deal at their summit in Brussels today. The EU wants Turkey to (i) reduce illegal border crossings into Greece from the current daily rate of some 2000 to far less than 1000 a day and (ii) to take back migrants with no claim for asylum in the EU (that is, broadly speaking, to take back almost all non-Syrians who manage to cross the sea from Turkey to Greece). In return, the EU offers €3bn+ in cash for Turkey to take care of Syrian refugees in Turkey and visa-free travel for Turks to the EU from late 2016 onwards.

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  • 03.03.2016 — UK SERVICES PMI SINKS TO NEAR 3 YEAR LOW

    No escape from global risks for UK services: The headline services PMI index for February came in at its lowest rate since March 2013. The index was below the long-run trend of 55.2, below our expectations of 55.0 and below January’s figure of 55.6.

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  • 02.03.2016 — EUROZONE OUTLOOK: BACK TO TREND GROWTH BY MID-2016

    The renewed concerns about China, oil and banks will likely keep growth subdued until mid-2016, as explained when we reduced our forecasts 3 weeks ago. The decline in key economic surveys in February suits this view. We expect growth to return to trend, that is to an annualised rate of 1.6%, by mid-2016 unless a major new shock such as a Brexit chokes off the likely rebound in confidence.

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  • 01.03.2016 — UK MANUFACTURING: SIGNS OF STRAIN

    Weaker domestic and foreign demand leads to sharp drop in manufacturing: In February, the headline PMI index fell to its lowest level since April 2013.

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  • 29.02.2016 — EUROPEAN MIGRANT CRISIS: CRUNCH TIME AHEAD

    The migrant crisis poses a more serious challenge to the political cohesion and economic future of Europe than the overhyped‎ euro crisis ever did. Even the outcome of Britain’s Brexit referendum on 23 June 2016 may hinge on it. Some key issues will likely come to a head shortly.

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  • 26.02.2016 — UK Q4 GDP: GROWTH ACCELERATED BUT RISKS HIT INVESTMENT

    Q4 GDP - investment declined on heightened risks but consumer spending remained resilient. UK GDP growth accelerated to 0.5% qoq in Q4 2015 from 0.4% in Q3. This was unchanged from the previous estimate and in line with expectations. On an annual basis the economy grew by 1.9% in the final quarter.

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  • 26.02.2016 — ECB: WHAT TO DO ON 10 MARCH?

    The European Central Bank will scale up its monetary stimulus on 10 March. While the ECB will likely deliver a more convincing package than in December, the ECB will probably not break new ground by buying corporate bonds including senior bank bonds. We expect the ECB's package to combine additional bond purchases ‎with a more negative deposit rate and a targeted measure to address the exaggerated concerns about the health of the Eurozone banking system.

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  • 24.02.2016 — CAMERONS DEAL CAN HELP TO PREVENT BREXIT

    The renegotiated terms of membership to keep the UK in the European Union are positive. They advance Britain‘s economic and political interests within the EU and globally. Prime Minister David Cameron got what he wanted. After a noisy fight, he secured most of the changes to Britain’s terms of EU membership that he had asked for. He now has to sell this deal to his cabinet ministers and the British public.

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  • 19.02.2016 — UK CONSUMERS UNSHAKEN BY MARKET TURMOIL

    If consumption is the backbone of the UK economy, then retail spending is the canary in the coalmine. Retail sales volumes excluding auto fuel grew for a 33rd consecutive month yoy in January, increasing 5.0% versus expectations of 3.4% and up significantly on the December slowdown of 1.8%.

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  • 18.02.2016 — BREXIT UPDATE: DEAL LIKELY AT EU SUMMIT

    At the two day EU summit beginning today, UK Prime Minister David Cameron will look to secure a deal on the set of renegotiated terms outlined in a letter from EU President Donald Tusk. If he is successful, this will most likely mean a summer referendum – probably June 23 – when the UK will vote on whether or not it should remain in the EU.

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  • 17.02.2016 — UK LABOUR MARKET ENDED 2015 ON A HIGH

    After strong gains in 2015, employment growth is likely to slow going forward: After the impressive gains in employment in 2015 the UK market is likely to step down a gear in 2016. In December, UK unemployment remained unchanged at 5.1%, in line with our expectations but slightly above consensus

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  • 16.02.2016 — UK INFLATION: A VERY GRADUAL RECOVERY

    Is the recovery in inflation underway? Yes but very slowly. Headline inflation increased for the third consecutive month in January, reaching its highest rate since January 2015. Headline CPI was 0.3% yoy, up from 0.2% yoy in December and in line with consensus. 

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  • 16.02.2016 — EUROPEAN UPDATE: GERMAN COURT, EU SUMMIT ON BREXIT AND REFUGEES

    This week could be noisy in Europe. While the ECB is preparing a new stimulus for its 10 March meeting, Germany’s Constitutional Court holds a hearing on the ECB’s OMT programme today at 09:00h GMT. The criticism of the ECB likely to be voiced at that hearing could make some headlines. Even more importantly, EU leaders will try to tackle the thorny and interrelated issues of a new deal for Britain to avoid Brexit and of containing the refugee crisis at their summit on Thursday and Friday.

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  • 09.02.2016 — NOTES ON FINANCIAL TURMOIL

    After the sharp sell-off in markets, we need to get back to an old analogy: if the fire alarm goes off in a crowded room, we face two risks. First, there may actually be a dangerous fire. Second, even if there is no dangerous fire, people may hurt each other as they scramble for the exit.

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  • 04.02.2016 — UK INFLATION REPORT: DOVISH OVERALL BUT CARNEY SAYS ‘NOT ENOUGH TIGHTENING’ IN MARKET EXPECTATIONS

    MPC downgrades outlook for inflation but states ‘we don’t achieve our objective’ with the market implied path. The further ‘scale’ of declines in commodity prices in recent months alongside ‘muted’ growth in world prices have led to downward revisions to the inflation outlook.

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  • 04.02.2016 — PRE-INFLATION REPORT: BOE LIKELY TO INDICATE MARKETS ARE TOO DOVISH

    Bank of England likely to indicate markets are too dovish on the rate hike outlook: Low inflation, recent weakening of wage growth, growing concerns about the global economy and the Brexit risk will keep the dovish BoE on hold until at least November in our view

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  • 02.02.2016 — BREXIT UPDATE: DRAFT EU DEAL PROBABLY ENOUGH FOR CAMERON TO CAMPAIGN TO STAY

    Today European Council President Donald Tusk presented a draft settlement for the UK based on the four demands outlined by UK Prime Minister David Cameron. The proposals in Mr Tusk’s letter will be deliberated by all 28 member states at the next European Council meeting 18-19 February.

     

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  • 01.02.2016 — UK MANUFACTURING ACCELERATES IN JANUARY ON RISING DOMESTIC DEMAND

    Domestic demand resilient as global headwinds blow hard on UK manufacturers: The Markit/CIPS UK manufacturing PMI surprised on the upside in January (52.9 versus expectation of 51.6). This is a three month high and the 34th successive month that the index has pointed to expansion in the manufacturing sector.

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  • 28.01.2016 — UK GDP GROWTH ACCELERATED TO 0.5% IN Q4

    Services strength offset weakness in industrial and construction in Q4: GDP growth accelerated to 0.5% qoq in Q4, up from 0.4% in Q3 and in line with estimates. Services growth accelerated to 0.7% qoq, its fastest rate all year and up from 0.6% in Q3. Strong gains in employment, low interest rates and cheap oil supported solid growth in domestic demand in 2015 and the acceleration in services over the course of the year reflects these factors. 

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  • 25.01.2016 — GERMAN IFO: UNCERTAINTY HITS CONFIDENCE

    The concerns about some developing countries, the turmoil in financial markets and the refugee crisis are taking their toll on German sentiment.

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  • 22.01.2016 — UK RETAIL SALES UP IN Q4 DESPITE DECEMBER SLOWDOWN

    Retail sales growth slowed sharply in December but remained stable quarter-on-quarter. Even though retail sales increased on an annual basis for the 32nd month in a row in December, they did so at the slowest pace since November 2013. 

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  • 22.01.2016 — EUROZONE PMI: MODEST DENT

    Amid mounting concerns about China and escalating turmoil in financial markets, Eurozone purchasing managers became slightly less optimistic in January. The composite PMI for the Eurozone fell more than expected, from 54.3 in December to 53.5 in January. While this is the least positive reading since February 2015, it remains in line with roughly trend growth for the region.

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  • 21.01.2016 — ECB: BACK TO THE DRAGHI PUT

    In December, the ECB council did not grant Draghi all the easing that he had apparently asked for. In March, Draghi wants to try again. With new downside risks to economic growth and a significant drop in oil prices depressing the near-term outlook for inflation, chances have risen that the council may then agree to an additional stimulus.

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  • 20.01.2016 — UK UNEMPLOYMENT FALLS FOR FIFTH MONTH IN A ROW

    Unemployment at its lowest rate since 2005 but wage growth slows. The unemployment rate has fallen for five months in a row and is now at its lowest level since October 2005. The rate of unemployment was 5.1% in November, beating estimates of unchanged from 5.2% in the previous month. On a 3m/3m basis employment increased by 267k, the fastest rate all year and at 74.0%, employment is currently at its highest level since records began.

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  • 19.01.2016 — UK CORE INFLATION SURPRISES ON THE UPSIDE

    Core inflation beats expectations in December. Headline inflation increased by 0.2% yoy in December, up from 0.1% in November and in line with estimates. Core inflation, which strips out volatile components such as food and energy prices, surprised on the upside - increasing to 1.4%, 0.2ppt above both the consensus and the November figure of 1.2%. 

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  • 14.01.2016 — GERMANY: ENJOYING ITS GOLDEN DECADE

    Germany’s 2015 results:
    • 1.5% growth in GDP (even 1.7% if unadjusted for calendar effects)
    • near-perfect price stability with just 0.3% inflation
    • record employment with another gain of 0.8%
    • a fiscal surplus of 0.5% of GDP
    • decline in Germany’s public debt ratio to 71.4% of GDP from 74.9% in 2014

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  • 14.01.2016 — MPC MINUTES: OUTLOOK STABLE WITH MORE NEAR-TERM INFLATION WEAKNESS

    UK Fundamentals remain robust despite heightened risk perceptions. The key insight from today’s minutes of the Bank of England’s monetary policy committee (MPC) came from the committee’s perspectives on recent events rather than their revolving rhetoric on long-standing issues which rarely change month to month anyway. From a market perspective, a lot has happened in the last month so we were keeping a close eye on how the MPC would react to this.

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  • 12.01.2016 — UK INDUSTRIAL SOFTENS UNEXPECTEDLY IN NOVEMBER

    From bad to worse for UK industrial production: Output surprised sharply on the downside in November, falling 0.7% mom compared to growth of 0.1% in October and against expectations of flat growth mom. Output decreased in all of the main sectors. Manufacturing - the largest industrial sector - declined by 0.4% versus expectations of marginal growth of 0.1% mom.

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  • 06.01.2016 — UK SERVICES ENDED 2015 ON A SOLID FOOTING

    PMI points to stable gains in Q4. The on-going period of rising services output completed its third year in December with a figure of 55.5, slightly below the consensus of 55.6 but above the long-run trend of 55.2. On a quarterly basis the index remained stable at 55.4 suggesting that services output is likely to have sustained its Q3 growth rate of 0.6% in the final quarter.

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  • 05.01.2016 — UK CONSTRUCTION PMI STILL AT ODDS WITH OFFICIAL DATA

    Construction likely declined in Q4, despite rosy PMI data. At 57.8, the survey indicated a rebound in activity from November’s low of 55.3. Although monthly data shows a modest uptick in December and were above consensus (57.8), we treat the data with caution. Since mid-2015 PMI data has suggested much more favourable conditions than official data indicate.

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  • 03.12.2015 — UK UPDATE: SERVICES PMI HERALDS SOLID GROWTH IN Q4

    UK economy on target for 2.4% growth in 2015: In November, PMI data for UK services (which makes up 80% of GDP) improved for the second month in a row. The index rose to 55.9 from 54.9 in October, beating consensus estimates of 55.0 but broadly in line with our forecast of 56.0. Overall, this bodes well for GDP in the fourth quarter

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  • 02.12.2015 — ECB PREVIEW: ONE LAST STIMULUS

    The case for a further monetary stimulus is less clear-cut than it was ahead of previous big ECB decisions. The discussion in Frankfurt will likely be more contentious than in the past. But that is par for the course. The very low level of inflation, the prospect that headline inflation will not get close to the ECB’s “close to but below 2% target” before 2018 and the recent emerging-market hit to the Eurozone’s export oriented industrial sector gives the ECB the opportunity to scale up it stimulus tomorrow.

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  • 01.12.2015 — UK UPDATE: PMI HIDES TOUGH CONDITIONS FOR UK MANUFACTURING

    Long-term winds blowing against UK manufacturing are likely to stall any meaningful growth. PMI data from Markit/CIPS points to another month of growth with the headline index at 52.7, below consensus of 53.6 and the previous month 55.2.

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  • 01.12.2015 — UK UPDATE: FINANCIAL STABILTY REPORT

    Risks have shifted since the last report but the UK financial system can maintain core functions in the event of a large negative shock. Countercyclical capital buffer held at zero but will gradually rise to 1%.

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  • 30.11.2015 — UK UPDATE: MACRO PRUDENTIAL TOOLS AT THE READY

    BoE at risk of sending the wrong message: Is the BoE worried about raising interest rates? If so, the manifestation of this sentiment could have more serious long-term implications than the short-term adjustment risk that could occur when rates finally get off the ground. It contradicts the BoE’s stated interim objective of getting back to a situation where the interest rate is the primary policy tool.

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  • 30.11.2015 — EUROPEAN POLITICAL UPDATE: MIGRATION DEAL WITH TURKEY; SPANISH POLLS; PORTUGUESE NOISE

    The migrant crisis poses a more serious risk to the cohesion of Europe than the euro crisis ever did. But we do not expect these tail risks to materialise. Our base case is that, in its own bumbling way, Europe will slowly come to grips with the migrant crisis and other challenges which the continent is facing: despite a populist backlash against migration, anti-EU populists will not seize power in any major EU member, Britain will stay in the EU and German chancellor Merkel will stay in office as a strong pro-European leader.

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  • 27.11.2015 — UK Q3 GDP: STRONG IMPORTS OFFSET BROAD BASED GROWTH

    Strong demand is both a gift and curse for the UK economy. The UK economy grew by 0.5% qoq and 2.3% yoy in the third quarter, in line with estimates. Taking the Q3 growth rate at face value against the 0.7% qoq pace in Q2 hides more than it reveals.

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  • 26.11.2015 — ECB: THE POWER OF MONEY

    Have money, will spend. The ECB’s monetary stimulus underpins resilient domestic demand in the Eurozone. Ever since the ECB started to shift to a suitably aggressive stance in June 2014, money and credit dynamics have strengthened significantly in the Eurozone. Growth in M1 money supply advanced further to 11.8% yoy in October from 11.7% in September. This is the fastest pace since January 2010.

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  • 25.11.2015 — UK UPDATE: OSBORNE UNLIKELY TO HIT DEFICIT TARGETS

    Planned cuts will not come. George Osborne has set a precedent in the last five years that he won’t break over the next five years. He makes promises for cuts that he never quite gets around. This is good news for the economy today, but a risk for tomorrow

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  • 19.11.2015 — UK UPDATE: SOLID TREND IN RETAIL SALES DESPITE MONTHLY BLIP

    On an annual basis retail sales have increased for 30 months in a row. The stronger than expected dip in the monthly data does not take away from a solid trend which has persisted for almost two years. Going forward, we expect a strong pace of growth to continue into the medium-term.

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  • 17.11.2015 — UK UPDATE: UPTICK IN CORE INFLATION BUT HEADLINE HOLDS AT -0.1%

    Low-inflation continues to boost the UK economy. For the second month in a row, and for the third time this year, UK prices fell. Headline CPI declined 0.1% yoy, in line with estimates and unchanged from the previous month. Core prices grew by 1.1% yoy, the fastest rate for three months, beating estimates of 1.0% growth yoy.

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  • 16.11.2015 — AFTER PARIS: NOTES ON THE ECONOMIC IMPACT

    The long-term economic impact is difficult to judge. A lot will depend how forceful the West now reacts to the challenge. Near-term, we do not expect any significant break to the established economic trends in Europe, that is to a mediocre economic upswing led mostly by private consumption. We look for Eurozone growth to return to its 1.7% trend over the course of 2016 after a dip in 2H 2015 caused by declining exports to some major emerging markets.

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  • 13.11.2015 — EUROZONE: MODEST SLOWDOWN

    As in the US and the UK, growth lost some momentum in the Eurozone over the summer. The recession in some major emerging markets and the slowdown in China are taking their toll on export-oriented manufacturing. However, supported by a gradually firming labour market and the boost to real incomes from low oil prices, private consumption is holding up. We expect more of the same for Q4, followed by a gradual return to the trend rate of 1.7% over the course of 2016 as concerns about emerging markets fade.

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  • 13.11.2015 — UK UPDATE: CONSTRUCTION CONTINUES TO SLIDE

    2.2% qoq decline eliminates chance of an upward revision to Q3 GDP: Official construction data continue to mystify. According to PMI and survey evidence, construction is the strongest performing UK industry, and yet official data show it as the worst performing. Even export-oriented manufacturing, which has proved vulnerable to slowing global trade, only fell by 0.4% qoq in Q3.

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  • 13.11.2015 — GERMAN GDP: STRONG AT HOME, MODEST HIT FROM ABROAD

    The strength in German domestic demand does not suffice to fully offset the hit from emerging markets. After a gain of 0.44% qoq in Q2, German growth slowed down to 0.32% qoq in Q3, roughly in line with expectations. We expect more of the same for the last quarter of the year before growth could rebound back to its trend rate of around 0.45% qoq (1.8% yoy) over the course of next year. In yoy terms, German growth in Q3 still came in at 1.7% and thus close to the trend rate.

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  • 11.11.2015 — UK UPDATE: LABOUR MARKET CONTINUES TO BEAT EXPECTATIONS

    Labour market points to building domestic pressure. Latest unemployment data unambiguously demonstrate the labour market has recovered, proving the UK economy is not just doing ok anymore, but is in good shape – it’s time to start thinking about rate hikes.

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  • 10.11.2015 — EU PROPOSALS: CAMERON HAS A REASONABLE CHANCE OF SUCCESS

    Cameron’s EU reform proposals look mostly constructive. While they are somewhat contentious, they are a reasonable basis for discussions with the EU about the terms of continued UK membership in the EU. They can help to quell British apprehension towards EU.

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  • 10.11.2015 — FORECASTS AT A GLANCE: OUTLOOK 2017: SUSTAINED GROWTH AGAIN

    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit risk

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  • 06.11.2015 — UK UPDATE: TRADE AND MANUFACTURING DRAG ON Q3 GROWTH

    Despite the risks from abroad production edged up in Q3. Output increased in the industrial sector by 0.2% qoq. Export oriented manufacturing, the largest component of the sector, declined by 0.4% over the same period. The largest contribution to growth came from mining and quarrying which grew by 2.8%.

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  • 05.11.2015 — UK UPDATE: MPC MORE DOVISH THAN EXPECTED

    Still more doves than hawks on the MPC: We will have to wait until the press conference for Governor Carney to add some colour to the minutes and inflation report but the unchanged vote split of 8-1 in favour of keeping rates on hold, in addition to downward revisions to inflation and growth indicate that the MPC are still cautious on the outlook.

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  • 05.11.2015 — UK UPDATE: MIXED SIGNALS FROM THE BOE

    Monetary Policy Committee (MPC) thinks markets are too dovish: The Bank of England (BoE) sees the interest rate path that is implied by market indicators as too dovish. The statement said that “the lower path for the Bank Rate implied by market yields would provide more than adequate support to domestic demand”. Adding, “the MPC’s best collective judgement is for the most likely path for inflation to exceed slightly the 2% target in two years and then rise a little further above it, reflecting modest excess demand”.

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  • 05.11.2015 — EUROZONE LARGELY ON TRACK DESPITE SOFT GERMAN ORDERS

    Despite a 2.8% qoq drop in German industrial orders in Q3, the Eurozone economy looks set to weather the recent external shocks fairly well. So far, we find no strong evidence that the controlled slowdown in China, the recession in some other emerging markets and the Dieselgate scandal are hurting demand beyond the export oriented sectors directly affected. Instead, most broad-based leading and co-incident sentiment indicators have either strengthened or moved sideways at a high level in the last few months.

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  • 10.09.2015 — BOE MINUTES: RISK PROSPECTS HEIGHTENED

    Wait and see minutes from the Bank of England. The Bank of England voted 8-1 in favour of holding the policy rate at 0.5% and unanimously in favour of maintaining the stock of assets purchased via QE at £375 billion. The collective judgement of the MPC was that whilst the risks stemming from recent headwinds had worsened somewhat, they had not increased sufficiently to warrant a revision to the near-term outlook

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  • 09.09.2015 — MIGRATION: NOTES ON THE POTENTIAL IMPACT ON EUROPE

    Looking for safety and a job. The rise in immigration has become a major issue in Europe. To some extent, the pictures of migrants trying to make their way north after having crossed the Mediterranean or Aegean Sea also illustrate an age-old truth: on top of fleeing war, unrest and often destitution back home, migrants also want to work. In Europe today that mostly means going to Germany, Scandinavia, Britain and some other places such as the Netherlands.

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  • 09.09.2015 — UK UPDATE: INDUSTRIAL PRODUCTION AND TRADE, OUCH

    Industrial production declines for second consecutive month. Industrial output fell 0.4% mom in July following a 0.4% fall in June.

    Trade hit by non-EU exports. The trade deficit for goods and services widened by £2.6 billion compared to June, owing to a significant widening of the trade deficit in goods which increased to £11.1 billion in July from £8.5 billion in July.

     

     

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  • 09.09.2015 — FORECASTS AT A GLANCE: Cruising speed despite serious EM risk

    Global: Developed world mostly resilient, emerging markets hit trouble.
    US: Solid fundamentals, strong dollar hurts a little.
    China: Serious wobbles but no hard landing.
    Japan: Mediocre cyclical upturn, future hinges on reforms.
    Eurozone: Periphery firming, core stable despite external risks.
    UK: Recovery continues, Brexit risk not virulent yet.

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  • 03.09.2015 — ECB: READY TO ACT IF REQUIRED

    The European Central Bank will do all it takes to keep the Eurozone recovery on track. With its statement, the ECB did not pre-announce further quantitative easing. Instead, the ECB made a conditional statement: if things get worse, the ECB will act.

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  • 03.09.2015 — UK ECONOMIC UPDATE: SERVICES PMI SURPRISES TO THE DOWNSIDE

    Key services indicator points to slight dip in August. The Markit/CIPS PMI index for August came in at 55.6, below expectations of 57.6 and at its weakest rate for 27 months. This is not a serious cause for concern.

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  • 02.09.2015 — UK ECONOMIC UPDATE: CONSTRUCTION REGAINS ITS BALANCE

    After a sharp dip in spring PMI data suggest that the stability in Q2 is carrying over into Q3. The headline index came in at 57.3, slightly below our expectations of 57.5, but up on the previous month of 57.1. With the headline rate above 50.0 for 27 consecutive months, construction is experiencing the longest duration of unbroken growth for over seven years.

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  • 01.09.2015 — UK ECONOMIC UPDATE: ACHILLIES HEEL(S)

    UK manufacturing growth remains sluggish. The headline index fell to 51.5 in August from 51.9 in May. Overall, PMI data from the manufacturing sector has showed weakness since spring.

    Weak UK mortgage approvals data reflects structural problems in the UK housing market.

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  • 01.09.2015 — EUROZONE DATA WRAP: RESILIENT RECOVERY

    REFORMS PAY OFF: UNEMPLOYMENT IS HEADING DOWN
    The emerging market crisis will hurt. But not very much. Thanks to improving domestic fundamentals, the Eurozone can cope with a modest external shock. Most importantly, Italy is starting to reap the first rewards of the Renzi labour market reforms. That leaves France as the only still unreformed major economy within the region.

     

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  • 31.08.2015 — ECONOMIC CALENDAR: WEEK OF 31 AUGUST

    • Eurozone CPI estimate (31 August): Cheap oil
    • ECB refi rate (03 September): Dovish comments
    • US change in nonfarm payrolls (04 September): Stable trend

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  • 28.08.2015 — THE STRENGTH AT HOME: EUROZONE RECOVERY ON TRACK

    The Eurozone recovery remains on track despite a small wobble in export-oriented industry. Overall economic sentiment reached its highest level since May 2011.

    Of course, it is early days, but it is nice to see that there is as much of an upside than a downside risk to our calls.

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  • 28.08.2015 — UK Q2 GDP: A SOLID SECOND QUARTER

    GDP Results: Economic output increased 0.7% in Q2. Services sector continues to surge ahead.

    Effect of China: Concerns are somewhat overstated. UK is well placed to brace headwinds from afar and we forecast growth of 2.6% per annum over the next two years

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  • 28.08.2015 — FORECASTS AT A GLANCE: CRUISING SPEED DESPITE SERIOUS EM RISKS

    Forecast changes
    • US Fed: Likely to delay first hike from September to December.
    • Eurozone GDP: Modest EM impact, growth in late 2015 down slightly.

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  • 27.08.2015 — EUROZONE: A MONETARY CUSHION AGAINST EXTERNAL SHOCKS

    Eurozone M1: Have money, will spend. Households and companies have money to spend, the credit cycle is turning up.
    France: Business confidence up.

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  • 25.08.2015 — GERMAN IFO INDEX: BEATS EXPECTATIONS

    Germany’s key business sentiment index has surprised on the upside. In the midst of financial market turmoil, resulting from the EM crisis, a slowdown in China and low commodity prices, today’s data reminds us that fundamentals in the developed world are improving, with all headline indicators beating consensus forecasts.

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  • 24.08.2015 — ECONOMIC UPSWING AT RISK? PROBABLY NOT

    Is the economic upturn at risk? The sell-off in European equity markets is now slightly worse than the correction of September/October last year that was driven mostly by irrational deflation fears. At the time, the economic impact of the market gyrations was marginal, possibly dampening business investment slightly. Instead, consumers celebrated low oil prices by buying more cars. Do we now have to worry more about economic fundamentals than 10 months ago? Probably not, at least not yet.

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  • 21.08.2015 — MACRO UPDATE: CHINA SLOWS, GREECE VOTES, EUROZONE STAYS ON TRACK

    China: PMI hits 77-month low

    Eurozone: PMI rises slightly despite China

    Greece: Fresh mandate for a chastened Tspiras?

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  • 21.08.2015 — FORECASTS AT A GLANCE: CRUISING SPEED DESPITE SERIOUS EM RISKS

    • Global: Cheap oil, supportive central banks, gradual return to normal.
    • US: Solid fundamentals, strong dollar hurts a little.
    • China: No hard landing.
    • Japan: Mediocre cyclical upturn, future hinges on reforms.
    • Eurozone: Periphery firming, core rebounding despite Greek risks.
    • UK: Recovery continues, Brexit risk not virulent yet.

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  • 20.08.2015 — UK: RETAIL SALES CONTINUE WINNING STREAK

    The UK keeps on spending! In volumes terms UK retail sales increased by 4.3%, in July (yoy); the 30th consecutive month of growth. On a monthly basis retail sales (excl auto fuel) recovered, up 0.4%, from the 0.3% dip in June. Whilst today’s figures show broad growth across nearly all categories of retail sales, increasingly, UK consumers are shopping from home.

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  • 18.08.2015 — UK: INFLATION, SIGNIFICANT UPTICK IN CORE PRICES

    Significant uptick in core prices! Headline inflation came in at 0.1% yoy in July, just above our forecasts. The big surprise came from core inflation. Core prices growing 0.3 pp above expectations suggests more underlying price pressure than previously thought.

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  • 14.08.2015 — A LITTLE IRONY OF HISTORY: TSIPRAS TURNS REFORMER

    After an almost Damascene conversion when he finally realised that Europe is not bluffing, Greek prime minister Tsipras now seems to be doing his best to keep Greece in the Euro. In one of the many small ironies of history, the man who rose to power promising to boot out the troika is now trying to implement the most comprehensive troika reform programme ever.

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  • 14.08.2015 — EUROZONE GDP: STILL MEDIOCRE AMID INVENTORY CORRECTION

    Driven by strong gains in Spain and more muted growth in Germany, the Eurozone economy continues to recover. In line with our call but a tad below consensus, GDP expanded by 0.3% qoq in Q2.

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  • 31.07.2015 — ECONOMIC CALENDAR - WEEK OF 3 AUGUST

    • Eurozone PMI manufacturing (03 August): Periphery ahead
    • Eurozone PMI services (05 August): Trend growth
    • Bank of Japan monetary policy statement (07 August): No change from BoJ

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  • 27.07.2015 — EUROZONE DATA: SHRUGGING OFF THE GREEK NOISE

    Pretty good news. Despite Greece, China and other irritants, the Eurozone recovery is on track and looks set to pick up some extra momentum later this year.

    Even German businesses, who tend to react sensitively to any global disturbance, are shrugging off the Greek noise with a surprise rise in Ifo business confidence in July.

    More importantly, the further acceleration in Eurozone real M1 growth projects firmer domestic demand ahead.

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  • 24.07.2015 — CRUISING SPEED DESPITE GREXIT RISK

    • Global: Cheap oil, supportive central banks, gradual return to normal.
    • US: Solid fundamentals, strong dollar hurts a little; 2.3% growth in 2015.
    • China: No hard landing, growth slowing gradually to 6.6% in 2016.
    • Japan: Modest cyclical upswing, future hinges on reforms.
    • Eurozone: Periphery firming, core rebounding despite Greek risks.
    • UK: Recovery continues, Brexit risk not virulent yet.

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  • 16.07.2015 — ECB: A MESSAGE OF COMFORT

    • The Eurozone recovery is on track despite Greece

    • If any shock were to cloud the outlook, the ECB would act decisively to safeguard the recovery

    • The ECB is raising ELAs to Greece by €0.9bn for one week

    • After the Greek vote for the new programme, the European decision for a bridging loan made the ELA increase possible

    • More ECB support for Greece can come if Greece passes the next steps on 22 July

    • Once Greece has a mutually approved bailout programme, the ECB may discuss whether it could eventually include Greek bonds in its QE programme

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  • 16.07.2015 — GREEK DEBT HAIRCUT: THE BIG FAT RED HERRING

    The deal struck on Monday morning is fragile. But we do not expect a dispute among creditors about the size and nature of debt relief to undo the deal. Whether or not the deal will work will depend almost exclusively on Greece: will it do what it has to do to stay in the euro? Chances are it will, now that Greece have had a first close look at the abyss that Grexit would mean. But that remains a somewhat close call.

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  • 13.07.2015 — GREECE: CAN THE DEAL WORK?

    It is no more than a fragile half-deal. It will not be easy for all creditors to ratify a support package of more than €80bn for a country whose leaders had accused them of “terrorism” just days ago. Tsipras now seems to be at the mercy of the opposition in Athens. Still, the deal could work.

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  • 13.07.2015 — EURO SUMMIT: CLOSE TO A FRAGILE HALF-DEAL FOR GREECE

    Trust is easy to destroy but difficult to rebuild. The late night decision of Greek Prime Minister Tsipras to call a referendum, campaign against an interim offer of his creditors and let the old bailout programme lapse has turned into one of the most expensive economic policy mistakes in the European Union for a long time.

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  • 10.07.2015 — GREEK UPDATE: CAN "OXI" TURN INTO YES?

    Greece finally submitted a serious proposal last night. Big hurdles remain. But this does raise some hope that Greece and its creditors could strike a preliminary deal over the weekend. 

     

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  • 10.07.2015 — ECONOMIC CALENDAR - Week of 13 July

    • Special EU summit on Greek bailout with 28 members of the European Union (12 July): Can “OXI” turn into YES?
    • Chinese Q2 GDP numbers  (15 July): Gradual slowdown
    • ECB main refinancing rate and deposit facility rate (16 July): No change – ready to contain Greek risks

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  • 09.07.2015 — TOUGH LOVE AT WORK: EUROZONE BASICS

    Within less than six months, a radical left government has aborted the Greek recovery of 2014, pushed the economy back into a deepening recession and driven capital worth almost €60bn out of the country. Prime minister Tsipras now has to make the final choice: perform a radical U-turn and accept the rules of the Eurozone - or get out of the euro.

    While we wait for the proposals which Tsipras has to submit by midnight, it is worth remembering the rules of the club: the Eurozone is about tough love.

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  • 09.07.2015 — MACRO UPDATE: GERMAN STRENGTH, CHINESE CASINO, GREEK DRAMA

    EUROPE CAN COPE: Germany is doing fine thanks to an ongoing surge in core employment, rising real wages, a slight fiscal surplus and strong exports.
    CHINESE CASINO: The real issue to watch is whether the temporary trouble in China’s financial sphere causes contagion to other emerging markets far away.
    GREECE: THE FINAL LIST?: The risk has not receded in the meantime, to put it mildly. But it is not a clear-cut case. Greece still has one final chance over the next four days to avoid the abyss.

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  • 07.07.2015 — Forecasts at a glance

    Cruising speed despite Grexit risk.

     

     

     

     

     

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  • 06.07.2015 — GREECE: AFTER VAROUFAKIS?

    • Grexit is our base case. One week ago, we raised the probability for Grexit to 55%. The referendum result has clearly not reduced that probability, to put it very mildly.

    • As discussed a week ago, almost the only chance to keep Greece in the euro is serious political change that must happen fast

    • Two resignations leave a chance that there may be still a minimum of political change in Athens: Varoufakis and Samaras.

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  • 05.07.2015 — GREECE: AFTER THE CLEAR "NO"

    • With more than 60% of votes counted, the „no“ side leads 61% to 39%. Tsipras has won his referendum clearly. As this differs from the neck-on-neck opinion polls last week, it comes as a surprise for markets.

    • The referendum will not help Tsipras much in Europe. With a vote in one Eurozone country, you cannot order the taxpayers of the other 18 countries to send more money.

    • But the clear margin of victory may embolden Tsipras to take Greece out of the euro if he fails to strike a deal with Europe, claiming that it is all Europe’s fault if Europe does not fulfil the impossible promises he has made to his Greek voters.

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  • 03.07.2015 — GREECE: HOW LONG CAN TSIPRAS CLING TO POWER?

    The political outlook for Tsipras looks rough. Let’s hope that, with a “yes” on Sunday, Greek voters shorten the agony, restore trust and open the way for a Greek economic recovery in the euro. A “no” may not save Tsipras for very long. But it could mean the Grexit abyss for the people of Greece.
      

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  • 03.07.2015 — GREXIT RISK: A POLITICAL SHOCK FOR EUROPE?

    So close to a potential Grexit decision, we can sniff no whiff of panic across Europe. For the Eurozone economy and its markets, Grexit would be manageable. Having been talked about so much, it would be no hitherto unheard of black swan. After a first knee-jerk reaction, we cannot even rule out a relief rally across Europe some time later on because investors would no longer have to follow the antics of Tsipras and Varoufakis, except those specialising in distressed submerging markets.

    Greece no longer seems to pose a systemic risk. But what about the politics?

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  • 03.07.2015 — FORECASTS AT A GLANCE: CRUISING SPEED DESPITE GREXIT RISK

    • Global: Cheap oil, supportive central banks, gradual return to normal.
    • US: Solid fundamentals, strong dollar hurts a little; 2.3% growth in 2015.
    • China: No hard landing, growth slowing gradually to 6.7% in 2016.
    • Japan: Artificial stimulus has faded, future hinges on reforms.
    • Eurozone: Periphery firming, core rebounding but Russian/Greek risks.
    • UK: Pro-business government re-elected – recovery continues.

     

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  • 02.07.2015 — THE GREEK CHOICE: EUROS OR BOLIVARS

    Greek voters face a simple choice this Sunday: do they want euros - or Venezuelan-style bolivars? Forget what Tsipras is saying about needing a "no" to strengthen his bargaining position. As in January, he may be trying to mislead his voters. The institutions in charge of the euro are adults: they can take "no" for an answer. A “no” to the euro probably means no euros.

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  • 01.07.2015 — GREEK UPDATE: BAILOUT OVER

    • The bailout is over. Backed by top Eurozone leaders, Eurogroup Finance ministers rejected Greece's last minute request to extend the bailout.

    • Greece missed its €1.55bn payment to IMF, becoming the first developed country ever to not pay the IMF, joining the likes of Zimbabwe and Cuba. Anybody wanting to know more about the direction into which Syriza policies would be taking Greece in the long run, take that as your first hint. 

    • The outcome of the referendum on Sunday remains unclear. According to a poll in Efsyn, the lead of “no” over “yes” has shrunk from 57:30 to 46:37 after the closure of banks. However, the situation looks very fluid.

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  • 01.07.2015 — GREEK UPDATE: TSIPRAS ACCEPTS BAILOUT TERMS?

    Upon the expiry of the bailout last night, Tsipras reportedly sent a letter to creditors in which he largely accepts the terms offered to Greece last Friday, subject to some apparently modest amendments according to the FT. In the letter, Tsipras agrees to many creditor demands “as part of an extension of the expiring EFSF program and the new ESM Loan Agreement” in which Greece yesterday requested €29.1bn for two years to cover Greece’s external and internal debt service.

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  • 30.06.2015 — GREEK UPDATE: A NEW PROPOSAL?

    Is Tsipras relenting at the last minute? Hours before the current bailout expires tonight, Greece has sent a new “proposal” to its European creditors. Greece asks for:
    - a two-year loan from the ESM to cover its external and domestic debt service obligations for two years
    - a restructuring and reprofiling of its EFSF debt “in the spirit of the proposals to be made by the Eu-ropean Commission”
    - an extension of the current bailout until this loan is agreed and in force.

    Taken at face value,the letter has five serious problems so the Greek proposal is a non-starter.

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  • 30.06.2015 — IS TSIPRAS HAVING SECOND THOUGHTS?

    The political situation in Athens seems fluid. According to one Greek newspaper, Prime Minister Tsipras may be having second thoughts.

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  • 30.06.2015 — MACRO UPDATE: GREXIT RISK, GERMAN RETAIL SALES

    TSIPRAS: TRYING TO MISLEAD VOTERS AGAIN?

    With the country’s most charismatic campaigner, Tsipras, apparently trying to dupe voters about what the referendum is really about, it looks like a close call at the moment, with a slightly higher risk of a “Grexit” than a political change in Athens

    We raised our probability of Grexit from 40% to 55% yesterday

    GERMAN RETAIL SALES STRONG
    German private consumption had expanded at an annualised rate of 2.7% in the last three quarters
    The Greek trouble hits core Europe at a time when it can deal with the modest fall out fairly well.

     

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  • 29.06.2015 — EUROZONE: SMALL DIP IN SENTIMENT

    The Greek uncertainty is weighing on business sentiment across the Eurozone, but only modestly so.

    • Greece is falling deeper into the Tsipras recession
    • Sentiment stayed stable in Germany
    • Rreform laggard France suffered a small dip in sentiment
    • Italy is reaping the rewards
    • Sentiment in Spain fell back after strong gains until April
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  • 29.06.2015 — MACRO UPDATE: CONTAGION CONTROL, GREECE, CHINA
    • Contagion control: This is not a "black swan" event. The Eurozone has spent the last four years strenghtening its defences against contagion risks.
    • Greece: The tragedy unfolds. Now down to either serious political change or Grexit
    • China eases again: Accelerating the pace of monetary easing
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  • 29.06.2015 — GREEK UPDATE: BANKS CLOSED, ECB READY TO ACT

    Greek banks will remain closed today, probably until after the 5 July referendum according to Kathi-merini.

    Greece is preparing capital controls.

    The ECB stands ready to act against financial market turmoil.

     

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  • 29.06.2015 — FORECASTS AT A GLANCE

    Forecast changes
    •      Grexit risk: Rises from 40% to 55% as Tsipras campaigns against euro.
    •      Eurozone GDP: Q3 call down from 0.4% to 0.3% qoq – small Greek impact.

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  • 26.06.2015 — THINK ITALY, NOT GREECE: Berenberg chart of the week

    The Greek tragedy gets all the headlines: But it is not the only story in Europe. Outside Greece, the eurozone is
    firmly on the recovery track. The systemic euro crisis was always about the risk that contagion may spread from
    small places such as Greece to much bigger places such as Italy or Spain, or to the region as a whole.
    
    Italian economic sentiment surged further to 104.3 in June, reaching its highest level since the start of the Lehman crisis in the summer of 2008 (see chart)


    Hopefully, it won’t come to a Grexit. But in these days, we need to consider the state of our defences. By and large, Europe looks ready to deal with the risk

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  • 26.06.2015 — HAVE MONEY, WILL SPEND: EUROZONE M1 SURGES FURTHER

    Money matters. For more than ten years, the liquid balances of households and companies have been our best leading indicator for the Eurozone business cycle. The surge in M1 continued strongly in May, boosting the annual growth rate from 10.5% in April to 11.2% in May. This is the fastest pace since the immediate post-Lehman in February 2010.

    The money and credit data support a positive outlook for Eurozone domestic demand.

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  • 26.06.2015 — GREEK UPDATE: WEEKEND DEAL - OR PLAN B

    Eurogroup finance ministers will meet again Saturday for a last effort ahead of 30 June bailout expiry to avoid Greek default.

    Either Greece accepts, with some amendments, the proposal presented by creditors yesterday - or the Eurogroup starts formal discussions how to limit damage to the Eurozone from a Greek default (“Plan B”)

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  • 24.06.2015 — GERMAN IFO: A GREEK DIP

    We had expected the Greek uncertainty to cause a temporary setback in sentiment indicators for core Europe, especially in the forward-looking expectations components in core Europe: with the significant dip in ZEW expectations of analysts and investors, that is of people close to the market, and a smaller dip in expectations in the German Ifo. That has now happened. It will likely restrain the rebound in business investment temporarily.

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  • 24.06.2015 — GREEK UPDATE: TROUBLE FOR TSIPRAS - AND A BITTER IRONY

    Double trouble for Tsipras: while his left-wing threatens a mutiny back home, he has been summoned to an emergency meeting with creditors in Brussels as IMF staffers have raised doubts about his proposals.

    IMF experts are reportedly concerned that the Greek proposals would be too recessionary (93% of Greek measures are tax hikes) and would weaken Greece's competitiveness (extra burdens on business). That, in turn, would make debt less sustainable.

    For once, this apparent IMF assessment seems in line with our view (see our message "towards a skewed deal" yesterday).

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  • 22.06.2015 — GREEK UPDATE: PROGRESS BUT NO DEAL TODAY?

    As it stands, finance ministers and Eurozone leaders do not seem to have the basis for a final decision today as the details of the Greek proposal need to be checked first. If so, they will probably tell Tsipras very clearly that, to the extent that his latest proposal still falls short of creditor demands, he has to go further. The final decision, deal or default, would then come in the next few days, possibly with another Eurogroup meeting just ahead of the regular EU summit 25-26 June.

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  • 22.06.2015 — DECISION DAY FOR TSIPRAS: EUROPE OR THE ABYSS

    Decision day for Tsipras. Today, he can either accept the deal his creditors are offering, sell some face-saving concessions as a victory back home and tell his radical left-wing to shut up or get lost – or he can refuse to get real and run a tail risk that his country’s banks and economy may be starting to collapse by the time his plane is back in Athens.

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  • 19.06.2015 — DOES DEFAULT MEAN GREXIT?

    Can Greece default and still keep the euro? Yes it can - in theory. But in practice, a default without Grexit would put Greece into a highly unstable limbo. It could not stay there for long. In the end, it’s either in or out.

    Without a deal with its only willing lenders, Greece is broke. Upon stopping to service its debt, it would face two issues: does it still have the euros for its other payments, and does it still have banks?

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  • 19.06.2015 — GREEK UPDATE: GLOVES ARE OFF

    The Eurogroup finance minister meeting ended in the expected failure.
    The ECB Council will reportedly hold an emergency teleconference today.
    Eurogroup leaders will meet for an emergency summit on Monday.
    We can group possible outcomes in three stylised scenarios:
    •      A deal in June: Probability: 35%.
    •      No deal in June: Probability: 25%.
    •      Grexit risk: Probability: 40%.

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  • 15.06.2015 — TSIPRAS STILL REJECTS REALITY: WHAT NEXT?

    Bad news: talks between Greece and its international creditors failed in Brussels on Sunday after less than 45 minutes as Greece refused to accept last week's "ready to sign" proposal by lenders as the basis for talks, demanding further debt relief and rejecting most pension cuts instead.
    The Eurogroup meeting of finance ministers on Thursday will now be the almost last chance to strike a deal that could still be ratified before the current bailout expires on 30 June and Greece misses its €1.5bn payment to the IMF that day.

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  • 12.06.2015 — GREECE: THE KEY ISSUES

    Time is running out for Greece. The longer Tsipras waits to accept the offer, with a few face saving changes in details on the way, the more difficult it will get for him – and the more may Greece descend into crisis.
    So far, Greek prime minister Tsipras has avoided the hard decision: get rid of his left-wing or lead Greece into the default/Grexit abyss.
    We continue to see a 30% risk of Grexit and a 70% probability that Greece will stay in the euro. But this main scenario could easily include a period of political turmoil in Athens until the will of the majority of Greeks, namely to stay in the euro, prevails over the economic illiteracy of Syriza’s left wing.

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  • 11.06.2015 — EUROZONE OUTLOOK: SUCCESS AT LAST

    Real life is never perfect. So what can we call success? Easy: if things are going reasonably well despite some pesky problems. In a nutshell, that describes the Eurozone today.

     

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  • 10.06.2015 — GREEK UPDATE: GOING BACKWARDS?

    Lenders reject a proposal sent by Greece yesterday morning, Tsipras opines that a Grexit could lead to the end of the euro, Juncker sees no point in meeting Tsipras again at this stage. Ahead of a likely meeting of Tsipras with Merkel and Hollande this evening in Brussels, the newsflow is not encouraging.
    We maintain our key views: 70% probability that Greece stays in the euro, which includes a significant chance of some political upheaval in Athens in the meantime, and 30% risk of Grexit.

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  • 09.06.2015 — EURO GDP: CLOSE TO CRUISING SPEED

    Back to almost normal. The Eurozone is enjoying a moderate broad-based recovery that looks set to firm further later this year.
    Helped by the end of austerity, suitably aggressive ECB policies and reforms at the euro periphery, domestic demand is the main driver of the rebound.
    We expect growth to strengthen to an annualised pace of 1.8% in the second half of 2015.

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  • 03.06.2015 — ECB: NO CONFETTI, HEADS DOWN, WORK EVERYONE

    The ECB unanimously agreed to continue its monetary stance.
    The operational implementation of the asset purchases is going well, with no signs of a shortage of bonds to buy.
    The economic and financial improvements as well as the return of inflation into positive territory are welcome but at an early stage.
    As expected, Draghi did not shed any additional light on the current state of the negotiations with Greece, nor on the ECB’s considerable role in them.

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  • 03.06.2015 — GREECE'S TSIPRAS: RENDEZVOUS WITH REALITY

    Having already caused serious economic damage, Tsipras will soon have to make his ultimate choice: does he want to go down in history as the prime minister who ejected his country out of Europe and into a Venezuelan-style abyss, or will he grasp his possibly last chance to put Greece back on the path of Spanish-style pro-growth reforms and a secure and ultimately prosperous future in Europe?
    Our base case remains: we see a 70% probability that Greece will remain in the euro, possibly with some serious political turmoil in Athens in coming weeks. That leaves a 30% risk of a Grexit.

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  • 03.06.2015 — EUROZONE DATE WRAP: PLENTY OF GOOD NEWS

    Eurozone unemployment appears to be falling faster than previously estimated. 
    Eurozone services and composite PMIs were revised up for May, leaving them largely unchanged from the previous month. Outside the Eurozone, the UK reported a sharp decline in services sentiment.
    Eurozone retail sales strong in April.

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  • 02.06.2015 — EURO WRAP: UNEMPLOYMENT DOWN, INFLATION UP

    Eurozone unemployment was still very high at 18.1 million in April, but in large parts of the currency union, such as Spain and Germany, it is falling.
    Eurozone edges further away from deflation, as inflation rose to 0.3% yoy in May, with core inflation up from 0.6% to 0.9%.

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  • 02.06.2015 — GREECE: CRUNCH TIME APPROACHING

    Rising political tensions in Athens and a secretive meeting of the troika heads with German Chancellor Merkel and French President Hollande make clear that the Greek question will come to a head soon.
    No detailed results emerged from the five-way meeting in Berlin, but the FT and other media report that participants agreed on a “last offer” to the Greeks.
    The key trouble for Mr Tsipras will be getting legislation through parliament quickly.

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  • 01.06.2015 — US ISM: DOWNTREND BROKEN

    The first increase in the US manufacturing ISM in 7 months could be a sign that the American manufacturing slowdown is coming to an end.

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  • 01.06.2015 — GERMANY: DEFLATION FEARS RECEDE, REAL INCOMES RISE

    German consumer price inflation continued its rebound out of deflation, increasing from 0.3% yoy on the EU-harmonised measure to 0.7% in May.
    Deflation fears recede, real incomes still rising nicely.

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  • 01.06.2015 — UK MANUFACTURING: EUROPEAN AVERAGE

    The UK may sometimes consider itself a place apart in Europe, but of all countries which have published manufacturing PMIs so far for May, no country came closer to the Eurozone average of 52.2 than the UK with 52.0.

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  • 01.06.2015 — EUROZONE MANUFACTURING: MAY SURGE EXCEPT GERMANY

    With a delay, the tailwinds of a weaker euro, cheap oil and aggressive easing from the ECB are boosting manufacturing sentiment in much of the Eurozone, with the notable exception of Germany.
    Most of the periphery is in strong recovery mode now, but the Eurozone core lags behind.

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  • 01.06.2015 — MACRO UPDATE: ITALY ELECTIONS, CHINA PMIS

    Italy: Divided opposition ensures Renzi rule.
    Centre-left coalitions aligned with Renzi’s PD came first in five of the seven regional elections this Sunday, but opposition centre-right coalitions came first in two northern regions.
    China: Manufacturing stagnating; Services trending down.
    Manufacturing sentiment is broadly stable, while service sector PMIs are gradually trending down.

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  • 29.05.2015 — US Q1 GDP: A LOT OF DATA MEANING VERY LITTLE

    The US economy apparently contracted in early 2015: the overall rate of GDP change was -0.7%.
    The data do not shed much light on the underlying trend in the US economy.
    At its late July meeting, the Fed will know whether the economy rebounded to a speed of at least 2% in Q2. If so, we expect the Fed to signal on 29 July that it intends to raise rates on 17 September.

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  • 29.05.2015 — EUROZONE: MORE CASH READY TO BE SPENT

    Monetary data points to a further firming of the Eurozone recovery over the coming quarters.

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  • 29.05.2015 — GERMAN RETAIL SALES SHAKE OFF EASTER VOLATILITY

    Germany’s notoriously volatile retail sales resumed their sharp uptrend at the beginning of Q2 with a 1.7% mom increase in April.
    Consumption growth may slow a little with the oil price recovering a bit in recent months. However, the robust labour market, very low inflation and little incentive to save from very low interest rates should support continued household spending rises.

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  • 28.05.2015 — EUROZONE CONFIDENCE: STABLE AT COMFORTABLE LEVEL

    The Eurozone economy has reached cruising altitude for now, with the EU Commission’s economic sentiment indicator for the currency union unchanged at 103.8 in May.
    Some of the economic tailwinds for the Eurozone are blowing a little less strongly.
    Confidence cooled further across much of Eastern Europe, but the real tragedy plays out in Athens. Greek economic confidence fell to 91.4, its lowest level since December 2013. Fortunately, there is still no significant sign of any spill-overs from Greece to other countries.

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  • 27.05.2015 — GREECE: OMINOUS SIGNALS FOR DEPOSITORS

    Anyone following the Greek situation must be wondering, what Prime Minister Tsipras is holding out for. While the Greek economy and its financial system are increasingly at peril of a major collapse, Syriza has achieved virtually nothing in the negotiations with the troika.
    Today, the ECB apparently left the ELA limit unchanged at €80.2bn.
    Prime Minister Tsipras is in a very difficult situation. On the one hand, the Eurozone and the IMF will not help him deliver his impossible election promises. On the other hand, large parts of his party are not yet pragmatic enough to water down these promises and put the interest of the country above ideology.

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  • 27.05.2015 — GERMAN CONSUMERS SHRUG OFF OIL REBOUND

    Consumption will be a pillar of German growth in 2015. On the GfK measure, consumer confidence will reach a new 14-year high of 10.2 for June.
    Other indicators of German consumer confidence, such as the EU Commission’s index, have also been rising in recent months, but remain below the levels of last summer, let alone record levels of the past two decades.

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  • 22.05.2015 — GERMAN IFO INDEX: CRUISING ALTITUDE

    Germany’s most widely followed business sentiment index gave reason for confidence in the economic outlook as it held up much better in May than other surveys such as the PMIs: The Ifo business climate index edged down from 108.6 to 108.5.
    Within the Ifo index, manufacturing confidence fell a bit after six successive increases, while construction, retail and services all rose.

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  • 22.05.2015 — GERMAN Q1 GDP: SOLID AT HOME, WOBBLY ABROAD

    A healthy rebound in German machinery and construction investment was the key positive element amidst an overall growth slowdown in Q1, as GDP growth fell to 0.3% qoq, down from 0.7% in Q4.
    The strong uptick in business investment reflects fading uncertainty despite the Greek and Russian risks, another drop in borrowing costs thanks to the ECB’s aggressive quantitative easing and a structurally sound economy.

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  • 21.05.2015 — EURO WRAP: SKEPTICAL ECB; LESS TAILWIND FOR CONSUMERS

    The account of the April monetary policy meeting of the ECB reveals continuing scepticism vis-à-vis the economic outlook for the Eurozone and reform progress.
    The ECB put the increased economic momentum in early 2015 largely down to the cyclical tailwinds of cheap oil boosting consumption, low interest rates boosting investment and the weaker euro helping exports.
    Calling for more structural reforms is good, but not the ECB’s main job; it is ultimately judged on whether it hits its policy target.  
    As oil becomes less cheap, Eurozone consumer confidence retreats. In May, it fell from -4.6 to -5.5, further away from its March peak of -3.7, which had made the current upswing the third-highest since 1980.

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  • 21.05.2015 — EURO PMIS: GERMAN DRAG

    With a weakening Germany and a somewhat improved France at its core, Eurozone economic sentiment edged down a little in May. The composite output PMI fell from 53.9 to 53.4.
    The only real weak spot in May was Germany. Its economy has some idiosyncratic problems to deal with, although most are probably temporary and growth continued at a moderate pace anyway.

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  • 20.05.2015 — FED: STRONGER DATA NECESSARY FOR FIRST HIKE

    Fed does not see hike in June, but sees Q1 GDP weakness as temporary. Worry about taper tantrum repeat.

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  • 20.05.2015 — JAPAN: MODERATE GROWTH

    Japan’s emergence from its post-tax-hike recession in mid-2014 continued in early 2015, with Q1 GDP growth more than doubling from 0.3% qoq to 0.6% qoq.
    As it is, domestic demand excluding private inventories rose moderately, with private consumption and business expanding by 0.4% qoq.
    We expect Japanese GDP to continue growing at a moderate pace of around 1.5% annualised in the coming quarters.

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  • 19.05.2015 — ZEW SURVEY: MODERATING, NOT REVERSING EXPECTATIONS

    German financial analysts became a little less optimistic about the economic outlook for Germany and the Eurozone in May, with the ZEW investor expectations index dropping from 53.3 to 41.9 for Germany and from 64.8 to 61.2 for the Eurozone.
    When assessing the current situation of the economy, investors painted a markedly less rosy picture for the US (-14.1 to 46.3), Germany (-4.5 to 65.7) and Britain (-1.4 to 40.4), while becoming much less sceptical on Italy (+12.8 to -59.5) and France (+11.7 to -56.9).
    Italy was the only country with improvements in both expectations and current assessment, highlighting the shift in the mood vis-à-vis the country which Prime Minister Renzi’s reforms and political stability have brought.

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  • 19.05.2015 — UK: DEFLATION, BRIEFLY

    For the first time since 1960, UK inflation on the CPI yoy measure fell into negative territory in April, dropping to -0.1%. What the Lehman crisis did not achieve thanks to the large depreciation of sterling against the euro, the sterling uptrend in combination with cheap oil has this time around.
    The timing of Easter is likely to have played a role as air and sea fares were a major downward driver in inflation in April, suggesting that inflation may already exit negative territory in the coming months.

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  • 19.05.2015 — GREECE: NO PROGRESS UNTIL TSIPRAS CHOOSES

    As long as Greece’s Prime Minister Tsipras has not made up his mind about the tough decision he has to make, it is almost futile to comment on the day-to-day developments in the negotiations between Greece and the Eurozone and IMF.
    As Greece is failing to come up with credible alternatives for the reforms demanded, we expect the Eurozone and the IMF to table a “take-it-or-leave-it” proposal soon to end this exasperating back-and-forth and make the choice clear to Greece.
    The pressure on Mr Tsipras is rising: Greece has several repayments to the IMF to make in June and Greek opinion polls suggest that people are anxious.
    Ultimately, the priority of the vast majority of the Greek population seems to be staying in the euro.

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  • 15.05.2015 — GREEK OUTLOOK: THE TSIPRAS RECESSION

    Few policy mistakes are more costly than shattering trust. Unfortunately, this is one of the few things which Greece's double populist coalition has done so far.
    Assessing the damage: Nothing brings out the damage more clearly than the comparison to Spain. Spain is thriving, Greece is back in recession.
    Outlook: even if Greece strikes a deal with its creditors first, the recovery thereafter will likely be shallow. Restoring trust takes a long time.

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  • 15.05.2015 — GREEK OUTLOOK: THE TSIPRAS RECESSION

    Few policy mistakes are more costly than shattering trust. Unfortunately, this is one of the few things which Greece's double populist coalition has done so far.
    Assessing the damage: Nothing brings out the damage more clearly than the comparison to Spain. Spain is thriving, Greece is back in recession.
    Outlook: even if Greece strikes a deal with its creditors first, the recovery thereafter will likely be shallow. Restoring trust takes a long time.

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  • 14.05.2015 — GREECE: “CREATIVE AMBIGUITY” OR PROGRESS?

    Finance minister Varoufakis’ speech at an event in Greece today left open many questions, but some of the soundbites were promising. However, as always with Mr Varoufakis, positive interpretations may be wishful thinking.
    Mr Varoufakis implicitly acknowledged that Greece will need a third bail-out this summer. But creative ambiguity is not going to help secure money from Europe.

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  • 13.05.2015 — EURO WRAP: PERIPHERY REBOUND, GREEK RECESSION

    With some surprises on a country-level in both directions, the Eurozone's economic recovery firmed mod-erately in Q1 to 0.4pc GDP growth, up from 0.3pc qoq in Q4 last year.
    As expected, the disastrous start of the new Greek government has returned the country from nascent recovery in 2014 back into official recession, with GDP shrinking by 0.2ppc.
    In Q1, consumption buoyed by cheap oil was the major growth driver for Eurozone GDP, while the weak euro and the ECB easing had mixed effects.

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  • 13.05.2015 — UPSIDE DOWN: FRANCE GROWS FASTER THAN GERMANY

    A surprise 0.6pc qoq jump in French GDP and a disappointing 0.3pc qoq expansion in Germany should be enough to underpin a satisfactory growth rate in the Eurozone as whole in Q1 2015.
    Cheap oil was a major driver of growth, while the weak euro and the impact of aggressive ECB easing on interest rates had a more mixed effect.
    We expect investment to become a major growth driver in most Eurozone countries in the coming quarters.

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  • 11.05.2015 — GREEK U-TURN?; GERMAN STABILITY; CHINESE STIMULUS

    Greece: Edging towards reason? Kicking and screaming to the very last minute, Greece's populist government seems to be edging towards the inevitable U-turn.
    German politics: Steady as she goes. Regional elections in Germany's smallest state, the city of Bremen, yielded no major surprise on Sunday.
    China: Third rate cut in six months. Over the weekend, the People’s Bank of China cut its main interest rates, with the main lending rate now down from 6% in November 2014 to 5.1% and the deposit rate down from 3.0% to 2.25%.

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  • 08.05.2015 — US JOBS GROWTH: TOWARDS NORMAL

    The US economy has not fallen off a cliff, as jobs growth returns to 223k in April.
    The return to more normal jobs growth in April will relieve Fed policy makers, providing tentative evidence that the Q1 economic weakness was mostly a blip.

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  • 08.05.2015 — GERMANY: MARCH SOFTNESS

    Germany’s economy had started strongly into 2015, but the momentum eased in March, with a fall in industrial production adding to disappointing factory orders and a sharp fall in retail sales in that month.
    Brighter news came from trade, with exports rising by 1.2% mom and imports jumping by 2.4% mom in March.
    Details of the industrial production data point to a mixed outlook.

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  • 08.05.2015 — UK ELECTIONS: NOT TOO BAD

    • The Conservatives narrowly win the UK elections.
    • The UK can continue to run sensible economic and fiscal policies.
    • While a referendum on leaving the EU looms for late 2017, the weakish result for anti-EU UKIP points to a "yes" to EU in such a vote.
    • Strong Tories in England, strong SNP in Scotland sharpens English-Scottish division but Scotland leaving UK within next 5 years still unlikely. Big home rule debate ahead.
    • Small majority for Conservative PM Cameron makes hard decisions difficult. Major policy changes un-likely.
    • But it could be rather noisy as Tory fringes could try to hold government to ransom, especially over European issues.

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  • 08.05.2015 — UK ELECTION: FIRST TAKE

    Exit poll message: Cameron likely to remain prime minister, Conservatives stronger than expected but short of majority, Labour and LibDems weaker than expected, SNP strong, UKIP threat contained.
    If the exit polls are right: Good news for UK economic outllok, Brexit risk alive but unlikley, more home rule for Scotland, Tories facing internal debates, market impact modestly positive.

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  • 07.05.2015 — EURO BOND SELL-OFF: WHAT SUCCESSFUL QE DOES

    Bond yields across Europe have risen over the past few weeks; 10-year bunds increased from below 0.1% to nearly 0.8% today.
    Rising yields are a proof that QE is successful. But, economic tailwinds are blowing a little less strongly.
    The current market move has a momentum that can carry on for a while.

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  • 07.05.2015 — GERMANY: DOMESTIC STRENGTH SUPPORTS FACTORY ORDERS

    German factory orders rebounded modestly in March after two weak months, rising by 0.9% mom and 1.9% yoy.
    The weaker euro has not helped order volumes, highlighting that most German exports are not very price-sensitive.

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  • 06.05.2015 — EUROZONE SERVICES: SPAIN RACING AHEAD

    Another big jump in Spain’s services PMI has almost erased the decrease which the flash Eurozone flash PMI release had signalled for April.

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  • 05.05.2015 — UK ELECTION PREVIEW: THE ISSUES THAT COUNT

    The election on 7 May may sharpen the issues or even shape the destiny of the UK like few votes before.
    Only one result seems virtually certain: no single party will command a majority of seats.
    The 6 big issues the next government will face are: Brexit, Scotland, fixing the budget, trend growth, the fight for the soul of the Tories, and the new government’s stability.

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  • 05.05.2015 — GREEK UPDATE: THE TOUGH STUFF

    After three months of pointless posturing, the new Greek government has finally entered into serious negotiations with its creditors.
    However, the Greek side needs to move much further away from their impossible election campaign promises.
    This Wednesday, the ECB will reportedly discuss to restrict access of Greek banks to liquidity by asking them to post more collateral.

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  • 01.05.2015 — UK: BAD LUCK THWARTS REBALANCING

    Export-oriented UK manufacturers suffer as the competitive advantage of weak sterling is fading.
    In a way, bad luck has prevented a more balanced recovery in the UK, where consumption continues to be the most reliable driver of growth.

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  • 30.04.2015 — STRONG TAILWINDS, RISK CONTROL WORKS

    Forecast changes: 2015 GDP - downgrade US & UK, upgrade Spain & Portugal

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  • 30.04.2015 — EUROZONE: DEFLATION OVER, BUT STICKY UNEMPLOYMENT

    After four months with negative inflation rates, the Eurozone officially exited deflation in April as HICP inflation edged up from -0.1% to 0.0% yoy. However, this is not yet a sign of fading domestic disinflationary pressures.

    Unemployment continued to fall for a fourth successive month in the Eurozone, but declines remain modest and uneven.

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  • 30.04.2015 — GERMANY: MINIMUM WAGE CAUSES EMPLOYMENT SHIFT

    German “core” employment is booming as unemployment continues to fall. However, overall job creation has slowed since the start of the year, which could be a result of the national minimum wage, which makes some forms of flexible employment such as internships unviable.

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  • 30.04.2015 — SPAIN PUTS EURO GDP ON TRACK TO BEAT UK AND US

    The Eurozone could grow faster than its rivals for the first time in four years after disappointing GDP data from the UK and the US for Q1, that is if EZ GDP grows in line with our expectation of 0.4% qoq in Q1.
    Spain’s performance, if corroborated by future revisions, is good news: it shows that reforms work, it should help reduce unemployment and thus political fragility and it serves as a shining example to Greeks.

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  • 29.04.2015 — FED: WAIT AND SEE

    The Fed did not jump to any conclusions despite a raft of disappointing economic data for the first three months of the year, culminating in today’s weak GDP release, as well as further softness in some April survey data.

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  • 29.04.2015 — ECJ SPELLS MORE BAD NEWS FOR TSIPRAS

    The ECJ has set the date for its OMT ruling for 16 June, suspiciously merely two weeks before Greece's bail-out formally ends. Perhaps the ECJ is sending another reminder to Athens that blackmailing the EZ into giving it more money will be futile.

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  • 29.04.2015 — US Q1 GDP: GROWTH PAUSE

    The US economy had a bad start to the year. GDP growth slowed to 0.2% qoq annualised in Q1, following already weak 2.2% in Q4 2014, partly due to bad weather in the east, port strikes in the west and dollar strength.
    Cheap oil helped consumers maintain a comparatively solid 1.9% qoq annualised growth rate in Q1.
    We expect a first hike in September, as well as only one hike this year.

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  • 29.04.2015 — GERMANY TO END EURO DEFLATION

    German inflation continued its modest rebound in April as food prices rose more strongly than before. The national inflation rate edged up from 0.3% to 0.4%, the European harmonised rate from 0.1% to 0.3%. The latter suggests that the Eurozone may officially emerge from deflation after four months this April.

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  • 29.04.2015 — EUROZONE SENTIMENT TAKES A BREATHER

    Eurozone economic sentiment took a breather in April, as small declines in consumer and industrial confidence caused the overall index to edge down from 103.9 to 103.7.
    The real story plays out in the periphery, where Spain, Italy, Portugal remain strong as Greece falls deeper into recession.

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  • 29.04.2015 — EUROZONE: THE POWER OF MONEY

    Monetary policy is working. With its more aggressive stance, the European Central Bank is finally bringing the Eurozone back to at least trend growth. The strong acceleration in M1 money supply and the upturn of the credit cycle point to significant gains in real GDP to come.

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  • 28.04.2015 — UK Q1 GDP: GROWTH SLOWS SHARPLY

    The UK economy slowed markedly in Q1, with GDP growth falling to 0.3% qoq, half the rate of Q4 2014. Strong sterling, weakness in the financial sector and the impact of cheap oil on North Sea oil production slowed the recovery to its weakest pace since late 2012.
    Despite the latest softness, the UK economy has had one of the better economic recoveries in Europe since the great recession in 2008/2009.

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  • 24.04.2015 — GERMAN IFO: NICE CRUISING SPEED

    German growth is settling in at a nice cruising speed, probably just north of 2%. While the acceleration phase will likely be over soon, the economy can continue to expand at that rate for the foreseeable future with the usual odd fluctuations.

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  • 21.04.2015 — GERMAN ZEW: AS GOOD AS IT GETS

    German ZEW investor confidence message: Germany is doing fine. In fact, it may now be doing so well that some observers believe it can’t get much better.

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  • 09.04.2015 — GERMAN INDUSTRY: MODERATE UPTREND IN EARLY 2015

    German manufacturing and trade data points to a much more moderate start to the year 2015 than very strong consumption data.

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  • 08.04.2015 — EUROZONE RETAIL SALES CONSOLIDATE STRONG UPTREND

    Eurozone retail sales consolidated the strong gains around the turn of the year, edging down 0.2% mom in February.

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  • 08.04.2015 — THE OUTLIER: WEAK GERMAN FACTORY ORDERS

    Not all German hard data is jumping instantaneously as confidence indicators rise and risks fade. Germa-ny’s volatile factory orders fell by 0.9% mom in February, extending their drop in early 2015.

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  • 07.04.2015 — ECB QE FIRST MONTH: ON TRACK

    With the first month of its expanded asset purchase programme complete, the ECB can look back at a success.

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  • 07.04.2015 — EUROZONE SERVICES: SPAIN STRENGTH LEADS GENERAL FIRMING

    The mood in the Eurozone’s domestic oriented services sector continued to brighten in March, with Spain and Germany surging ahead and Italy posting a nice bounce.

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  • 02.04.2015 — ECB: QE WORKS, NOW IT’S GOVERNMENTS’ JOB

    An upbeat assessment of the start of quantitative easing (QE) and sharp warnings against governments’ complacency are the key message of the second “account of the monetary policy meeting” (or minutes) of the ECB.

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  • 02.04.2015 — FORECASTS AT A GLANCE

    Forecast changes: French 2015 GDP up after strong start to 2015

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  • 31.03.2015 — GERMAN RETAIL SALES SURGE CONSOLIDATES

    Germany’s consumption surge consolidated in February, with retail sales falling by 0.5% mom, following a 2.3% jump in January. Monthly average sales in the first two months of Q1 2015 were still a whopping 2.9% higher than in Q4 2014.

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  • 26.03.2015 — UK: CHEAPER PETROL. ENOUGH SAID

    UK retail sales volumes are booming. Sales beat consensus expectations in February by rising 0.7% mom and 5.7% yoy, compared to consensus of 0.4% and 4.7% respectively.

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  • 18.03.2015 — UK: STRONG JOBS GAINS BUT WEAKER PAY

    Employment continues to plough ahead. Solid economic momentum in the UK continues to feed through to strong jobs gains, which should in-time push up pay growth. But the path back to more normal wage gains is proving to be rather bumpy.

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  • 17.03.2015 — EUROZONE: SHORT AND LONG-TERM GOOD NEWS

    Yet another increase in German investor confidence and a fourth successive quarterly rise in Eurozone employment provide good news for the short-term and the longer-term recovery.

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  • 05.03.2015 — GERMAN ORDERS: CORRECTION AT START OF 2015

    Germany’s volatile factory orders fell by 3.9% mom in January, their biggest drop since August last year. But unlike when that August figure was released in early October 2014, today’s release will probably not cause great concerns.

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  • 02.03.2015 — EUROZONE MANUFACTURING PMI: STILL LACKLUSTRE GROWTH

    A story of reform laggards and leaders. The February Eurozone manufacturing PMI was revised down a touch in the final readings today, to 51.0 from 51.1.

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  • 26.02.2015 — EUROZONE SENTIMENT: SAILING THROUGH GREEK TURMOIL

    Happier consumers help Eurozone growth accelerate further. The EU Commission measure of economic sentiment increased further in February, reaching 102.1, a touch higher than consensus estimates and the best reading since last July

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  • 26.02.2015 — UK: CONSUMPTION AND EXPORTS DRIVE Q4 GROWTH

    UK fourth quarter slowdown was a blip, not a harbinger of trouble. UK fourth quarter GDP growth was confirmed at 0.5% qoq and 2.7% yoy today

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  • 26.02.2015 — EUROZONE CREDIT GROWTH IMPROVES AGAIN

    Eurozone upturn set to strengthen. Today’s money and credit data from the ECB surprised on the upside again. Most importantly, our favourite lead indicator for Eurozone growth, real M1, improved sharply in January.

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  • 25.02.2015 — MACRO UPDATE: FED, CHINA, GREECE

    The Fed is confident about the economy, making a July rate hike likely. Chinese manufacturing is showing signs of life. And Greece is plenty of U-turns still to do.

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  • 24.02.2015 — GREECE: LESS RISK, BUT LITTLE FUNDAMENTAL PROGRESS

    Greece’s long-awaited list severely limits Syriza’s reform reversals and imposes fiscal discipline. It may improve the effectiveness of the welfare system and reduce the weight of private sector debts and arrears on activity. But instead boosting employment and investment by going further on making labour market more flexible and cutting taxes for business, Syriza will plug fiscal gaps by raising taxes on entrepreneurs and strengthen the unions in collective bargaining.

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  • 17.02.2015 — UK: CHEAPER PETROL WILL BOOST CONSUMERS

    Cheaper petrol drags down UK inflation. CPI inflation slipped to 0.3% in January, from 0.5% in December, a touch below consensus estimates. The 16.2% yoy fall in petrol prices was the main factor dragging down inflation relative to December,

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  • 28.01.2015 — GERMAN CONSUMER CONFIDENCE: OIL SUPERCHARGES REBOUND

    German consumers, just like most around the world, are receiving a massive boost to real spending power from cheap oil. As a result, consumer confidence is climbing to new highs.

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  • 26.01.2015 — GERMAN IFO: STRONG REBOUND, NEW RISKS

    German businesses left the confidence trough in October last year further behind with a third successive improvement in the most widely followed sentiment survey, the Ifo business climate index.

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  • 14.01.2015 — GREEN LIGHT FOR ECB OMT AND QE

    The Eurozone firewall stands, in fact it has been strengthened by the legal opinion of the European Court of Justice’s advocate general on the ECB’s outright monetary transactions (OMT) programme.

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  • 19.12.2014 — GERMANY: CHEAP OIL, HAPPY CONSUMERS

    Cheap oil and fading uncertainty boost German consumer confidence. On the GfK measure, consumer confidence is closing in on its 2006 record.

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  • 18.12.2014 — UK CONSUMERS LIKE A BARGAIN

    Funnily enough, consumers like price cuts. Retail sales beat consensus expectations, rising 1.6% mom in November after a 1.0% rise the previous month with the year-on-year growth rate the highest in a decade. Before we talk of boom times, remember the figures were flattered by Black Friday which fell in December retail sales last year but was included in November this year.

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  • 18.12.2014 — GERMANY: EXITING THE ROUGH PATCH

    A second successive increase in Germany’s Ifo index heralds the end of the economic rough patch. The con-fidence shock from Russia’s aggression against Ukraine has faded since October.

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  • 17.12.2014 — UK: NOW IS THE TIME FOR OPTIMISM

    Strong jobs growth, improving pay gains, very weak inflation as well as low and falling mortgage interest rates add up to a powerful cocktail that should put the fizz back in consumption next year. Anyone arguing for softer fiscal cuts and more monetary stimulus, this is it.

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  • 16.12.2014 — ZEW: POWERFUL REBOUND FOR NOW

    The ECB’s monetary stimulus and sharply lower oil prices are lifting the Eurozone gloom for German investors while geo-political risks receded.

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  • 16.12.2014 — UK: CONSUMERS GET BOOST FROM LOW INFLATION

    Inflation fell more than consensus expected in November, to 1.0% from 1.3% in October. Falls in food, petrol and imported goods prices all contributed noticeably, as did volatile air fares. That is great news for consumers whose spending power is getting a sizeable boost in the run-up to Christmas, an effect that should put some of the fizz back in UK growth next year.

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  • 11.12.2014 — ECB TLTRO: BALANCE SHEET INTENTION STILL OFF-TRACK

    The ECB will have to employ additional tools to reach its intended balance sheet size of €3trn by late 2016. It provided €130bn in the second TLTRO auction, taking the total after the two initial auctions to €213bn.

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  • 11.12.2014 — GREEK POLITICAL ICAL RISK: EARLY SHOWDOWN IN ATHENS

    Will Greece be able to reap the rewards of its Herculean reform efforts – or will it fall back into a deep crisis with a risk of euro exit? We will find out sooner than expected.

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  • 10.12.2014 — UK: TRADE DEFICIT NARROWS ON OIL

    Cheaper oil should improve the UK trade balance in the coming months. The UK’s trade deficit narrowed to £2bn in October from £2.4bn in September, as North Sea oil platforms came back on-line cutting the UK’s need to import oil from the elevated September level, while lower oil prices might also have helped. There will be more to come on that score.

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  • 09.12.2014 — UK: MANUFACTURING HIT BY EUROZONE WEAKNESS

    Manufacturing suffering from Putin’s war. UK manufacturing has suffered noticeable fall-out as Putin’s war undermined sentiment in core Europe over the past six months, but falling oil prices, robust domestic demand, cheap money and probably soon turning sentiment in the Eurozone should push the UK sector past the worst by the end of the year.

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  • 09.12.2014 — GERMAN TRADE: RESILIENT START TO Q4

    Trade is not Germany’s problem as exports have been growing robustly this year despite the Putin shock and emerging market travails.

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  • 08.12.2014 — GERMAN INDUSTRY: GOOD START TO Q4

    Following big jumps in industrial orders and retail sales in October, the second successive rise in German industrial output provides further evidence of a resilient start for the German economy to the final quarter of the year. Industrial output rose by 0.2% mom in October, following a 1.1% increase in September.

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  • 05.12.2014 — GERMAN FACTORY ORDERS: STRONG START TO Q4

    A big jump in factory orders at the start of Q4 defied gloomy business confidence data at that stage, but may help explain why forward-looking indicators like the Ifo business confidence index have improved since.

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  • 04.12.2014 — ECB PREPARES MORE QE FOR EARLY 2015

    The ECB prepares more stimulus as the inflation outlooks weakens and existing measures are not "expected" to be sufficient to hit the €1trn easing target anymore.

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  • 03.12.2014 — UK: STILL STRONG DOMESTIC MOMENTUM

    Domestic momentum keeps the UK growing strongly. The services PMI surprised on the upside today, rising to 58.6 in November from 56.2 in October and beating consensus.

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  • 03.12.2014 — EURO PMIS: Q4 STAGNATION LIKELY

    The Eurozone will struggle to achieve growth in the current quarter, as the November purchasing manager indices confirmed. But despite the current gloom, there are many signs that the current economic rough patch may be coming to an end by spring 2015.

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  • 01.12.2014 — UK: DOMESTIC STRENGTH

    Domestic strength keeps the UK economy ticking along. The UK manufacturing PMI rose to 53.5 in November from 53.3 in October, reaching a four month high. UK manufacturing is resisting the weakness in the Eurozone on the back of strong domestic momentum this side of the Channel.

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  • 01.12.2014 — EUROZONE MANUFACTURING: ROUGH PATCH

    Contradicting other recent indicators, the November Eurozone manufacturing PMI provided no evidence that the economic rough patch has troughed.

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  • 28.11.2014 — EUROZONE DATA WRAP: INFLATION, UNEMPLOYMENT, CONSUMPTION

    Lower inflation and higher unemployment raise the pressure on the ECB to act.

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  • 27.11.2014 — EUROZONE: MORE SIGNS OF STABILISATION

    Sentiment improves to best since July. The European Commission’s comprehensive survey of Eurozone economic sentiment beat consensus expectations for a resumed fall by improving a little in to 100.8 in November from 100.7.

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  • 27.11.2014 — EUROZONE CREDIT CYCLE KEEPS TURNING

    The very gradual upswing in the Eurozone’s credit cycle continued in October. While the growth rates of mone-tary aggregates M3 and M1 remained unchanged at

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  • 27.11.2014 — GERMAN LABOUR MARKET IN RUDE HEALTH

    Germany’s job market remains unaffected by the current economic rough patch. After a brief lull in late summer, unem-ployment dropped by 23k in October and 14k in November.

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  • 26.11.2014 — ITALY LABOUR REFORM CLEARS ANOTHER HURDLE

    Italy is making progress with its long-awaited labour market reform. The lower house of parliament yesterday approved Prime Minister Renzi’s planned labour market reform with a majority of 316 to 6 votes.

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  • 24.11.2014 — GERMANY: BUSINESS CONFIDENCE REBOUNDS

    Good news for the German and Eurozone economies as German business confidence rebounds in November. Germany’s broadest and most widely-followed index of business confidence, the Ifo business climate index, increased by 1.5 points to 104.7 in November.

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  • 21.11.2014 — UK: HEADACHE FOR CHANCELLOR OSBORNE

    Better data for Chancellor George Osborne, but still off-course. The government borrowed £7.7bn in October, ignoring distortions from public sector banking groups. That was down from £7.9bn a year ago and in-line with consensus expectations. Revisions were kind for the Chancellor, with borrowing in the first six months of the fiscal year cut by £1.6bn. Nevertheless, those two pieces of good news are pretty marginal compared to the degree of overshooting so far this year.

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  • 21.11.2014 — BREXIT WOULD BE BAD FOR THE UK

    A big upset: This was the by-election UK Prime Minister Cameron was not supposed to lose. But UKIP now has a second MP at Westminster after Mark Reckless won last night’s by-election for the anti-EU party, a vote triggered by his defection from the Conservative Party. The Kent constituency of Rochester and Strood was low down the list of UKIP targets, so the result raises the potential for UKIP to capture a dozen or more seats at the May general election.

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  • 20.11.2014 — UK: CONSUMERS LIKE FALLING PETROL PRICES

    Consumers like falling petrol and food prices. Retail sales volumes rose 0.8% mom in October, the strongest gain since April and ahead of consensus expectations of 0.3%. Sales volumes excluding petrol were up 4.6% yoy, and including petrol they rose 4.3% yoy. Evidently the consumer is feeling pretty happy.

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  • 20.11.2014 — EURO PMIs: THE ROUGH PATCH IS NOT OVER

    Stagnation not recession. The flash Eurozone composite PMI fell to 51.4 from 52.3 in November, below consensus expectations, the lowest since July last year, and signalling the rough patch triggered earlier this year by Putin’s aggression in Ukraine is not over. The German services PMI was the main culprit for the decline (see chart and table below) as it hit a 16-month low.

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  • 20.11.2014 — MACRO UPDATE: UK VOTE, CHINA, OBAMA

    It would be a shock if Mark Reckless did not win a second parliamentary seat for the United Kingdom Independence Party (UKIP) tonight. Reckless triggered tonight’s vote to select an MP to represent the Kent constituency of Rochester and Strood by defecting from the ruling Conservatives to UKIP. Some bookmakers price a UKIP win at 1-100. UKIP reaching two MPs is a momentous moment for the party, and raises the potential for the party to capture upwards of a dozen seats at the general election. But the implications run wider than that.

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  • 19.11.2014 — BOE: ALL ABOUT INFLATION AND RISKS

    Mixed messages again, and splits emerge. The minutes of the Monetary Policy Committee’s November meeting today were not as dovish as the BoE’s Inflation Report forecasts. Although presented a “best collective view” of rate setters last week that implicitly said rates would not need to rise for the next year, two rate setters still voted for hikes this month.

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  • 18.11.2014 — ZEW: SIGNS OF STABILISATION

    A good start. Faced with uncertainty caused by geopolitical events German businesses have delayed investment, driving a slowdown in the Eurozone growth motor and weakening in survey indicators. Today’s improvement in the ZEW survey of financial analysts, the first rise in the expectations component for 11 months, provides some of the first tentative evidence that those trends may be reversing.

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  • 18.11.2014 — UK: INFLATION SHOULD REACH 1.0% BY YEAR-END

    Inflation ticks-up, but should drop to 1.0% by December. Core and headline inflation rose one-tenth of a percent in October reversing some of September’s very sharp inflation decline as volatile air fares inflation rose and a sharp petrol price fall last year dropped out of the twelve month comparison. That was in-line with our forecasts.

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  • 14.11.2014 — EUROZONE IN ROUGH PATCH, NOT CRISIS

    External risks weighed on Eurozone growth in Q3 and are likely to continue to do so for the rest of 2014. But Q3 GDP growth, which edged up from 0.1% qoq in Q2 to 0.2%, highlights that the Eurozone has entered a rough patch rather than a new recession or crisis.

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  • 14.11.2014 — UK: CONSTRUCTION OUTPUT BOUNCES AS WELL

    Construction adds to signals of only mild and temporary UK slowdown. Output growth was weaker than expected in September, rising 1.8% compared to consensus expectations of a 4.0% gain. But revisions to the backdata should temper that disappointment significantly. August’s fall was cut to 3.0% from 3.9% before, and year-on-year growth was 3.5%, in-line with our forecast.

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  • 12.11.2014 — BOE INFLATION REPORT: DOVISH AS RISKS MATERIALISE

    The Bank of England’s Inflation Report was dovish today reflecting low inflation, still weak pay growth and stalling Eurozone growth. The BoE cut its growth forecasts a little, slashed its near-term inflation forecasts (see section at the bottom of this email for details) and left its longer-term inflation forecasts little changed, meaning it does not expect inflation to return to the 2% target until the end of 2017.

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  • 10.11.2014 — THE NIGHT THE WALL CAME DOWN - 25 YEARS ON

    Like most Germans, I will never forget that night 25 years ago. Alerted by two friends to news that sounded too good to be true while working late in my office in Kiel (West Germany), I ended up at midnight at the border in Luebeck-Schlutup, greeting East Germans crossing the now open Iron Curtain in their funny “Trabi” cars. "Trabi klatschen", as it came to be known.

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  • 07.11.2014 — GERMAN INDUSTRY: SLOWING OUTPUT, STRONG EXPORTS

    Germany’s industrial sector showed two faces over the summer. Amid pronounced volatility due to the timing of holidays, industrial output fell slightly, while exports boomed.

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  • 07.11.2014 — ECONOMIC CALENDAR - Week of 10 November

    • Eurozone Q3 GDP: rough patch
    • UK BoE Inflation Report: when to hike rates?
    • China October data: resilient growth

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  • 06.11.2014 — ECB CLOSES THE RANKS, PREPARES MORE EASING

    ECB President Draghi’s press conference was a demonstration of unity and readiness to act at the ECB. According to Draghi, the entire Governing Council signed off the target of boosting the ECB’s balance sheet by €1trn back to the early 2012 level of €3trn.

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  • 06.11.2014 — BOE HOLDS AMID LOW INFLATION AND GROWTH RISKS

    The BoE kept interest rates on hold today because inflation is low, wage gains meagre and the economy is slowing a little. There is no pressing need for rate hikes right now, so it was little surprise to see the BoE standing pat today. Indeed, rate hikes are likely to remain off the table for the next six months, as rate setters wait for growth risks to fade and unemployment to fall further. We look for the first hike in June 2015, after the General Election.

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  • 06.11.2014 — BOE HOLDS AMID LOW INFLATION AND GROWTH RISKS

     

    The BoE kept interest rates on hold today because inflation is low, wage gains meagre and the economy is slowing a little. There is no pressing need for rate hikes right now, so it was little surprise to see the BoE standing pat today. Indeed, rate hikes are likely to remain off the table for the next six months, as rate setters wait for growth risks to fade and unemployment to fall further. We look for the first hike in June 2015, after the General Election.

     

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  • 06.11.2014 — UK: INDUSTRIAL BOUNCE ON CARS AND OIL

    The hard data are countering some of the worse fears about the mild UK slowdown. Manufacturing output rose 0.4% mom in September and industrial production was up 0.6% mom. That September bounceback was driven by car plants coming back on-line after a summer lull – not dissimilar to the pattern we expect to see in Germany – and production resuming in some big North Sea fields after summer maintenance.

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  • 05.11.2014 — UK: STILL STRONG, BUT UNCERTAINTY HITS SERVICE SECTOR

    Uncertainty created by troubles abroad and recent financial volatility hit UK services firms in October, with the services PMI falling to a 17-month low of 56.2 in October, down from 58.7 in September. The composite PMI fell to 55.8 from 57.5, the weakest since May last year. This reinforces our sense of caution about UK growth over the next couple of quarters.

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  • 05.11.2014 — GLOBAL MACRO UPDATE: US ELECTIONS, CATALONIA REFERENDUM

    The Republicans increased their majority in the House, now holding 241 of the seats, and took control of the US Senate in yesterday’s mid-term elections. In the latter, they held 52 seats at the time of writing with three results still to be finalised. There were plenty of Republican victories in Governorship races too. The question now is whether the Republican Congress and President Obama will try and find common ground, perhaps helping seal two important trade deals, or whether there will simply be more gridlock.

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  • 04.11.2014 — UK: STILL STRONG CONSTRUCTION

    Still strong construction. The construction PMI fell to 61.4 in October from 64.2 in September, well below consensus of 63.5, as the softer housing market fed through to a weaker housebuilding expansion, leaving commercial activity as the fastest growing sector. That being said, the PMI is well above its long-run average of 54.5 and not far off the average of 62.5 recorded so far this year, so it continues to signal very strong construction growth.

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  • 03.11.2014 — UK: MANUFACTURING JUMP EASES SOME DOWNSIDE RISKS

    Domestic strength keeps the UK economy ticking along. The UK manufacturing PMI rose to 53.2 in October rom 51.5 in September, reaching a three month high. Weakness in the Eurozone has slowed UK manufacturing growth from its rapid early-2014 growth pace, an effect that showed in another fall in export orders this month, but solid domestic demand growth is keeping manufacturing and the economy more widely in solid expansionary territory.

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  • 03.11.2014 — EUROZONE MANUFACTURING: “MIXED” PMIS ARE AN IMPROVEMENT

    October manufacturing PMIs were mixed, which is an improvement compared to previous months. However, the small rebound in the Eurozone’s manufacturing PMI from 50.3 to 50.6 in October is not a clear sign of stabilisation yet.

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  • 31.10.2014 — EUROZONE: INFLATION UP, UNEMPLOYMENT DOWN

    Alarm bells may be ringing a little less loudly in Frankfurt ahead of next week’s ECB meeting after a modest rebound in inflation in October and a further decline in unemployment in September.

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  • 30.10.2014 — EUROZONE: MORE SIGNS OF STABILISATION

    The increase in the Eurozone ESI adds to evidence from the October PMIs. But caution is warranted when it comes to Germany.

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  • 30.10.2014 — GERMAN JOB MARKET: SIGNS OF TIGHTNESS

    Rises in open positions and hiring intentions as well as a drop in unemployment and high wage growth point to tightness.

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  • 27.10.2014 — EUROZONE CREDIT CYCLE SWINGS A LITTLE FASTER

    Even ahead of the completion of the ECB’s asset quality review, the Eurozone’s long absent credit cycle was beginning to show signs of life. Monetary data for the currency zone improved broadly and significantly in September.

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  • 27.10.2014 — GERMANY: STILL NEAR-TERM DOWNSIDE RISKS

    Dashing hopes for stabilisation, Germany’s most widely-followed indicator of economic sentiment, the Ifo index, recorded another broad and steep decline in October.

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  • 26.10.2014 — TOUGH ECB: NECESSARY CONDITION FOR EUROZONE RECOVERY

    The Eurozone’s reform efforts after the near existential crisis of 2011/12 reached another milestone today with the publication of the results of the ECB’s comprehensive assessment of Eurozone banks.

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  • 24.10.2014 — UK: SLIGHTLY SLOWER GROWTH, BUT STILL STRONG

    Slightly slower growth. GDP growth slowed to 0.7% qoq in the third quarter from 0.9% in the second, as the stalling Eurozone weighed on manufacturing while construction rose solidly rather than spectacularly despite red hot surveys.

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  • 23.10.2014 — UK: GENTLE SLOWING

    Gentle slowing. Total retail sales volumes fell 0.3% in September, after rising 0.4% the previous month. Over the third quarter as a whole sales rose just 0.3%, the weakest three-month growth rate since November last year. Retail sales fit into the general pattern from a range of indicators – mortgage approvals today was another - of gently slowing growth.

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  • 23.10.2014 — EURO PMIS: STAGNATION RATHER THAN RECESSION

    German resilience and a rebound in the periphery helped Eurozone confidence stabilise in October. The rough patch is not over, with many details in the PMI survey warranting caution.

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  • 22.10.2014 — BOE: ON HOLD FOR NOW

    Low inflation and a stalled Eurozone economy will keep the BoE on hold until mid-2015. The minutes of the Monetary Policy Committee’s early October meeting today were dovish. Although two of the nine members continued to vote for a rate hike on the basis that unemployment is still falling rapidly, the majority focused on September’s inflation slide and the risks posed by recent drops in Eurozone sentiment as well disappointing German data for August.

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  • 21.10.2014 — ECB STEPPING UP ITS RESPONSE?

    The ECB is weighing purchasing corporate bonds. A potentially adequate and impressive further easing.

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  • 21.10.2014 — UK: PUBLIC BORROWING CUTS MISSING IN ACTION

    UK public sector borrowing rises despite still buoyant economic growth. The government borrowing £11.8bn in September, ignoring distortions from public sector banking groups. That is up from £10.3 bn a year ago and worse than consensus expectations of £10.1bn.

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  • 15.10.2014 — UK: SLACK STILL FALLING QUICKLY

    Slack keeps falling sharply. UK unemployment dropped again, to 6.0% in August from 6.2% in July, surprising consensus. Another fall in jobless claims in September signals that no let up in those unemployment falls is in sight. In the past year, unemployment has fallen the most on record (records began in 1972).

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  • 14.10.2014 — HOW WEAK IS GERMANY?

    Markets have their own sense of humour. Last week, they took an unusual pattern of summer holidays in Germany as an excuse to dump German equities and start an almost global rout. Because the summer closures in major parts of the German car industry fell mostly into August instead of the usual July, unusually strong output and export data for July were followed by unusually weak data for August.

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  • 14.10.2014 — ZEW: GERMAN CONFIDENCE SLIDE CONTINUES

    German investor confidence continued to drop sharply in October, highlighting the downside risks to the German economic outlook in the near-term.

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  • 14.10.2014 — UK INFLATION WILL REMAIN SUBDUED

    Sharp inflation fall reflects partly subdued underlying price pressures and partly volatility. Inflation fell to 1.2% in September from 1.5% in August, well below consensus expectations of 1.4%. Although falling oil and food prices often grab the headlines, the inflation slide this month was more than accounted for by weaker core inflation, which strips out energy and food prices.

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  • 10.10.2014 — UK: CONSTRUCTION ADDS TO SIGNS OF SLOWING

    Construction adds to the signs of some slowing in UK growth. Construction accounts for only around 6% of the UK economy but its volatility gives the sector an outsized importance for economy wide growth. Building activity can also reflect confidence in the rest of the economy.

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  • 10.10.2014 — ECONOMIC CALENDAR - Week of 13 October

    • UK labour market and inflation: slack falling, prices under control
    • German ZEW index: disappointing economic data weigh on confidence
    • European Court: hearing on ECB rescue shield complaints

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  • 09.10.2014 — BOE HOLDS AMID SLOWING GROWTH

    The BoE kept interest rates on hold today, as expected, amid increasing signs of easing momentum in the UK. To date the UK has seen only a gentle slowdown from elevated rates of growth, so we would caution against exaggerating the change in tone of the latest data.

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  • 09.10.2014 — MACRO UPDATE: ITALIAN REFORMS, GERMAN TRADE

    Italy is making progress with its labour market reforms, stoking long-term hopes. Meanwhile, Germany's short-term troubles intensify with a drop in exports,

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  • 07.10.2014 — UK: MORTGAGE DISRUPTION SET TO EASE

    Tighter mortgage regulations hit credit availability in the third quarter. The Bank of England’s third quarter Credit Conditions Survey published this morning suggests that the disruption is passing now. Banks tightened household credit availability significantly in the third quarter, partially in response to tougher mortgage rules introduced with the so-called Mortgage Market Review.

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  • 07.10.2014 — UK: MANUFACTURING SLOWING

    UK manufacturing is entering a soft patch as the fall-out from events in Ukraine spreads.

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  • 07.10.2014 — GERMANY INDUSTRY: AUGUST SLUMP OVERSTATES DOWNTREND

    Later-than usual school holidays caused seasonal factory closures to fall into August, triggering a large decline in German industrial on the month.

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  • 03.10.2014 — UK: CONTINUED DOMESTIC STRENGTH

    Domestic strength is keeping the UK recovery on track, while manufacturing suffers from events overseas. The services PMI continued to signal rapid growth in the UK despite falling as expected from its ten month high of 60.5 in August. The PMI was 58.7 in September, well above the long-run average of around 56.

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  • 03.10.2014 — EUROZONE SERVICE PMIS: SLOWDOWN SPREADING

    The Eurozone’s economic slowdown continued to spread in September. The services sector PMI eased from 53.1 to 52.4, the composite output index from 52.5 to 52.0. Both indices continued to point to moderate growth at the end of Q3, but provided little evidence that the cooldown in sentiment has ended yet.

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  • 03.10.2014 — GLOBAL MACRO UPDATE: ECB, CHINA

    Reactions to the ECB's decision highlight that Draghi had to strike a balance between those who wanted more and those opposed to asset purchases. In China, service sector growth slowed in September.

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  • 02.10.2014 — ECB BUYS ASSETS, WARNS FRANCE

    As expected, the ECB put flesh to the bones of the asset purchase programmes pre-announced at the September meeting. However, it did not deliver a single big number and did not go beyond these announcements.

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  • 02.10.2014 — UK: STRONG CONSTRUCTION

    Red hot construction growth, but signs of slowing in the pipeline. The construction PMI rose slightly in September to 64.2 from its already elevated August level of 64.0. The UK’s lopsided recovery seems to have continued into September with the manufacturing PMI dragged down by weak growth overseas while the domestic oriented construction sector powers ahead, driven by low interest rates and rising confidence.

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  • 01.10.2014 — UK: LOPSIDED RECOVERY

    UK manufacturing growth followed the Eurozone down. The UK manufacturing PMI fell to 51.6 in September from 52.2 in August, hitting a 17-month low. The UK is being hit by developments in its major export market, with the Eurozone manufacturing PMI down nearly 4 points from its January peak.

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  • 01.10.2014 — EUROZONE PMIS: GERMANY STILL SLOWING

    A downrevision of the German manufacturing PMI in September overshadowed signs of stabilisation elsewhere in Euro-zone manufacturing.

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  • 30.09.2014 — EUROZONE: INFLATION, UNEMPLOYMENT DROP

    Providing support for ECB advocates of more decisive monetary easing, Eurozone inflation dropped to 0.3% yoy in September, from 0.4% in August.

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  • 30.09.2014 — GERMAN JOBS ENGINE KEEPS HUMMING

    German unemployment fell a little less than usual in September, leading to an unexpectedly strong increase in seasonally adjusted unemployment by 12k to 2.918 million.

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  • 30.09.2014 — GERMAN RETAIL: SALES SEASON BEATS PUTIN

    German consumers were busy shopping in August despite Putin’s antics in Eastern Ukraine. Business confidence indicators had turned down sharply in that month due to the intensification of the crisis in Donbass.

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  • 29.09.2014 — GERMAN INFLATION STAYS LOW

    German inflation stayed at 0.8% yoy in September as slightly higher food price and fuel inflation was offset by weaker increases in textile prices. Overall, inflation remained very subdued.

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  • 29.09.2014 — EUROZONE: CONSUMERS, RETAIL DRAG DOWN CONFIDENCE

    Eurozone economic confidence fell again in September, as the Putin factor spread to domestic demand. The overall Eurozone economic sentiment index from the EU Commission fell to 99.9, down from 100.6.

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  • 26.09.2014 — ECONOMIC CALENDAR

    ·         Eurozone: Economic confidence hit by geopolitics.
    ·         ECB: ABS purchase details.
    ·         PMIs: US and UK stay strong.

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  • 25.09.2014 — EUROZONE CREDIT CYCLE TURNS VERY SLOWLY

    Eurozone monetary data kept improving gradually in August. M3, M1 and private sector loans growth rates all edged up slightly. M3 rose 2.0% yoy, beating consensus expectations. M1 is a good leading indicator of output growth 9 months ahead when adjusted for inflation and it increased for a third successive month to 5.8% yoy in August. With inflation still very low, real M1 growth is picking up and points to a potential growth uptick in spring next year.

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  • 24.09.2014 — GERMANY: IFO EXPECTATIONS SIGNAL INVESTMENT DROP

    Contrary to other indicators, Germany’s most widely followed business confidence survey, the Ifo index, was not showing any signs of stabilisation in September yet.

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  • 23.09.2014 — UK: PUBLIC FINANCES DISAPPOINT ON WEAK INCOME TAX

    UK public sector borrowing rises despite buoyant economic growth. Public sector borrowing was £11.6bn in August, once distortions from public sector banking groups are removed from the figures. That is up from £11.0bn a year ago but a little better than consensus expectations of £11.8bn.

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  • 23.09.2014 — EURO PMIS: TROUGH IN SIGHT?

    After the huge fall in August, the decline in Eurozone economic indicators showed some signs of easing in September.

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  • 22.09.2014 — PUTIN STILL SCARES EUROZONE CONSUMERS

    Eurozone economic confidence indicators continued to slip in September under the impression of Russia’s semi-covert aggression in Eastern Ukraine. Consumer confidence, which dropped from -10.0 in August to -11.4 in September, adds to the evidence of the ZEW investor confidence index.

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  • 19.09.2014 — SCOTLAND STAYS: RISK AVOIDED FOR EUROPE?

    A sigh of relief. Scotland has apparently rejected outright independence by a bigger margin than projected by the opinion polls in the last ten days, voting instead for more home rule within the UK. Europe can breathe a sigh of relief. A problem avoided.

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  • 19.09.2014 — BACK FROM THE BRINK: THE IMPACT OF SCOTLAND'S NO

    Scotland stays. The UK will be different, but it will remain one country for the time being. By promising extra powers to Scotland within the UK, London has helped to keep Scotland in. But Prime Minister David Cameron may have to pay a price for the late promise of more home rule for Scotland.

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  • 18.09.2014 — UK: CONSUMER STILL GOING STRONG

    UK retail sales are on a steady upward trend. Total retail sales volumes rose 0.4% mom in August, in-line with consensus expectations and up from no change in July. Smoothing through the monthly volatility, sales volumes rose 0.7% in the three months to August, which suggests the UK consumer is still going strong, helped by falling prices in the shops.

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  • 17.09.2014 — UK: SLACK FALLING QUICKLY

    The BoE will not wait too much longer before hiking rates. UK unemployment dropped sharply again, to 6.2% in July from 6.4% in June and another big fall in jobless claims in August signals no let up in those unemployment falls is in sight. Wage growth, however, remains weak.

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  • 17.09.2014 — MACRO UPDATE: SCOTLAND, FRANCE

    The polls have steadied in the past week. Three polls published overnight all gave a four point lead to the anti-independence camp. Taken together they show the yes campaign’s gains stopped around a week ago

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  • 16.09.2014 — ZEW: CONFIDENCE HANGS ON UKRAINE TRUCE

    German investor confidence fell only slightly in September. After plunging by 18 points in August the headline expectations component of the ZEW index fell only another two points to 6.9 in September.

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  • 16.09.2014 — UK INFLATION WILL REMAIN SUBDUED

    Inflation is not a concern right now. It fell to 1.5% in August, down from 1.6% in July and in-line with consensus expectations as falling food and petrol prices offset a rebound in clothes prices and air fares. Oil prices have weakened further in recent weeks.

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  • 15.09.2014 — CYPRUS: HEADING FOR A REBOUND

    Catching up with the Eurozone again. With our “Chart of the Week” of 29 November 2013, we argued that Cyprus could be heading for a Baltic-style rebound in late 2014 if it stayed on the reform track. Since then, the evidence has largely supported our optimistic call.

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  • 12.09.2014 — SCOTLAND VOTE WILL BE TIGHT

    All the polls show a tight race, but the independence campaign’s gains have stalled. On Wednesday night a Survation poll showed the anti-independence camp leading by six points, unchanged from their previous poll two weeks earlier.

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  • 09.09.2014 — UK: UNBALANCED BUT STILL GROWING STRONGLY

    Still waiting for the Ukraine effect on UK industry. Industrial production made a solid start to Q3, rising by an above consensus 0.5% mom in July. But growth should slow in the next couple of months as the effect of fighting in Ukraine on core-Eurozone business confidence feeds through to the UK.

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  • 05.09.2014 — GERMANY INDUSTRY: VERY STRONG START IN Q3

    German manufacturing had a very strong start into Q3 after the calendar- and weather-induced blip in the spring. Following a big jump in industrial orders (+4.6% mom), industrial production also rebounded much more strongly than we or consensus had expected.

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  • 05.09.2014 — ECONOMIC CALENDAR - Week of 8 September

    • German, Chinese trade data: moderate growth
    • UK manufacturing: going strong in July, Ukraine hit still to come
    • Eurozone finance minister meeting: Greece, Ireland, budgets and reforms in focus

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  • 04.09.2014 — ECB RATE CUT PAPERS OVER ASSET BUYING SPLIT

    The ECB stepped up to the plate, again, as the Eurozone recovery is grinding almost to a halt. The confidence shock of ussia’s aggression against Ukraine and reform delays in France and Italy are threatening the projected gradual rebound of inflation towards target.

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  • 04.09.2014 — BOE BALANCING WEAK WAGES AND STRONG EMPLOYMENT

    The BoE will not wait too long before hiking. As expected, the BoE left interest rates unchanged today. The economy is growing growing strongly and unemployment is tumbling, but weak wage growth signals there is still enough slack left in the economy to allow interest rates to stay on hold for a few months yet.

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  • 03.09.2014 — THE RETURN OF GEOPOLITICS: THE LONG-TERM IMPACT OF PUTIN'S WAR

    Even if Ukraine conflict can now be frozen, allowing business confidence and economic growth to rebound in core Europe after a few months, the long-term impact of Putin’s war will likely be significant.

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  • 03.09.2014 — UKRAINE: A PERMANENT CEASEFIRE?

    If Putin now decides that he has conquered enough, and that conquering more would not be worth the costs of an accelerated Russian economic decline caused by further capital flight and disruptions in economic and financial relations with the West, at least European economies could start to gradually rebound from the Putin shock in a few months.

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  • 03.09.2014 — EUROZONE SERVICE PMIS: PERIPHERY BOOMS, CORE STUMBLES

    The new intra-Eurozone divergence between a strong rebound in the former crisis countries on the periphery and the stumbling core countries widened in August.

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  • 02.09.2014 — UK: CONSTRUCTION ROARS AHEAD

    Signs of continued strong UK domestic spending. Tomorrow’s services PMI will give a more comprehensive read on that of course, but the surge in August’s construction PMI, published today, suggests continued buoyant confidence at least among those buying houses and investing in infrastructure and premises.

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  • 01.09.2014 — UK MANUFACTURING HIT BY PUTIN

    Putin hits UK manufacturing. The manufacturing PMI fell sharply to a 15 month low of 52.5, down from 55.4 in July and below consensus expectations. Russia’s escalation of the conflict in Ukraine has taken a toll on the internationally exposed manufacturing sector, and that effect could yet worsen further in the coming months given confidence drops in the more directly exposed core European economies.

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  • 01.09.2014 — EUROZONE ECONOMIC ROUGH PATCH SPREADS

    The economic slowdown which began in the Eurozone core in spring is spreading. The currency area’s PMI manu-facturing declined from 51.8 to 50.7 in August, its lowest level since July last year.

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  • 01.09.2014 — GERMANY: INVESTMENT WEAKNESS, BUDGET SURPLUS

    On many counts, Germany had a strong first half of the year. The government ran a budget surplus of 1.1% of GDP, with the federal level delivering its first H1 surplus since 1991. Companies created 329k new core jobs, allowing the social security system to fill its reserves further. However, output growth was meagre in the first half as a whole.

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  • 01.09.2014 — FORECASTS AT A GLANCE: UNEVEN GLOBAL RECOVERY

    Forecast changes: Russia’s more open aggression against Ukraine will hit confidence and investment in core Europe. We reduce our GDP calls for core Europe to virtual stagnation for 2H 2014 and a slower start into 2015. That brings our 2015 GDP forecast for the Eurozone from 1.4% to 1.0%. It has ramifications for other regions, too.

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  • 29.08.2014 — EUROZONE: UNEMPLOYMENT STABLE, INFLATION FALLS

    What looks like good news for many Eurozone consumers is a mixed blessing for the ECB.

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  • 29.08.2014 — ECONOMIC CALENDAR - Week of 1 September

    • EU, NATO summits: Russia in focus
    • ECB: stepping up the stimulus … soon
    • US non-farm payrolls : going strong

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  • 28.08.2014 — UKRAINE SITUATION DETERIORATES FURTHER

    Two days ago, we asked how far Russia would go (see our message from 26 August). The latest newsflow from Eastern Ukraine suggests an increased risk that Russian President Putin may go well beyond snatching Crimea and de-stabilising the pro-Western government in Kyiv. Instead, he is edging closer to an almost-invasion to occupy parts of southeastern Ukraine.

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  • 28.08.2014 — GERMAN INFLATION STAYS LOW

    German inflation was unchanged at 0.8% in August, although state-level rates suggested a slight increase.

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  • 28.08.2014 — UKRAINE CRISIS, ITALY TRIGGER EURO CONFIDENCE DIP

    The crisis in Ukraine hit Eurozone confidence hard in August. The EU Commission’s economic sentiment indicator fell from 102.1 to 100.6, the biggest decline since August 2012, before Draghi’s magic words ended the European bond market tensions.

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  • 28.08.2014 — GERMAN JOBS ENGINE KEEPS HUMMING

    Germany’s buoyant labour market has remained largely unaffected by the external uncertainties and the swings in economic output so far this year. While unemployment may have troughed, job creation remained robust so far

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  • 27.08.2014 — PUTIN REACHING GERMAN CONSUMERS

    The crisis in Ukraine is beginning to make German consumers more cautious. German domestic demand had been one of the bright spots amid the recent slowdown so far.

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  • 26.08.2014 — NEW FRENCH CABINET: FIRST TAKE

    Hollande and Valls remove the radical-left rebels and enter a pro-market influence into the cabinet. But without support from the centre-right opposition, we may have to brace for a hot political autumn.

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  • 22.08.2014 — ECONOMIC CALENDAR - Week of 25 August

    • German Ifo index, Eurozone ESI: geo-politics hurt the recovery
    • Eurozone, German inflation: very low on energy, food prices
    • Eurozone credit data: lending cycle turning

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  • 21.08.2014 — GEO-POLITICS HIT EUROZONE SENTIMENT

    Despite surprisingly resilient German data, Eurozone economic sentiment took another hit in August according to Markit’s flash PMIs.

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  • 20.08.2014 — BOE: TWO DISSENTERS KEEP RATE HIKE OUTLOOK FINELY BALANCED

    In a sign that the first rate hike may come slightly earlier than markets currently expect, two members of the Bank of England’s rate setting committee voted for a 25bp rate hike at the 6/7 August meeting.

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  • 18.08.2014 — EUROZONE: RUSSIA HURTS EXPORT-LED RECOVERY

    Eurozone exports to Russia declined sharply in the first half of the year. Even before the latest escalation of the conflict in the Donbass and the more serious EU/US sanctions and Russian retaliation to them, Eurozone exports to Russia fell by 14% yoy in the first five months to the year.

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  • 15.08.2014 — UK: BROAD BASED GROWTH

    Strong and broad based growth in Q2. UK growth was confirmed at 0.8% qoq in Q2 in today’s second release of GDP. Year-on-year, the pace of expansion was raised slightly to 3.2% from 3.1%, which is the strongest growth since mid-2007.

     

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  • 15.08.2014 — ECONOMIC CALENDAR - Week of 18 August
    • Bank of England minutes: a first dissenter
    • Fed minutes: growing confidence
    • Euro PMIs: Ukraine uncertainty
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  • 14.08.2014 — EUROZONE SLOWS IN Q2 AS PERIPHERY BEATS THE CORE

    Eurozone GDP was flat in the second quarter. Strong growth figures in some of the former crisis countries and small Eastern member states were not enough to offset the slowdown in Germany, which was hit by calendar effects and the “Putin factor”, as well as the reform laggards France and Italy.

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  • 14.08.2014 — UK HOUSE PRICE INFLATION STABILISING

    House prices are still rising very rapidly, but the pace of increase is stabilising. The headline price balance in the RICS survey of estate agents slipped a little in July to 49, down from 52 in June. That still elevated reading suggests house price inflation continues to motor on at its recent pace of around 10% yoy.

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  • 14.08.2014 — EURO GDP: GERMANY SETBACK, FRANCE FLAT

    Both French and German second quarter GDP figures came in slightly lower than estimated. Investment fell in both countries, albeit for different underlying reasons, while consumption held up well.

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  • 13.08.2014 — GREECE: RECESSION OVER?

    A simple de-seasonalisation technique suggests that Greek GDP may have expanded by 0.5% qoq in the spring quarter. That would mean the end of the recession and the first significant growth since the brief post-Lehman recovery in late 2009.

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  • 13.08.2014 — BOE INFLATION REPORT: SOMETHING FOR EVERYONE

    Something for everyone in today’s Inflation Report. In response to still weak wage growth, the BoE cut its pay forecasts in its quarterly Inflation Report update today and said unemployment could fall to a lower level before setting off inflation.Delving a little deeper, there was plenty in these forecasts for the more hawkish members of the BoE rate setting Committee, the most important of which is that the central bank raised its growth forecasts a little and cut its unemployment projections.

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  • 13.08.2014 — JAPAN: SETBACK CREATES ABENOMICS RISK

    Abenomics is at a pivotal stage. The initial impact of the massive monetary and fiscal stimulus which constituted the first two arrows of the economic policy package of Prime Minister Abe is fading.

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  • 12.08.2014 — ZEW: GERMAN INVESTORS GET NERVOUS ON PUTIN

    German investor confidence plunged in August, as concerns over growth and the escalation of tensions in Eastern Ukraine triggered a sharp correction in equity markets in the past two weeks.

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  • 08.08.2014 — ITALY UPDATE: RENZI WINS A BATTLE

    Renzi’s determination should be good news for other economically more important reforms. In particular the labour market reform, on which the parliamentary process is likely to come to a head this autumn, is key to Italy’s economic prospects as the example of Spain or Portugal shows.

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  • 08.08.2014 — UK: OFF-BALANCE BUT ON-TRACK

    Solid construction but weak trade highlights the lopsided nature of the UK’s recovery. Construction output rose 1.2% mom in June, beating consensus expectations, as housebuilding continued rising rapidly.

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  • 08.08.2014 — GERMAN TRADE REBOUNDS IN JUNE

    Germany’s volatile exports and imports rebounded in June after a weak May. Exports rose by 0.9% mom after falling by 1.1% in May, imports jumped by 4.5%, after a drop by 3.4% in May.

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  • 08.08.2014 — ECONOMIC CALENDAR - Week of 11 August

    Euro GDP data for Q2

    ZEW investor confidence

    UK labour market

    Turkish elections

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  • 07.08.2014 — ECB: NOTHING UNUSUAL IN FRANKFURT

    The current nervousness in financial markets has not reached the Eurotower in a significant way.

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  • 07.08.2014 — BOE ON HOLD, BUT DID A RATE SETTER VOTE FOR A HIKE?

    The BoE kept interest rates on hold today as expected. The key question this month was not what the decision would be, but what is happening behind the scenes.

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  • 07.08.2014 — GERMAN INDUSTRIAL OUTPUT: SETBACK IN Q2

    The rebound in June underwhelmed, meaning industrial output faced a serious setback in Q2. That puts a downside risk to our GDP forecasts for the quarter and the year.

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  • 06.08.2014 — ITALY GDP: STRUGGLING TO GET OUT OF THE BLOCKS

    Italy fell back into technical recession in the second quarter with a decline of GDP by 0.2% qoq succeeding the 0.1% decline in Q1, instead of rising somewhat as all the soft data had indicated.

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  • 06.08.2014 — UK: DISAPPOINTING MANUFACTURING

    A disappointing start to Q3 for manufacturing. Manufacturing output rose 0.3% mom in June, weaker than consensus expectations and a disappointing bounceback from May’s sharp fall.

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  • 06.08.2014 — UK: HOUSE PRICES SHAKE OFF TOUGHER RULES

    Far from slowing, house price inflation may even be accelerating. The Halifax this morning reported a 1.4% mom rise
    in house prices in July, taking prices up 3.5% in the three months to July.

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  • 06.08.2014 — GERMAN FACTORY ORDERS FALL SHARPLY IN JUNE

    The erratic pattern of bulk orders for planes, ships and trains caused a sharp 3.2% mom decline in German factory orders in June. But geo-political risks are also hurting Germany’s manufacturers.

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  • 05.08.2014 — UK: SOLID START TO Q3

    A solid start to the third quarter. Some slightly disappointing data recently have posed the risk of UK growth slowing in the second half of 2014. But the chances of that were cut today by the services PMI surging to 59.1 in July, up from 57.7 in June and the highest reading since November.

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  • 05.08.2014 — EUROZONE PMI: MODEST RECOVERY CONTINUES

    The Eurozone’s modest recovery continued in July. The July composite PMI was a touch lower than the flash release, but rose to 53.8 in July from 52.8 in June.

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  • 04.08.2014 — HOUSEBUILDING DRIVES STRONG CONSTRUCTION

    The construction PMI bucked the recent trend of slightly disappointing data releases.

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  • 01.08.2014 — US NON-FARM PAYROLLS: A BALANCED REPORT

    A timely reminder that US economic data is not suddenly shifting into overdrive.

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  • 01.08.2014 — REMEMBER THE UK IS PART OF EUROPE

    Putin and sanctions drive a downside UK manufacturing surprise. The July manufacturing PMI fell to 55.4 in July, from (a downwardly revised) 57.2 in June, well below consensus expectations and probably in response to escalating Ukrainian tensions.

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  • 01.08.2014 — ECONOMIC CALENDAR - Week of 4 August

    Bank of England (wait for the minutes for dissenting votes), ECB (dovish talk) and Italian GDP (back to modest expansion).

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  • 31.07.2014 — EUROZONE: SOLID UNEMPLOYMENT DOWNTREND

    The Eurozone recovery, gradual and uneven as it is, is creating new jobs and reducing the number of unemployed.

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  • 31.07.2014 — GERMAN LABOUR MARKET: STEADILY MORE JOBS

    Good news all around for German workers. Unemployment fell by 12k in July, total employment rose by 16k in June and core employment rose by 20k in May. The number of open positions reached its highest level since Q2 2012 and the employment intentions index remained on its upward trend.

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  • 31.07.2014 — ARGENTINA: A LESSON EUROPE HAS LEARNED

    The Argentina saga should be a reminder that debt restructurings are by no means a straightforward short-term-pain-long-term-gain solution for countries in trouble.

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  • 31.07.2014 — UK: CONSUMER CONFIDENCE STILL RIDING HIGH

    Consumer confidence remains buoyant despite a 3 point dip in July. The index fell -2 in July, from 1 in June, as consumers became a little less optimistic about the prospects for the economy. However, this fall comes after a 30 point rise in the index in the two years to June.

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  • 31.07.2014 — GERMAN RETAIL SALES: BETTER AT WORLD CUP START

    At the start of the Brazil 2014 world cup, Germans headed to the shops. The sharp rebound in retail sales by 1.3% mom in June embellishes what would otherwise have been a weak second quarter and sets a solid base for a much better third quarter.

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  • 30.07.2014 — US: BRIGHT SUNSHINE AFTER HARSH WINTER

    Strong US growth will force a rate hike early next year. The US rebounded strongly in the second quarter as snow gave way to sunshine in the weather and the economic data. GDP rose 4.0% annualised in Q2 after falling 2.1% in the first quarter, with consumption and business investment returning to strong growth.

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  • 30.07.2014 — GOOD NEWS FOR GERMAN CONSUMERS: INFLATION FALLS

    Good news for consumers: falling food and energy price inflation brought German inflation down from 1.0% to 0.8% in July.

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  • 30.07.2014 — EURO CONFIDENCE RESILIENT DESPITE PUTIN

    So far, Putin has not derailed the Eurozone recovery. Economic confidence edged up from 102.1 to 102.2 in July, above the long-run average of 100 but below the May peak of 102.6 and thus pointing to moderate growth at the start of the third quarter.

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  • 29.07.2014 — UK: MORTGAGE RULES ONLY A TEMPORARY DRAFT

    Housing activity is expanding again as the temporary hit from stricter mortgage rules passes.. Mortgage approvals rose to 67.2k in June from 62.0k in May, beating consensus expectations.

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  • 25.07.2014 — UK: SOLID GROWTH AND STRONG PROSPECTS

    Strong growth and solid prospects mean our call for a November rate hike remains on track. uK GDP grew 0.8% qoq in Q2, in-line with consensus estimates and the BoE’s forecast, and the fifth quarter of expansion at or above trend rates.

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  • 25.07.2014 — EUROZONE CREDIT CYCLE TURNING

    Slowly but surely, the Eurozone’s credit cycle is turning.

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  • 25.07.2014 — GERMAN IFO: THE PUTIN EFFECT

    The conflict stoked by Russia’s President Putin in Eastern Ukraine has a strong effect on the German economy.

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  • 25.07.2014 — ECONOMIC CALENDAR - Week of 28 July

    Very busy week ahead. US GDP, non-farm payrolls and Fed decision. Eurozone confidence, inflation and unemployment.

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  • 24.07.2014 — UK: STRONG SECOND QUARTER FOR RETAILERS

    Despite a slightly disappointing June, UK retail sales had a very strong second quarter. Retail sales volumes rose
    0.1% mom in June, disappointing consensus expectations. But helped by the late Easter, the 1.6% rise in sales volumes in
    the three months to June was the strongest calendar quarter growth for 10 years.

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  • 24.07.2014 — EURO PMIs: WINNING THE WORLD CUP HELPS

    A strong rebound in confidence in Germany’s domestic-oriented services sector and continued firming of the recovery in the periphery helped Eurozone PMIs to rebound nicely after a weak June.

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  • 23.07.2014 — A SMALL PUTIN EFFECT? EUROZONE CONSUMER CONFIDENCE DROPS SLIGHTLY

    Geopolitics is taking a toll on the Eurozone. With the Ukraine crisis coming to a head after the downing of MH17, consumer
    confidence retreated slightly in July to -8.4 from -7.5 in June. The second drop in a row still leaves consumer confidence
    well above the long-term average of -13.1.

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  • 23.07.2014 — UK: RATE HIKE APPROACHING

    The Bank of England is edging closer to the quarter point rate hike that we expect to come in November. Today’s minutes of the rate setters’ early July meeting showed continued gradual evolution to a rate hiking position.

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  • 23.07.2014 — DRAGHI TWO YEARS ON: THE WORDS THAT FIXED THE EURO

    Magic words: Rarely have so few words changed so much. Two years ago, European Central Bank (ECB) president Mario Draghi finally vowed to do “whatever it takes” to defend the euro against an irrational market panic.

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  • 22.07.2014 — UK: STRONG MANUFACTURING, PUTIN IS THE BIG RISK

    Extremely strong new orders signals continued rapid manufacturing expansion. Do not be misled by the fall in the Confederation of British Industry (CBI) July quarterly manufacturing survey business optimism balance to 19 from 33. This survey was very strong.

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  • 22.07.2014 — UK: RECOVERY BOOSTING TAXES

    UK tax receipts are starting to respond to the recovery. Borrowing was a little down on last year’s £11.6bn, once the distorting effect of interest transfers from the BoE are stripped out of the numbers. In the details, tax revenues are showing signs of improvement.

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  • 16.07.2014 — EUROZONE: STRONGER MAY TRADE DATA

    Eurozone trade picked up in May, with exports rising by 0.6% mom and imports by 0.5% on a seasonally adjusted basis, providing slightly brighter news after a series of disappointing hard data releases for the month.

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  • 16.07.2014 — UK: RAPIDLY TIGHTENING LABOUR MARKET

    The labour market is tightening quickly in response to strong UK growth, which should lead the BoE to hike interest rates in November. Employment rose very strongly again in May, beating consensus expectations, and the unemployment rate fell again.

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  • 16.07.2014 — CHINA: STRONG, STABLE GROWTH

    The Chinese authorities are loathe to let growth slow too far. The recent mini-stimulus, a response to weak first quarter
    growth, has had the intended effect. GDP grew 7.5% yoy in Q2, slightly stronger than consensus had expected.

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  • 15.07.2014 — ZEW: GROWING RECOVERY UNCERTAINTY

    German financial analysts’ optimism for the economy continued its decline in July. The headline ZEW investor con-fidence index’ expectation component fell for a fourth successive month.

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  • 15.07.2014 — UK: INFLATION BOUNCES, BUT MUCH OF THE RISE IS TEMPORARY

    Clothes prices send UK inflation higher, but some of that effect is likely to be temporary. Inflation picked up to
    1.9% in June, well above consensus of 1.6%, as clothes prices surprisingly jumped by 2.5%yoy in June.

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  • 14.07.2014 — EURO INDUSTRY: UNIFORM MAY DIP CONCEALS UNEVEN RECOVERY

    Q2 data so far points to a split recovery, but the May weakness was widespread.

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  • 11.07.2014 — ECONOMIC CALENDAR - Week of 14 July

    • China Q2 GDP: stabilising growth
    • Central bankers in parliament: Draghi, Yellen, Carney testimonies
    • German investor confidence: new turbulences?
    • UK labour market: boom continues

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  • 10.07.2014 — UK: IS THE BOE DECISION HIDING DISAGREEMENT

    The BoE left interest rates on hold again today as expected, but we expect the rate setters to respond to strong
    growth and tumbling unemployment by hiking rates in November this year. We see a 60% chance of a November
    hike, and 40% chance of a February move.

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  • 10.07.2014 — UK: ROBUST MAY TRADE

    British exports and imports kept growing nicely in May, while the trade deficit widened, but bounced around recent averages.

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  • 10.07.2014 — EUROPEAN INDUSTRIAL OUTPUT: WHAT HAPPENED IN MAY?

    There is a noticeable divergence between survey-based data and hard data, which we already observed in Q1, when survey-based data seemed to point to more than just 0.2% qoq GDP growth.

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  • 10.07.2014 — UK: HOUSE PRICE INFLATION TOPPING OUT

    House price inflation is topping out at about 10% yoy, and the risks to future gains are more balanced. Approaching interest rate hikes and talk from the BoE about housing risks have cut exuberance in the housing market.

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  • 09.07.2014 — UK: HOUSE PRICE INFLATION STABILISES

    House price inflation is steadying around 10% yoy. The Halifax reported prices fell 0.6% in June. That was a modest
    correction after a huge 3.9% gain in May, leaving house price inflation at 8.8% yoy.

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  • 09.07.2014 — FRANCE: VALLS NO PUSH-OVER

    France’s new prime minister Valls is making progress with his reform agenda, reducing the political tail risks for the French and Eurozone economies

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  • 08.07.2014 — UK: SURPRISE FALL IN MANUFACTURING

    Surprise drop in UK manufacturing output is unlikely to be a true reflection of what is happening in the sector. Industrial production fell by 0.7% and manufacturing output declined by 1.3% in May, well below consensus expectations. That is utterly at odds with strong survey readings and the 1.8% rise in manufacturing employment over the past year.

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  • 08.07.2014 — UK: VERY STRONG GROWTH AND TIGHT CAPACITY

    The UK is in the midst of a growth boom according to surveys. The second quarter British Chambers of Commerce
    (BCC) survey out this morning was just the latest survey to confirm that view.

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  • 08.07.2014 — GERMANY: AMID TRADE WEAKNESS, EUROPE SUPPORTIVE

    A weak May trade release wraps up an overall disappointing month, during which retail sales (-0.6% mom), industrial orders (-1.7%) and production (-1.8%) also fell sharply.

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  • 07.07.2014 — GERMAN OUTPUT PLUNGES IN MAY, BETTER NEWS AHEAD?

    German industrial production went into reverse with the third successive monthly decline in May taking Q2 average output so far 1.5% below the Q1 average. That points to a significantly weaker second quarter, although some temporary downward effects from calendar factors like the late Easter holidays will be reversed in coming months.

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  • 03.07.2014 — ECB: WAIT, MEET LESS AND SEE

    No major decisions at the ECB, but interesting details on the June decisions and a new meeting frequency from next year

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  • 03.07.2014 — US: STRONG PAYROLLS

    Jobs gains are stepping up a gear, signalling solid underlying momentum in the US. Payrolls gained 288k in June,
    well above consensus expectations while the previous two-months were revised up by a net 29k.

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  • 03.07.2014 — UK: BALANCED STRONG EXPANSION

    The UK is experiencing a balanced strong expansion that should result in a rate hike in November this year. The
    PMI’s signal accelerating UK growth in Q2.

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  • 03.07.2014 — EURO PMIS: ITALY JOINS THE PERIPHERY CHARGE

    The Eurozone’s economic recovery slowed in June, but two trends were confirmed: first, domestic demand is faring better than exports and, second, the periphery is catching up with and even overtaking the core of the Eurozone.

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  • 01.07.2014 — US: SOLID UNDERLYING MOMENTUM

    US manufacturing grew strongly in the second quarter, according to the ISM. Assuming the first publication of the ISM is correct this month, it fell slightly in June, to 55.3 from 55.4, disappointing consensus expectations.

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  • 01.07.2014 — UK: ACCELERATING

    The UK is on-track to record strong growth in the second quarter, probably faster than Q1’s 0.8% qoq. The June manufacturing PMI this morning showed the sector is flying.

     

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  • 01.07.2014 — EUROZONE: UNEMPLOYMENT DOWNTREND

    Despite the apparent slowdown in growth momentum in the second quarter, Eurozone unemployment continued its decline.

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  • 01.07.2014 — EURO MANUFACTURING PMIS: AMID SLOWDOWN, SPAIN’S REFORMS PAY OFF

    The overall recovery of the Eurozone economy continued at more moderate pace in Q2. But within that, the outperformance of some of the former crisis countries is becoming remarkable.

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  • 30.06.2014 — EUROZONE INFLATION STAYS LOW DESPITE GERMAN REBOUND

    On the positive side, the divergence in inflation rates between core and periphery is key for the speed of the competitive rebalancing within the Eurozone.

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  • 30.06.2014 — UK: HOUSING ACTIVITY STEADYING?

    Housing activity is steadying after the temporary hit from the more demanding mortgage regulations introduced in April. Mortgage approvals slipped to 61.7k in May, from 62.8k in April, in-line with consensus expectations. That was the smallest monthly fall in the current four month sequence.

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  • 30.06.2014 — UK OUTPUT ALREADY BEATING THE 2007 PEAK?

    The 2007 recession was not as bad as the statistics office had thought. Following methodological revisions published today, the UK may have passed its 2007 peak level of output already. But the revisions do not change the big picture.

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  • 30.06.2014 — GERMAN RETAIL SALES: VERY WEAK SPRING

    Germany’s notoriously disappointing retail sales lived up to their billing in May. The drop by 0.6% mom, the second in a row, takes Q2 average monthly sales so far 1.3% below their Q1 equivalent.

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  • 27.06.2014 — BRITAIN IN EUROPE: CAREFUL WHAT YOU WISH FOR

    We expect Britain to stay in the EU as a full member of the common market but with no say in the governance of the Eurozone and limited say in other political matters not primarily related to the common market. 

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  • 27.06.2014 — GERMAN INFLATION OSCILLATES AT LOW LEVELS

    German inflation rebounded modestly in June to 1.0% yoy on both the national and EU-harmonised measures in June, up from, 0.9% and 0.6% yoy, respectively. It remained at the higher end of the range of Eurozone inflation rates, but also far below the ECB’s 2% target.

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  • 27.06.2014 — GREECE, SPAIN DODGE EUROZONE SENTIMENT DOWNTURN

    Eurozone economic sentiment weakened in June as a drop in industrial confidence outweighed a resilient services sector
    reading. The downturn was widespread, with some notable exceptions among the former crisis countries on the periphery.
    Sentiment surged in Spain and Greece, which are now moving towards the front of the peloton, nearly closing the gap
    with Germany.

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  • 27.06.2014 — ECONOMIC CALENDAR - Week of 30 June

    US non-farm payrolls, ECB meeting, Eurozone credit data, global PMIs.

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  • 26.06.2014 — UK BOE: GENTLE STEP ON THE BRAKE

    The Bank's steps to cool the housing market are gentle and will not derail it. More will follow.

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  • 25.06.2014 — US DATA WRAP: Q1 GDP DOWN; Q2 ORDERS, PMIS UP

    The harsh winter hit the US economy much harder than reported so far in early 2014. But as other indicators project a significant rebound for Q2, the very weak final data for Q1 GDP will likely not throw the US Fed of course.

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  • 20.06.2014 — EURO CONSUMERS: CONFIDENCE TAKES A BREATHER

    The sharp rise in Eurozone consumer confidence stopped in June. But at -7.4, the EU Commission’s index was only a fraction
    below the May level, which had been the highest in seven years.

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  • 18.06.2014 — US FED: NOISY INFLATION AND DOVISH DOTS

    The Federal Reserve continued to gradually withdraw stimulus at its meeting today by “tapering” monthly asset
    purchases.

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  • 18.06.2014 — UK: BOE SURPRISED AT GUIDANCE SUCCESS?

    The BoE minutes state that policy makers were surprised that markets did not attach a higher higher probability to a rate hike in 2014, given how sharp the decline in unemployment has been.

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  • 18.06.2014 — ECB: NEITHER FEATHER DUSTER NOR "END OF CAPITALISM"

    Observers’ reactions to the ECB’s easing steps in June varied widely. Many doubted the effectiveness of the steps. Others, almost exclusively in Germany, called negative interest rates “the end of capitalism”.

     

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  • 17.06.2014 — EUROPEAN DATA WRAP: LARGELY ON TRACK

    German investor confidence falls, but to be put in perspective. Positive signals from the Eurozone labour market. And UK house price boom heating up.

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  • 13.06.2014 — UK: CARNEY'S U-TURN

    BoE Governor Mark Carney’s set piece Mansion House speech last night marked a significant change in tone on interest rates and the housing market

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  • 13.06.2014 — EURO LABOUR MARKET: REFORMS START TO PAY OFF

    The Eurozone’s modest economic recovery is creating some new jobs. More importantly, the reform countries at the euro
    periphery are starting to reap the rewards of their efforts.

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  • 12.06.2014 — EURO INDUSTRY: PERIPHERY LEADS GOOD START INTO Q2

    Big gains in industrial output in several former crisis countries on the Eurozone periphery put the currency zone’s manufacturing sector on track for a bright start into Q2.

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  • 09.06.2014 — PORTUGAL Q1 GDP: PROGRESS AND VULNERABILITY

    Portugal’s Q1 output data highlights both progress and vulnerability. In the last full quarter under the EU/IMF bail-out, GDP contracted by 0.6% qoq, slightly less than the initial 0.7% estimate by the statistical office.

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  • 06.06.2014 — US: SOLID JOBS, UNEMPLOYMENT UNCHANGED

    A solid report showing the US bounce-back from the snow disruption continues.

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  • 06.06.2014 — GREECOVERY: ANOTHER SIGN OF HOPE

    The worst is over for Greece. Its economy seems to be on the verge of a meaningful recovery.

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  • 06.06.2014 — GERMANY: SUBDUED INDUSTRY, STRONG EXPORT AT Q2 START

    Exports rise strongly as the European recovery offsets weakness elsewhere. But manufacturing lost some momentum after a very strong Q1.

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  • 05.06.2014 — ECB: DRAGHI'S SECOND TREAT: A NICE BUNDLE

    Not quite a repeat of summer 2012, but the combination of rate cuts and more liquidity could be a powerful booster.

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  • 05.06.2014 — UK: BOE ON HOLD, ANY SURPRISES IN THE MINUTES?

    UK interest rates are unlikely to mark a sixth anniversary at 0.5%. The BoE cut borrowing costs to that unprecedented low level in March 2009 and left them on hold again today.

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  • 05.06.2014 — ECB RATES TO STAY LOW FOR FOUR MORE YEARS? NOT AT ALL

    If and when the ECB has achieved its purpose and the stimulus is no longer needed, the ECB can easily scale back the stimulus by hiking all rates including the deposit rate.

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  • 05.06.2014 — EURO RETAIL SALES GROW AT FASTEST RATE SINCE 2007

    Late Easter holidays may have played a role in the April jump, but the country mix suggests it was probably neutral. Many
    Germans went to their favourite holiday destination Spain.

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  • 05.06.2014 — GERMAN FACTORY ORDERS START STRONGLY IN Q2

    Strong jump in April took orders 1.5% above Q1 average, driven by Eurozone orders. But series is volatile and some underlying evidence of a loss in momentum.

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  • 05.06.2014 — GERMAN FACTORY ORDERS START STRONGLY IN Q2

    Strong jump in April took orders 1.5% above Q1 average, driven by Eurozone orders. But series is volatile and some underlying evidence of a loss in momentum.

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  • 04.06.2014 — US: CATCHING UP AFTER THE HARSH WINTER

    A mixed set of US economic data leaves us with a positive conclusion after all. Predictably, domestic demand is rebounding
    after the horror winter, which left some temporary scars in the economic trajectory.

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  • 04.06.2014 — ECB DECISION: DOES IT REALLY MATTER?

    Our best guess remains: Draghi will deliver, with some surprises in the details. But the ECB will not spring a dramatic surprise
    and will not change the underlying trends in the euro economy.

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  • 04.06.2014 — UK PMIs: THE BOOM CONTINUES

    The UK economic engine keeps running red hot. Services and construction PMIs may have fallen a bit below their peaks in
    recent months, but the speed of the economic recovery remains very impressive.

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  • 04.06.2014 — EURO SERVICES PMI: GARMANY AND SPAIN VYING FOR TOP SPOT

    The Eurozone’s gradual recovery rumbles on, according to the May PMIs. The services PMI edged up to 53.2, from 53.1, pointing to significant growth.

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  • 03.06.2014 — EUROZONE: UNEMPLOYMENT FALLS, INFLATION VERY LOW

    Mixed news for the ECB in the last major data release before the Thursday meeting: on the positive side, unemployment fell by 76k in April, lowering the rate to 11.7%, 0.3pcp below the peak last autumn. At the same time, inflation declined by a little more than expected in May, settling at 0.5% yoy after 0.7% in April.

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  • 02.06.2014 — GERMAN INFLATION: MAY DIP HELPS ECB DOVES

    Probably washing away the last ECB hold-outs against further policy easing, German inflation fell sharply to 0.9% in May, from 1.3% in April

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  • 02.06.2014 — EURO PMIS: PERIPHERY IN THE LEAD AS CORE DIPS

    The former crisis countries are gradually developing into the new stability anchors of Eurozone output growth.

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  • 30.05.2014 — GERMAN RETAIL SALES: REPEATING Q1 BOOM WILL BE A CHALLENGE

    The detailed sales data shows some evidence of a positive impact from the late Easter holidays, offset by an unusually weak spring rebound after the relatively mild winter.

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  • 30.05.2014 — UK: WHAT IS HELP-TO-BUY DOING?

    On the face of it, Help to Buy (HTB) is doing very little. 7,313 mortgages were completed in the first six months of the government’s mortgage guarantee scheme, equivalent to 1.3% of all mortgage completions.

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  • 30.05.2014 — ELECTIONS IN EUROPE: FIRST TAKE

    Very mixed results, with good and bad news for markets roughly balanced according to projections so far. On the positive side: a clear vote for stability in Ukraine and a result in Greece that may just suffice to keep the government stable and keep the Grexit tail risk at bay. But anti-EU protest parties came top in the UK and France. No surprise in Germany where an anti-euro/anti-immigration protest party scored about 7%. German support for the EU and the euro remains rock solid.

     

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  • 30.05.2014 — ELECTIONS IN EUROPE: THE REAL MESSAGE

    The gains for protest parties get all the headlines. That is not wrong. Voters in the EU did use the EU elections to protest against the pain of austerity and structural reforms, against immigration and perceived interference from "Europe". But it is not the full story. Key messages from one of the biggest exercises in democracy ever are.

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  • 29.05.2014 — US: HARSH WINTER CAUSED TEMPORARY OUTPUT DIP

    The very harsh winter had its fingerprints all over the decline in US GDP in Q1. The US Bureau of Economic Analysis revised down its preliminary estimate of US GDP growth in Q1 2014 from +0.1% qoq annualised to -1.0%. Even lower inventories and weaker net exports than first published were the key culprits. 

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  • 28.05.2014 — EUROZONE PERIPHERY GAINS MAKE RECOVERY VERY RESILIENT

    A remarkably resilient EU Commission sentiment indicator in May shows that despite weakish Q1 GDP data and some external geopolitical risks, the Eurozone is making further economic progress. The sentiment indicator rose more than we and consensus had expected in May, to 102.7, its highest since July 2011.

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  • 28.05.2014 — ECB: TENTATIVE SIGNS OF CREDIT CYCLE TURNING

    Despite further tentative evidence that, after one year, the economic recovery is feeding through to a return of the credit cycle, Eurozone monetary data remained very weak in April, with M3 money supply growth falling to 0.8% yoy. 

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  • 27.05.2014 — ECB ABS purchases: expanding the toolbox

    Prohibitive funding costs for small and medium-sized companies (SMEs) are one of the obstacles to an end of the recession in the Eurozone periphery. Spanish and Italian SMEs still pay roughly 200bp more than their German counterparts, although the ECB’s safety net OMT has contributed to lower funding costs since last summer.

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  • 23.05.2014 — UK: BROADENING RECOVERY

    The UK recovery is broadening out to business investment, with signs that growth will accelerate in the second quarter. Total investment has contributed as much to growth in the past year as consumers (1.2ppts vs 1.3ppts, respectively) The gradual economic slowdown that the BoE is banking on is nowhere to be seen. 

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  • 23.05.2014 — THE PUTIN EFFECT: MODEST DROP IN GERMAN BUSINESS CONFIDENCE

    The German economy will not accelerate beyond the impressive speed it has reached already. But despite a modest setback caused partly by concerns about Russia’s incursions into Ukraine, the German economy will likely continue to expand at rates just above 2% as firm domestic demand offsets a slightly less positive export outlook.

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  • 22.05.2014 — EURO PMIs: PERIPHERY STRONG, FRANCE FALLING BEHIND

    Dragged down by France, but strongly supported by the periphery, the Eurozone composite output PMI was almost unchanged in May at 53.9, signalling significant private sector output growth in the second quarter of 2014.

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  • 22.05.2014 — US: FED MINUTES DOVISH

    The Fed remains confident in the underlying strength of the US recovery and sees little inflationary risk from its efforts to stimulate the economy. The minutes of the Fed’s 29-30 April meeting were dovish, repeating the view that there is more slack in the economy than the unemployment rate shows. 

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  • 22.05.2014 — SPRING BOOST FOR EUROZONE CONSUMERS

    Eurozone consumer confidence rose sharply again in May. That shows how resilient the Eurozone recovery has become, even though headline GDP growth rates disappointed in Q1 and geo-political risks like the Ukraine conflict dominate the headlines. With domestic demand rebounding, the Eurozone is a little less dependent on exports and thus the vagaries of global demand.

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  • 22.05.2014 — UK: EASTER PUSHES UP INFLATION

    Inflation is stabilising close to the Bank of England’s 2% target, giving little reason to keep interest rates at rock bottom levels. Inflation rose to 1.8% in April, from 1.6% in March, as the late Easter caused a temporary spike in air fares inflation.

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  • 21.05.2014 — UK: RATE SETTERS SHIFT VIEW, EASTER DISTORTS RETAIL SALES

    The UK economy is motoring, fuelled for now by consumption, and the BoE rate setters are shifting their views in response. The minutes of the BoE’s latest rate setting meeting, in early May, had a less dovish tone, saying: “for some members the monetary policy decision was becoming more balanced.”

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  • 21.05.2014 — NARROWING SCOTTISH POLLS RAISE UK POLITICAL RISKS

    The UK recovery is increasingly solid, but political uncertainty looms: Uncertainty could knock our above-consensus growth forecasts of 3.1% and 3.3% for 2014 and 2015 off course. Scottish independence (18 September referendum) is one key risk. Support for independence has risen by 5-10 points since December.

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  • 15.05.2014 — EURO PLUS MONITOR: SPRING 2014 UPDATE

    The euro crisis is over. The European Central Bank has defused the systemic risks. More importantly, the four initial crisis countries (Greece, Ireland, Portugal and Spain) are starting to reap the rewards of their profound reforms. Cyprus is no more than one year behind.

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  • 14.05.2014 — UK: EDGING TO A Q1 15 RATE HIKE

    The Bank of England is edging closer to a rate hike in Q1 2015. The updated forecasts presented in this morning’s Inflation Report showed stronger growth, lower unemployment and inflation close to target. All that assumes interest rates follow market expectations which have edged up over the past three months. 

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  • 14.05.2014 — GERMANY: INVESTOR CONFIDENCE SLIPS ON UKRAINE

    Events in Ukraine are taking a toll on financial analysts expectations for German growth, but the current pace of expansion remains very strong and may even have accelerated in Q2. 

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  • 09.05.2014 — UK: SOLID END TO FIRST QUARTER

    The UK is heading for another strong quarter of growth and the recovery is broadening. Today’s data were mixed but on balance still pointing to solid recovery. 

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  • 08.05.2014 — "COMFORTABLE WITH ACTING NEXT TIME" IF NEEDED

    Will the ECB act in June? Upon leaving policy unchanged, the ECB today dropped two heavy hints that it may ease policy next month.

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  • 08.05.2014 — GERMAN OUTPUT: SOFTER FINISH TO STRONG QUARTER

    The German economy roared ahead in early 2014. Despite a modest correction in industrial output in March (-0.5% mom), an upward revision to the February data and a very strong result for January left output in Q1 1.2% above the Q4 average. 

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  • 08.05.2014 — UK: PAST THE TIME FOR ACTION ON HOUSING

    The BoE needs to act on the housing market. A supply shortage, low interest rates and government subsidies have propelled house price inflation up strongly. The data are not beating consensus every month anymore, but they remain strong. 

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  • 06.05.2014 — EUROZONE: RECOVERY ON TRACK

    The Eurozone recovery accelerated in April. The services PMI improved to 53.1, in-line with the flash estimate. The final composite output PMI was 54.0 in April, in-line with the flash estimate, up from 53.1 in March and the highest since May 2011.

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  • 06.05.2014 — UK: ACCELERATING

    Another very strong quarter is on the way in the UK. There is certainly very little sign of the slowdown in growth that the BoE had been banking on in their February forecasts, when they planned for interest rates staying on hold until mid-2015. 

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  • 06.05.2014 — RATE HIKE NEEDED ON STRONG GROWTH: BOE PREVIEW

    There is no sign of UK growth slowing: In its last quarterly forecasts, in February, the Bank of England (BoE) planned on keeping rates unchanged until mid-2015 on the basis that growth would slow through 2014. But there is no sign of that scenario playing out.

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  • 01.05.2014 — US: BOOST AS WEATHER IMPROVES

    US growth is rebounding from the bleak winter months. The manufacturing ISM rose to 54.9 in April from 53.7 in March. The big change this month was in employment and trade. 

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  • 01.05.2014 — PORTUGAL‘ S CLEAN EXIT BOOSTS EUROPEAN REFORMERS

    As we had expected for a while, Portugal will not request any further Eurozone or IMF financial assistance after its €78bn bail-out ends on 17 May.  According to media reports, Prime Minister Passos Coelho will make the official announcement on the weekend or on Monday, before the meeting of Eurozone finance ministers. 

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  • 25.04.2014 — UK: RETAIL SALES SUPPORT STRONG Q1 GDP

    Consumption remains a key pillar of the UK recovery, with retail sales volumes up 4.2% yoy in March, from a down-revised 3.3% in February. However, the March annual rate may overstate the trend a bit as a weak comparative basis due to very cold weather in March last year inflates the annual comparison.

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  • 07.04.2014 — GERMANY HEADING FOR SUPER-STRONG WINTER QUARTER

    Germany’s economy had a super-strong winter quarter. Helped by relatively mild weather, the hard data is even exceeding the solid sentiment indicators of recent months.

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  • 04.04.2014 — US: WHAT JOBS SLOWDOWN?

    Evidently it was the weather that did it. In fact, the weather did not really cause much of a slowdown in jobs growth now that the numbers have been revised. Payrolls rose 192k in March, a little below consensus expectations, but the previous two months gains were raised by a net 37k.

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  • 28.03.2014 — UK: DOMESTIC ECONOMY HUMMING, BUILDING IMBALANCES

    The UK domestic recovery is humming along nicely and should continue to do so, with real wages finally starting to rise, confidence soaring and interest rates very low.

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  • 27.03.2014 — ITALY UPDATE: DETERMINED RENZI LARGELY ON TRACK

    Is Renzi on track? Or has his ambitious reform drive already lost momentum? The overall verdict so far is largely positive. While he had to backtrack somewhat on his very ambitious schedule, he seems to be making progress. However, the make-or-break reform, the labour market reform, is still outstanding.

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Macro Views

  • 24.03.2017 — EUROPE AT 60: THE TRENDS THAT SHAPE THE FUTURE

    Sixty years after the Treaty of Rome established the European Economic Community (EEC), the process of European integration as we know it seems to have reached its limits. So far the institutionalised cooperation between sovereign nation states in Europe has always grown in scope and size. With Brexit and the Le Pen challenge in France, this process is now at risk.

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  • 03.03.2017 — THE FED: ON THE VERGE OF AN OBVIOUS AND MINOR POLICY MOVE

    Federal Reserve Chair Yellen has signaled in a speech she gave today the high probability that the Fed will raise its Fed funds rate target at its upcoming March 14-15 FOMC meeting.  In her detailed assessment of the Fed’s conduct of monetary policy in recent years amid progress toward its dual employment and inflation mandate, perhaps the most insightful and meaningful part of the speech is its title:  “From Adding Accommodation to Scaling It Back”. 

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  • 28.02.2017 — EUROZONE ECONOMIC OUTLOOK: RESILIENT RECOVERY

    Forget all the political risks for a moment. Economic fundamentals look quite encouraging for the Eurozone.

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  • 06.02.2017 — US: HIGH CONFIDENCE LIFTS ECONOMY AND OUTLOOK

    Post-election confidence surveys have remained strong in early 2017, supporting expectations of accelerating economic growth. The better sentiment seems to be feeding into the economy – strong December durable goods report and robust job gains in January. There are a lot of moving parts in the fiscal reform proposals, but expect the tax reform package to be introduced in Spring, debated and modified and enacted by late summer.

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  • 01.02.2017 — FRENCH ELECTION UPDATE

    In politics, the road is rarely smooth. The investigation of presidential candidate François Fillon (Republican) following allegations of false employment of his family could alter the calculus of the French presidential elections on 23 April and 7 May.

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  • 17.01.2017 — BREXIT BASICS

    Brexit will do some significant damage to the British economy. Greater London is the services capital of Europe. Today, companies take advantage of the great conveniences of Britain's light-touch regulation, its competent administration, its deep pool of qualified labour and the English language to offer their services across Europe from a British base.

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  • 17.01.2017 — BREXIT BASICS

    Brexit will do some significant damage to the British economy. Greater London is the services capital of Europe. Today, companies take advantage of the great conveniences of Britain's light-touch regulation, its competent administration, its deep pool of qualified labour and the English language to offer their services across Europe from a British base.

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  • 10.01.2017 — EUROPEAN POLITICAL UPDATE

    Germany remains stable, France presents an opportunity, Italy poses a risk. The evidence so far this year strengthens some key conclusions of our Global outlook 2017: more growth, more risks.

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  • 14.12.2016 — THE FED: SO WHAT’S NEXT?

    As we described in our pre-FOMC note, the Fed raised its Federal funds rate target, but the FOMC members made virtually no changes to their economic or inflation forecasts.  The median FOMC member’s estimate of the appropriate Fed funds rate (the so-called “dots”) at year-end 2017 was raised to 1.4% from 1.1%, suggesting three rate increases in 2017, and raised to 2.1% from 1.9% the 2018 year-end Fed funds rate. 

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  • 12.12.2016 — FED TO HIKE BUT NOT CHANGE FORECASTS AT DECEMBER MEETING

    The Fed will raise its target Fed funds rate at this week’s FOMC meeting, but the Fed is not expected to materially alter either its economic forecasts or its forecasts of the trajectory of the appropriate Fed funds rate (the “dots”) in its quarterly forecasting updates, even though the Fed clearly senses an economic regime shift under President-elect Trump. 

     

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  • 12.12.2016 — MONDAY MACRO UPDATE: ITALIAN POLITICS, GERMAN ECONOMY

    Italy is trying to defuse its political crisis fast. After Renzi’s failed referendum eight days ago, the likely solution for the time being seems to be to carry on largely as before, just with Renzi exerting control from a back rather than the front seat.

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  • 07.12.2016 — MACRO UPDATE: ECB PREVIEW, ITALY

    Expect the European Central Bank to send a two-pronged message this Thursday. First, The ECB wants to maintain a highly accommodative stance.

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  • 29.11.2016 — RENZI'S REFERENDUM: NOTES ON THE THE ITALIAN RISK

    Ever since the Brexit vote, we have viewed a potential political crisis in Italy as the top event risk in Europe for 2017. ‎

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  • 28.11.2016 — MONDAY MACRO UPDATE: FILLON, MERKEL, BREXIT

    After winning the Republican primaries convincingly with two thirds of the vote, Francois Fillon is in the pole position to be the next French president.

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  • 09.11.2016 — IMPLICATIONS OF THE TRUMP VICTORY

    The election of Donald Trump as President and Republicans winning plurality in both the House of Representatives and Senate represent the electorate’s rejection of the Establishment’s progressive agenda.  It will mean significant changes in the thrust of domestic and international policies.  However, the many checks and balances in Washington, including the important role played by Congress and the various government agencies, will result in far less radical changes than many fear.

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  • 06.11.2016 — OBSERVATIONS ON MARKET REACTIONS TO US ELECTION OUTCOMES

    A Clinton victory is the most likely outcome, even though polls suggest that the US presidential race has tightened materially over the last week. This note examines possible immediate and medium-term market reactions to a Clinton or an unlikely Trump victory. As such it reflects these assessments, which are speculative. Obviously, uncertainty abounds.

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  • 24.10.2016 — US INFRASTRUCTURE SPENDING--A ROADMAP FOR THINKING BROADLY

    Now that the need for renewed increases in US infrastructure spending is widely acknowledged and is a focus of Washington policymakers, private companies and the investment community, there are many issues involved that will affect what legislation is ultimately enacted, how it affects the economy, jobs, interest rates and the Fed’s perspective on monetary policy, and of course the investment opportunities it will present. 

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  • 19.10.2016 — ECB PREVIEW: MARKETS WILL HAVE TO WAIT UNTIL DECEMBER

    Will Draghi announce an extension to the ECB’s asset purchase programme tomorrow? Probably not.

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  • 12.10.2016 — EUROZONE OUTLOOK: GROWTH, INFLATION AND ECB POLICY

    More of the same. Economic fundamentals and recent data suggest that the Eurozone economy will continue to expand at a rate close to 1.5% for the foreseeable future, as it has done since mid-2014 with some quarterly fluctuations.

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  • 19.09.2016 — GERMAN POLITICS: THE ROUGH ROAD AHEAD FOR MERKEL

    Another blow for the German chancellor. As in the two other rounds of state elections earlier this year, Angela Merkel's centre-right CDU lost heavily in the city state of Berlin.

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  • 13.09.2016 — POLITICAL UPDATE: US ELECTIONS

    With eight weeks to go until the US elections on 8 November, the most market-friendly outcome remains the most likely result: Hillary Clinton becomes US president while the Republicans maintain control of the House of Representatives.

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  • 12.09.2016 — YIELDS ARE UP: GOOD NEWS OR BAD NEWS?

    Having first dropped on exaggerated expectations that the ECB may ease policy further, bond yields have risen visibly since the ECB disappointed such hopes yesterday.

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  • 07.09.2016 — EUROPEAN POLITICAL UPDATE: ITALY, FRANCE, AUSTRIA

    ITALY: CRUCIAL REFERENDUM IN LATE NOVEMBER OR EARLY DECEMBER. FRANCE: WARMING UP FOR THE VOTES. AUSTRIA: ANOTHER CLOSE SHAVE?

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  • 05.09.2016 — ECB PREVIEW: NO COMPELLING NEED TO ACT NOW

    The pace of recovery in the Eurozone remains “unsatisfactory” according to ECB board member Yves Mersch. Does that mean that the ECB will have to act again this Thursday? Not necessarily.

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  • 05.09.2016 — EUROPEAN POLITICAL UPDATE: GERMAN REBUKE FOR MERKEL; SPANISH STALEMATE

    GERMANY: WILL THE REGIONAL REBUKE FOR MERKEL MAKE A DIFFERENCE? Another embarrassing regional election result for chancellor Angela Merkel

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  • 30.08.2016 — COPING WITH THE POLITICS OF ANGER

    For better or worse, we are living in exciting times. Globalisation and rapid technological change are creating huge opportunities.

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  • 22.08.2016 — MONDAY MACRO UPDATE: EU POLITICS, ECONOMIC OUTLOOK, JACKSON HOLE

    Merkel, Hollande and Renzi meet today to discuss post-Brexit EU reforms. The informal get-together starts a series of intra-EU discussions ahead of the 16 September summit where EU27 leaders want to outline some reform ideas to be elaborated in more detail in the six months thereafter.

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  • 08.07.2016 — BREXIT FALLOUT: UK GFK CONFIDENCE FALLS, GERMAN SUPPORT FOR EU RISES

    Following the UK vote to leave the EU, consumer confidence in the UK has suffered its sharpest fall in 21 years.

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  • 05.07.2016 — UPDATE ON BREXIT CONTAGION RISKS

    Will the British vote to leave the EU embolden anti-European populists elsewhere in Europe – or will the political and economic uncertainty into which the vote has plunged the UK serve as a salutary lesson for voters elsewhere? For the EU-27, this could turn into the key issue to watch in the coming months.

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  • 04.07.2016 — UK AND EU: UPDATE ON BREXIT FALLOUT

    KEY ISSUES FOR THE UK: Frontrunners for Conservative party leader vary on timing of Brexit talks with EU. UK Government debt still not a serious risk to the UK economy following change to fiscal plans. KEY ISSUES FOR THE EU-27: The future of the EU. French politics. Bellwether Austria

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  • 01.07.2016 — NOTES ON THE SCOTTISH ISSUE

    Eight days ago, 62% of Scots voted to stay in the EU. Scotland's regional government now wants to secure its nation's place in the EU.‎

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  • 22.06.2016 — After the Brexit vote: assessing the domino risks

    Domino risks: In this report, we look at the tail risk that key Eurozone members may decide to leave the euro or that Sweden or Denmark may vote themselves out of the EU.

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  • 20.06.2016 — THE WEEK THAT COUNTS: UPDATE ON EUROPEAN RISKS

    The week that counts has started. After a drubbing for Italy’s pro-European prime minister Renzi in local elections on 19 June, the German court verdict on the ECB's OMT programme on 21 June, the Brexit referendum on 23 June and the Spanish repeat elections on 26 June could make waves.

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  • 20.06.2016 — NOTES ON EUROPE

    After two generations, the process of European integration as we know it seems to have reached its limits. European integration has been a response to the wars that ravaged the continent until 1945 and to the protectionism that wrecked many economies in the inter-war years.

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  • 16.06.2016 — Brexit update: UK polls now show small lead for “leave”

    Brexit opinion polls now show “leave” marginally ahead: With 10 days to go until the UK’s “in” or “out” referendum on European Union (EU) membership, polls are showing a significant gain in support for “leave”, as
    immigration has taken centre stage in the UK public debate.

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  • 16.06.2016 — The Brexit Brief: our guide to the “what if”?

    A serious shock. If UK voters decide on 23 June to leave the European Union, the UK and, to a lesser extent, Europe as a whole could plunge into a significant crisis. Markets would price in the risks, possibly overdoing it in a first knee-jerk reaction.

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  • 06.06.2016 — EUROPE: THE SIX-DAY CLUSTER OF RISKS

    The German court verdict on the ECB's OMT programme on 21 June, the Brexit referendum on 23 June and the Spanish repeat elections on 26 June: Europe is heading for a six-day cluster of risks. We expect Europe to dodge the bullets again, as it has done so far.

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  • 23.05.2016 — The Euro Plus Monitor Spring 2016 Update

    Once a year, Berenberg and the Lisbon Council examine the fundamental economic health and recent adjustment progress of 21 European economies. We published the last full set of results in The 2015 Euro Plus Monitor on 14 December 2015. In The Spring 2016 Update, we look only at the Adjustment Progress Indicator. In addition, we take advantage of recent data releases to update the rankings based on full data sets for 2015, including the second half of the year.

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  • 11.05.2016 — Brexit: Das Risiko des Jahres

    Ein Schicksalstag für Europa? Am 23. Juni stimmen die britischen Wähler über den Verbleib ihres Landes in der Europäischen Union ab. Meinungsumfragen sagen einen knappen Ausgang voraus, das Risiko eines britischen Austritts („Brexit“) liegt unseres Erachtens bei 35 %.

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  • 22.01.2016 — SEVEN REASONS WHY WE ARE NOT HEADING FOR RECESSION

    Economic upswings don’t die of old age. They end because a cleansing recession is needed after the exuberance of a boom or because an external shock deals a devastating blow to the system. Across the Western world, we find no convincing evidence of serious excesses that would have to be corrected by a downturn soon. More precisely, we find seven reasons why the Western world will probably not fall into a new recession soon.

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  • 18.01.2016 — CHINA AND OIL: NO NEED TO PANIC

    Seven years after the post-Lehman crisis, memories of the disaster are still fairly fresh. Whenever things get wobbly, many scarred market participants are still inclined to sell first and ask questions later. We've seen this in the euro crisis hysteria of 2011-2012 as well as in some other corrections thereafter. As economists, we cannot call the peaks and bottoms of such market swings. But we can assess whether they make sense.

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  • 07.01.2016 — CHINA'S CURRENCY DEVALUATION IS ACTUALLY A POSITIVE

    Worries about China’s currency devaluation are overstated. In recent years, China’s yuan has appreciated significantly on a trade-weighted basis and its unit labor costs of production have soared, cutting into China’s competitive edge and contributing to declining exports. A modest depreciation of its currency is an appropriate adjustment that is positive for China’s economy and global performance.

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  • 05.01.2016 — GLOBAL OUTLOOK 2016: THE CRITICAL ISSUES

    What are the driving factors for the global economy in 2016? How will China’s deceleration and lower commodity prices affect global growth and trade? Will Eurozone economies continue to improve? Can the UK sustain healthy growth?  What are the political risks and how much do we have to worry about a potential British exit from the European Union (Brexit)? How will the US perform relative to the Federal Reserve’s expectations, and how will the US and global economies be influenced by rising US rates? In this report, we discuss the key issues for 2016 in a question and answer format.

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  • 09.12.2015 — FED HIKE WILL RAISE QUESTIONS FOR DOVISH BOE

    Citing robust GDP growth, full employment and rising inflation in 2016, the Fed will probably hike rates next week for the first time since cutting them to almost zero six years ago. For the BoE, the first hike remains a distant prospect. This is odd since UK GDP, labour market and inflation data are starkly similar to the US and indeed both Mark Carney and Janet Yellen have long stated that the timing and pace of rate hikes will be data dependent. We argue that the BoE should be hiking soon too

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  • 27.11.2015 — UK INFLATION OUTLOOK WARRANTS EARLY BOE HIKE

    Waiting too long to hike could make “gradual tightening” challenging if inflation overshoots. The risks to the economy and inflation of beginning the rate hike cycle sooner rather than later are low. Given the need for a gradual pace of tightening, an early start will be necessary to negate the risk that underlying price pressures accumulate more rapidly than desired. This scenario might require more aggressive hikes to control and would risk destabilising the economy.

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  • 23.11.2015 — EUROPE: OUR BASE CASE

    After a near-term dent, we expect Eurozone growth to gradually rebound to an annualised pace around 1.7% over the course of next year as the impact of the emerging market crisis fades. A fiscal stimulus across much of the Eurozone of roughly 0.3% of GDP, including extra spending on refugees of at least 0.6% of German GDP in Germany, will support domestic demand.

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  • 02.11.2015 — EUROZONE ECONOMY: HOLDING UP WELL SO FAR

    We expect 1.6% growth for 2016, rising to 1.8% in 2017, after 1.5% this year. Near-term, we still project a temporary slowdown in growth for late 2015 led by export-oriented industry. But as the survey data have, on balance, turned up rather than down over the last two months, we are delighted to acknowledge that there may be at least as much upside than downside risk to our calls for late 2015 and the start of 2016

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  • 23.06.2015 — GREECE: TOWARDS A SKEWED DEAL?

    Good news: Greece has moved. While Athens still has to offer more to its creditors by the new deadline of Wednesday evening, both sides apparently see the proposals Greece presented on Monday morning as a basis for a potential deal.


    Bad news: Greece is putting forward the wrong kind of deal. Within the overall sustainability parameters set by creditors, Athens proposes almost exclusively tax hikes rather than pro-growth structural reforms and well targeted expenditure cuts.

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  • 17.06.2015 — GREECE: CLOSER TO THE ABYSS

    The rhetoric from Athens sounds more like the start of a blame game than a prelude to compromise.
    The Greek problem can still be solved easily if the government changes tack: But with every semi-deadline that Greece misses and with every rude word that the Greek radicals hurl at their creditors, the damage already done to Greece gets worse.
    Contagion risks: Expect some volatility, yes, but the EZ has spent the past three years strengthening its defences against contagion.
    Economic impact: For Greece, it gets worse by the day. For the EZ, we expect the sheer noise to cause a small dent to business confidence now but no major impact.
    We raise the Grexit risk from 30% to 40%.

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  • 02.06.2015 — ECB: PROGRESS, BUT NO REASON TO LET UP

    No decisions are likely to be made at the ECB meeting on Wednesday but ECB President Mario Draghi will use the press conference after the meeting to counter recent upward pressure on yields and the euro
    The economic situation and outlook of the Eurozone is currently better than at any time since early 2011.
    But the time to let up on the stimulus is still a long way off, as the ECB’s mandated target of HICP inflation is still far away.

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  • 26.05.2015 — GREECE UPDATE: TSIPRAS MOVING, BUT TOO SLOWLY

    ● Having made three impossible promises in his election campaign, Prime Minister Alexis Tsipras still refuses to get real.
    ● Cracks in Athens: At a Syriza central committee meeting late on Sunday, 95 members voted for a Tsipras-backed “compromise”. 75 voted to ignore lenders altogether and risk Grexit if they continue to set conditions.
    ● Chances are that Tsipras will eventually have to choose between serving his country or the strong left-wing of his party.
    ● Our best guess: Mr Tsipras is very gradually edging towards a less unrealistic stance. But far too slowly.

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  • 06.05.2015 — EUROZONE: TAILWINDS STILL BLOWING, A LITTLE LESS STRONGLY

    The Eurozone had a great start into 2015, by strong economic tailwinds.
    These tailwinds are blowing a little less strongly now, due to a mix of the ECB’s own success and unexpected weakness elsewhere, but thanks to the great start to the year, they are no longer needed as much.

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  • 15.04.2015 — RISK CONTROL IS WORKING

    Life is full of tail risks: what really matters is whether we can control such risks, which seems the case in 2015. In Europe, for example, a huge political accident in Athens has caused no ripple effects beyond Greece, suggesting that the Eurozone now has the means to contain such crises.
    For further information see our quarterly Economic Outlook.

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  • 26.03.2015 — BRITAIN'S LABOUR MARKET MIRACLE: WHY IT MATTERS

    Flexible labour market creates plenty of jobs with low wage inflation: In days gone by, the UK’s recent employment surge would have triggered rip-roaring inflation and a need for the central bank to kill the recovery. Not this time.

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  • 26.03.2015 — PORTUGAL: EASIER RIDE FOR NEXT GOVERNMENT

    Portugal’s upswing shows the success of the tough adjustment programmes imposed by the EU and IMF in the aftermath of the global financial crisis, just as Spain and Ireland did. Growth is back, unemployment has fallen, deficits are down and market access has been fully restored.

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  • 19.03.2015 — STEADY EDDIE UK BUDGET

    Prudence instead of giveaways: Chancellor George Osborne took quite a risk this close to a very tight election by trying to portray prudence instead of engaging in the usual pre-election bribery

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  • 17.03.2015 — WATCH OUT FOR STERLING-DRIVEN SURPRISES

    If we learnt one thing from sterling’s 2008 fall, it is that the exchange rate can have big long-lasting effects on inflation, but only second-order impacts on exports. Those facts surprised markets a few years ago. They may do so again if sterling’s recent rise persists.

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  • 04.03.2015 — ECB PREVIEW: YOU MAKE YOUR OWN LUCK

    The ECB may not believe its own luck: Ever since 22 January, when the ECB announced that it would start buying sovereign bonds from March onwards, many Eurozone economic indicators have surprised on the upside.

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  • 27.02.2015 — BRITISH EUROSCEPTICISM RECEDES

    We can sleep easier. With two more years of debating to go, support for EU membership could improve further. We expect the UK to remain in the EU.

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  • 23.02.2015 — SYRIZA GETS REAL - BUT WILL THE DEAL LAST?

    Having promised his voters three impossible things in his election campaign, new Greek prime minister Alexis Tsipras now seems to have made the right choice, namely to back down almost completely rather than to push his country into the abyss of Grexit.

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  • 19.02.2015 — GREECE: WHAT IF?

    Greece facing short-term crunch, then potentially Argentina-style inflation. Eurozone can contain ST wobbles. Greek precedent bad in LT, but strengthens rules.

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  • 13.02.2015 — UK WAGE INDICATORS POINT UP

    Wage prospects turn up: After two years of solid UK recovery the labour market has tightened on almost any measure.

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  • 06.02.2015 — CLOWNS TO THE LEFT OF ME, JOKERS TO THE RIGHT

    Thirteen weeks until the general election and none of the options look appetising to an economist: For the economy, both main parties bring with them big, but different, problems.

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  • 05.02.2015 — GREEK CONTAGION RISKS? SPAIN AND ITALY LOOK SAFE

    2015 is not 2012: The Eurozone’s defences against financial contagion are much stronger. The European Central Bank’s 2012 Outright Monetary Transactions (OMT) programme looks set to survive German legal challenges. And, as part of its monetary policy stance, the ECB will soon buy large amounts of sovereign bonds anyway.

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  • 02.02.2015 — UK STILL GOING STRONG

    Wheels coming off?: The obituaries for the UK recovery were quick off the printing press this week when growth figures slowed a little in the fourth quarter. That was variously due to the housing market (when is it not about housing in the UK?), a lack of rebalancing, deleveraging or the Eurozone. A more sober assessment says there is nothing to worry about in these figures.

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  • 26.01.2015 — GREEK ELECTION: THE REALITY SHOCK AHEAD

    In a victory of anger over fear, of make-believe over reason, Greece has voted decisively for a populist insurgent who has made three impossible promises to his country in one campaign. Greece and its new prime minister, Alexis Tsipras, are in for a reality shock soon. 

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  • 18.12.2014 — LEADERS AND LAGGARDS: THE 2014 EURO PLUS MONITOR

    Our annual study of adjustment progress in the Eurozone puts Greece in #1 for adjustment progress again, and Luxembourg in #1 for fundamental health.

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  • 17.12.2014 — 1998 ALL OVER AGAIN? IT IS IN PUTIN'S HAND

    The sharp drop in oil prices is great news for consumers and companies around the world. But not for Russia. Among the side-effects we have to watch out for, a new Russian crisis, similar to 1998, is the risk to focus on in early 2015.

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  • 04.12.2014 — ARE PLANNED UK GOVERNMENT CUTS REALLY CREDIBLE?

    A highly political budget: Chancellor George Osborne had no money to play with in his mini-budget today so, putting it bluntly, he raided banks and foreigners to fund politically attractive cuts to stamp and air duty.

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  • 04.12.2014 — FORECASTS AT A GLANCE: ROUGH PATCH

    • Global: Rough patch on geopolitics and expected rate hikes.
    • US: Little austerity, monetary policy gains traction; 3% growth.
    • China: Resilient growth slowing gradually to 6.8% in 2016.
    • Japan: Artificial stimulus has faded, future hinges on reforms.
    • Eurozone: Geopolitics interrupt upswing but periphery firming.
    • UK: Strong trend, but near-term caution.

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  • 02.12.2014 — ECB: QUESTION NOT IF, BUT WHEN AND WHAT

    ECB Preview: we lower the chance of action at the December meeting to 40%, but raise the chances of corporate bond purchases to 80% by March and that of sovereign QE to 65%, also by March.

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  • 21.11.2014 — OSBORNE'S HEADACHE

    Still a long way to go: Back in 2010, UK Chancellor George Osborne planned for austerity to be finished by now perhaps giving room for pre-election tax cuts. But overshooting borrowing makes tax rises more likely.

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  • 17.11.2014 — FORECASTS AT A GLANCE: ROUGH PATCH

     

    ·       Global: Rough patch on geopolitics and expected rate hikes.

    ·       US: Little austerity, monetary policy gains traction; 3% growth.

    ·       China: Resilient growthslowinggradually to 6.8% in 2016.

    ·       Japan: Artificial stimulus has faded, future hinges on reforms.

    ·       Eurozone: Geopolitics interrupt upswing but periphery firming.

    ·       UK: Strong trend, but near-term caution.

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  • 14.11.2014 — UK: PERFECT STORM PASSING

    Improving consumer picture: The ever-reliable UK consumer has had a rough time over the past few years. Pay has failed to keep pace with price rises in the shops, banks severely restricted access to credit after the crisis and unemployment peaked at over 8%. But that perfect storm is easing.

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  • 04.11.2014 — ECB PREVIEW: OPPORTUNITY FOR ACTION

    The ECB’s easing debate is by no means over. While the Governing Council is unlikely to take more decisions already this week, ECB President Draghi is likely to emphasise in the press conference that the ECB is preparing to do more.

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  • 17.10.2014 — WAIT AND SEE, BOE

    Darkening horizon means rates will stay lower for longer: stalling Eurozone growth and global worries point to a downshift in the UK expansion. We now expect the first BoE rate hike in June 2015, compared to February 2015 previously

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  • 17.10.2014 — ECONOMIC CALENDAR

    • Eurozone PMIs: further declines
    • China Q3 GDP: gradually slowing growth
    • UK Q3 GDP: softer but still solid growth

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  • 14.10.2014 — UNDERSTANDING GERMANY

    Everything you need to know about the German economy. Holger's initiation piece from 2010.

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  • 13.10.2014 — GLOBAL OUTLOOK: ROUGH PATCH

    Russia’s aggression in Eastern Ukraine has interrupted the economic upswing in core Europe. Since early spring 2014, the hitherto extremely buoyant economic data for Germany have weakened substantially.

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  • 10.10.2014 — FOR NOW, A GENTLE SLOWDOWN

    Increasing signs of slowing: Manufacturing output was flat in August, while construction fell 3.9%. The possible fallout from ugly German industrial data adds to the potential worries for UK growth.

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  • 06.10.2014 — ECB TURNING INTO A “BAD BANK”? NONSENSE

    • Inflation far below target and weak growth require an ECB response
    • ECB asset purchases help to reduce the risk of a costly recession
    • ECB critics fall victim to a “lump of risk” fallacy
    • Less risk, more ECB profit: good news for Eurozone and German taxpayers
    • Comparing the bonds targeted by the ECB to US sub-prime is grossly misleading

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  • 03.10.2014 — FORECASTS AT A GLANCE: UNEVEN GLOBAL RECOVERY

    •US: Little austerity, monetary policy gains traction; 2-3% growth.
    •China: Resilient growth of close to 7.5%.
    •Japan: Artificial stimulus is fading, future hinges on reforms.
    •Eurozone: Putin’s war interrupts upswing but periphery rebounding.
    •UK: Growth stabilises at a strong rate.

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  • 30.09.2014 — ECB PREVIEW: FLESH TO THE BONES

    After the dramatic announcements of asset purchases in September, the ECB will need to put flesh to the bones of the programme at its meeting this week.

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  • 26.09.2014 — UK: LEAVING OUR TROUBLES BEHIND

    How bad was the financial crisis in the UK? It was much worse than in the US or the Eurozone on the current data. This is puzzling, as the epicentre of the crisis was the US while UK policymakers loosened more aggressively than their European counterparts. The picture will change next week when the Office for National Statistics (ONS) publishes sweeping data revisions.

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  • 24.09.2014 — COULD RIGHT-WING POPULISTS PARALYZE GERMANY'S PRO-EURO POLICIES? NOT REALLY

    Does the rise of a populist protest party in Germany threaten to paralyze Germany's pro-euro policies? An S&P report claiming that the gains for the right-wing AfD in German regional elections could force Chancellor Merkel to take a harder line in Europe seems to be getting some attention, mostly among euro sceptics. These concerns are simply wrong, in our view.

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  • 22.09.2014 — UK POLITICS: CAMERON'S OPPORTUNITY

    A great opportunity: The offer of more home rule – or devolution – for Scotland could make the UK stronger rather than weaker. More powers for Scotland have to be balanced by more powers for England – and Wales and Northern Ireland – too.

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  • 18.09.2014 — UK: NEVER THE SAME AGAIN

    Past the point of no return: The UK will never be the same again, whatever the result in Scotland’s independence referendum. The UK will either break apart or, more likely, turn into a looser union.

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  • 16.09.2014 — FORECASTS AT A GLANCE: UNEVEN RECOVERY

    Our latest forecasts.

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  • 08.09.2014 — MACRO UPDATE: UKRAINE, GERMANY, ECB, CHINA

    Despite a mortar attack on Ukrainian positions on the outskirts of Mariupol and some other incidents, the ceasefire seems to be mostly holding. Whether or not the war will erupt again or whether the conflict will now be frozen Transnistria-style remains an open question.

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  • 05.09.2014 — UK: WHERE DO WE STAND?

    Cruising: We have shaved our UK forecasts a little in response to the economic fall-out from events in Ukraine. But we remain optimistic.Politics is the big risk.

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  • 05.09.2014 — FORECASTS AT A GLANCE: UNEVEN GLOBAL RECOVERY

    US: Little austerity, monetary policy gains traction; 2.0% growth.
    China: Resilient growth of close to 7.5%.
    Japan: Artificial stimulus is fading, future hinges on reforms.
    Eurozone: Putin’s war interrupts upswing but periphery rebounding.
    UK: Growth stabilises at a strong rate.

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  • 03.09.2014 — SHOULD AULD ACQUAINTANCE BE FORGOT?

    The eerie quiet ahead of Scotland’s 18 September referendum on whether to leave the UK was broken this week. A 1 September YouGov poll showed a sharp fall in the anti-independence camp’s lead, taking it down to six points from a huge 22 point advantage in early August. It is a timely reminder that, as we have cautioned before (see, for instance, UK risks: politics is top of our list dated 21 July), the Scottish referendum result is particularly difficult to call and the possibility of a tight vote should not be dismissed

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  • 02.09.2014 — ECB PREVIEW: MOVING TOWARDS MORE ACTION

    The Eurozone has entered an economic rough patch: Many investors and policy makers expect the ECB to respond with a major new stimulus. It will likely deliver, but perhaps not quite as aggressively as some observers hope.

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  • 29.08.2014 — THE IMPACT OF PUTIN'S WAR

    We adjust our calls again: We now expect the German and Eurozone economies to stagnate in Q3, grow by 0.1% qoq at best in Q4 and have a more subdued start to 2015.

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  • 15.08.2014 — SLIGHTLY LATER UK INTEREST RATE HIKE LIKELY

    This week’s Inflation Report gave no clear sign of an imminent rate hike. In addition, uncertainty about the economic outlook has risen in recent weeks. As a result we now expect the first BoE rate hike to come in Q1 2015, later than our previous forecast of Q4 2014.

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  • 15.08.2014 — FORECASTS AT A GLANCE: UNEVEN GLOBAL RECOVERY

    Our latest forecasts.

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  • 08.08.2014 — FORECASTS AT A GLANCE: UNEVEN RECOVERY

    One big risk. Russia invades Ukraine.

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  • 07.08.2014 — UK FORWARD GUIDANCE ONE YEAR OLD

    Was it a good year? Bank of England (BoE) Governor Mark Carney introduced “forward guidance” on 7 August last year. At best it has achieved little. At worst it has damaged the BoE’s credibility. While some criticisms of guidance come with hindsight, not all of them do.

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  • 07.08.2014 — FORECAST UPDATE: GERMANY DRAGS DOWN EUROZONE

    Recent hard economic data for key countries of the Eurozone have fallen short of our expectations. We adjust our forecasts accordingly.

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  • 06.08.2014 — SHOULD THE UK FEAR STRONGER STERLING?

    No. Sterling’s 10% appreciation over the past year has taken its toll on some international companies’ earnings. But it is a sideshow for the wider economy.

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  • 04.08.2014 — ECB PREVIEW: WATCH PUTIN, NOT MONTHLY INFLATION

    The drop in inflation to 0.4% in July has led to more warnings of deflation from some observers and calls for more radical action from the ECB. But inflation is only falling because of lower food and energy price inflation.

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  • 01.08.2014 — IS UK GROWTH SLOWING?

    Data releases have begun surprising on the downside. This week, consumer confidence and the manufacturing PMI fell. Not by very much for the former, but the reports add to a number of slightly disappointing releases in recent weeks.

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  • 01.08.2014 — MARKETS AND FUNDAMENTALS

    A macroeconomist's take on the latest market volatility.

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  • 01.08.2014 — BOE PREVIEW: WILL PRODUCTIVITY PICK UP?

    Test of our call for a November rate hike. We expect no change from the BoE at its rate setting meeting next week. But two key events in August pose a test for our call that the Bank of England (BoE) will hike in November. We look for the 20 August minutes of next week’s meeting to show one rate setter voting for a hike.

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  • 31.07.2014 — PORTUGAL: SOUND RECOVERY GETS UNWANTED ATTENTION

    Some good news, some bad news for Portugal recently: After the bail-out exit in May, the upward momentum in sovereign ratings has continued with Moody’s upgrade of Portugal to Ba1 on 25 July. At the same time, the constitutional court has rejected half of the government’s 2014 fiscal saving measures and one of the country’s largest banks is mired in the troubles of a sprawling conglomerate.

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  • 28.07.2014 — FORECASTS AT A GLANCE

    Uneven global recovery.

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  • 21.07.2014 — UK RISKS: POLITICS IS TOP OF OUR LIST

    Politics trumps most other risks: The Scottish referendum could split the UK, the general election could be followed by damaging economic policies, while the UK could vote itself out of a huge external market in 2017. We do not expect politicians to put a spanner in the works of recovery but these low-probability, huge-impact, events are worth watching very carefully.

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  • 18.07.2014 — FORECASTS AT A GLANCE

    China GDP forecasts up, Russia down sharply on Ukraine crisis.

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  • 15.07.2014 — GLOBAL OUTLOOK: UNEVEN RECOVERY

    On track: The global economy continues to recover from the post-Lehman and euro crises. Most developed economies are enjoying a broad-based and gradually firming upturn, with the UK in the lead and parts of the Eurozone trailing behind.

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  • 11.07.2014 — FORECAST UPDATE: SOFTER CORE DRAGS DOWN EUROZONE

    Surveys suggest a bigger setback for reform laggard France than for other countries. We cut our growth forecasts for France from 0.8% to 0.5% for 2014 and from 1.5% to 1.2% for 2015. Together with a small Putin effect on Germany (2014 growth 2.0% instead of 2.1%), the French revision takes our Eurozone calls from 1.1% to 1.0% for 2014 and from 1.7% to 1.6% for 2015. In late 2013, our call for 2014 had been 1.2%.

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  • 11.07.2014 — PORTUGAL: TRUST IS A SAFETY NET

    By now, the Eurozone has plenty of experience to deal with short-term upsets. After a some wobbles, Portugal should continue enjoying to the fruits of reform

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  • 11.07.2014 — FORECASTS AT A GLANCE

    Downgrades to French, Portuguese, Eurozone and UK growth forecasts.

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  • 07.07.2014 — START EARLY TO GO SLOWLY: BOE PREVIEW

    UK monetary policy will become exciting soon: The BoE has kept rates on hold for 63 months now and is extremely unlikely to change them at this week’s policy meeting. But we expect the rate setters to respond to strong growth and tumbling unemployment by hiking rates in November this year.

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  • 04.07.2014 — FORECASTS AT A GLANCE: GRADUALLY FIRMING RECOVERY

    US unemployment rate forecast cut after another sharp fall in June.

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  • 02.07.2014 — UK: IS THE HOUSING MARKET TURNING DOWN?

    A number of leading indicators have softened a little recently: The first interest rate hike may now be only four months away, while the Bank of England (BoE) has taken (very) gentle action on housing. Could this challenge our forecast for house prices to rise by 10% this year and next? Not in our view.

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  • 02.07.2014 — BRITAIN BEWARE: THE POWER OF TRADE DIVERSION

    How would the UK fare outside the European Union (EU)? Nobody knows. It may thrive like Iceland, boom-bust and all. Or it may fall back and back like Ireland did before it joined Europe. It would all depend on the policy choices taken by both sides after a hypothetical departure (Brexit).

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  • 01.07.2014 — ECB PREVIEW: NO ACTION, BUT IMPORTANT DETAILS

    The ECB’s June decisions to cut rates, introduce a negative deposit rate and announce new, targeted cheap loans for banks have relieved the immediate pressure for action. The ECB has kept the door open for more easing, but will be less fussed by monthly inflation rate releases for a while.

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  • 27.06.2014 — THE LESSONS OF THE CRISIS: WHAT EUROPE NEEDS

    Instead of the EU Commission or the troika, an Independent Fiscal Council (IFC) akin to the ECB board should regularly examine the fiscal positions of all euro members.

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  • 27.06.2014 — FORECASTS AT A GLANCE: GRADUALLY FIRMING RECOVERY

    Downgrading US 2014 GDP growth to from 2.5% to 2.0%. ECB first rate hike in March 2016 instead of September 2015.

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  • 16.06.2014 — FRANCE: THE 2014 WINDOW OF OPPORTUNITY

    Focus on France as the periphery puts the worst behind it and Germany enjoys its "Golden decade". A few more reforms are possible this year.

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  • 09.06.2014 — THE POWER OF MONEY: REAL M1 SENDS A NEW MESSAGE

    We cannot dismiss the slowwon in real M1 growth easily. But we see one reason to believe that the modest loss in M1 momentum does not herald slower GDP growth to come.

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  • 06.06.2014 — EUROZONE: RECOVERY BENEFITS FROM LOW INFLATION

    Eurozone inflation returned to its post-Lehman recession low of 0.5% in May. At the same time, consumer confidence rose to its highest level since October 2007.

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  • 02.06.2014 — ECB PREVIEW: EASE BECAUSE YOU CAN

    An exciting ECB meeting is now looming, after policy makers have built up expectations over weeks. We expect to ease its stance further on Thursday (5 June) and keep the door wide open for further steps.

     

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  • 22.05.2014 — EUROPEAN ELECTIONS: SCARY HEADLINES, LITTLE IMPACT? -

    The European election will not trigger a new political crisis, let alone an economic one, despite many scary headlines about Europe’s 507m citizens turning against the EU at this week’s vote.

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  • 15.05.2014 — EUROZONE: DISAPPOINTING GROWTH

    Disappointing Eurozone growth adds to the case for ECB action in June. The Eurozone economy has expanded for four consecutive quarters now, but there was no acceleration in growth in the first quarter.

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  • 09.05.2014 — SUSTAINED UK GROWTH: BOE INFLATION REPORT PREVIEW

    Tacit acceptance of an earlier rate hike: The Bank of England (BoE) had forecast UK growth to slow through 2014 in its last quarterly update, in February. But the economy is growing rapidly and, if anything, is picking up pace. 

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  • 02.05.2014 — UK: CENTRAL BANK READYING FOR HOUSING ACTION?

    The Bank of England (BoE) is sounding off about housing market risks. As we have expected for some months now (see our Global Outlook 2014 note, 13 December 2013), the central bank will soon have to take action to rein in the upside risks to house prices.

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  • 09.04.2014 — ECB: THE UNTHINKABLE EDGING CLOSER

    The ECB has moved closer to quantitative easing (QE): the Governing Council has discussed asset purchases and committed unanimously to use unconventional measures to prevent too long a period of low inflation if necessary. 

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  • 04.04.2014 — THE UK CYCLE GETS GOING

    The start of a rebound: The evidence of a broadening recovery is mounting. As is typical in UK cycles, consumers did the early heavy lifting. That is now translating into surging optimism in the outlook, with firms planning to borrow to fund expansion plans and for M&A, as the Bank of England (BoE) Q1 2014 credit conditions survey out today (3 April) shows (Chart 1).

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  • 04.04.2014 — THE UK CYCLE GETS GOING

    The start of a rebound: The evidence of a broadening recovery is mounting. As is typical in UK cycles, consumers did the early heavy lifting. That is now translating into surging optimism in the outlook, with firms planning to borrow to fund expansion plans and for M&A, as the Bank of England (BoE) Q1 2014 credit conditions survey out today (3 April) shows (Chart 1).

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  • 02.04.2014 — ECB: ACTION POSSIBLE, BUT CONFIDENCE SHOULD PREVAIL

    Another sharp fall in inflation in March has put the European Central Bank’s (ECB) inflation forecasts at risk and increased the chance of further monetary stimulus. However, as the recovery has strengthened and broadened this winter, we expect the ECB to maintain its stance.

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  • 01.04.2014 — UK MACRO UPDATE: SPLITS IN THE UNIONIST CAMPAIGN

    The “no” vote lead in the Scottish referendum polls is narrowing and recent splits in the unionist campaign are unlikely to help. The latest disagreement was between the Westminster government and Alistair Darling, the former Chancellor who runs the Unionists’ campaign.

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  • 24.03.2014 — JOBS, TRADE AND FREE TRAVEL: HOW TO STABILISE UKRAINE

    Having finally mastered the euro crisis, Europe faces a big new challenge: how to stabilise Ukraine. Much is at stake. A thriving Ukraine would advance peace, prosperity and the rule of law across a major swathe of Europe, a weak and crisis-ridden Ukraine would invite Putin to stoke violent unrest and possibly start a war, with disastrous consequences not just for Russia and Ukraine but also for Europe as a whole.

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  • 20.03.2014 — UK BUDGET: LITTLE CHANGE

    Very small changes: Chancellor George Osborne forecast stronger growth and lower borrowing in his Budget. But this is a cyclical economic rebound, so the structural government borrowing position is not improving faster than expected.

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  • 18.03.2014 — PORTUGAL: SECOND CHANCE ... TAKEN

    Portugal is on track to repeat Germany’s successful conversion from the unsustainable sick man of Europe to a competitive and balanced growth champion. A wave of structural reforms and painful austerity laid the foundations. We expect Portugal to exit its bail-out programme in May without any tensions.

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  • 12.03.2014 — NO ROOM FOR GIVEAWAYS: UK BUDGET PREVIEW

    A cyclical upswing does not give room for giveaways: Amid a snowballing recovery, the UK fiscal deficit should fall faster than the government has forecast. But that largely reflects a cyclical upturn, rather than a structural improvement in the finances. There is no good news on the latter. Hence we do not expect Chancellor George Osborne to have any room to ease austerity in the 19 March Budget.

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  • 28.02.2014 — UK CONSUMERS ARE BECOMING MORE OPTIMISTIC
    • Rising optimism should drive strengthening UK consumption over the year
    • Consumer confidence is at its highest since 2007
    • Uncertainty has fallen dramatically
    • Optimism about the economy has also jumped
    • The recovery seems to be feeding through to consumers
    • Consumers will probably continue cutting their saving
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Macro Update

UK Macro Update

  • 28.04.2016 — What drives the UK current account deficit?

    The UK current account deficit has widened sharply from an average of 2.3% of GDP between 2001 and 2010, to a record of 7.0% in Q4 2015. Two trends are behind this negative outcome.

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  • 14.03.2016 — The day after Brexit: what would happen next?

    In the short-run, a vote for Brexit would be a demand-side shock: A sharp rise in uncertainty would harm business and household confidence, causing investment and spending to decline. Growth slows (recession possible), unemployment rises, the Bank of England (BoE) loosens monetary policy and fiscal deficits rise.

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  • 20.11.2015 — ECONOMIC CALENDAR - WEEK OF 23 NOVEMBER

    • Eurozone, PMI data (23 November)
    • Germany, IFO business climate (24 November)
    • US, Q3 GDP second (24 November): Upward revision?
    • Eurozone, Money supply/private sector loans (26 November): Strong growth
    • Eurozone, Confidence and climate data (27 November)
    • UK, Q3 GDP second (27 November)

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  • 11.09.2015 — UK unlikely to leave EU, despite the local noise

    The EU matters. The EU accounts for 45% (£227bn) of UK exports and 53% of UK imports (£288bn). In 2014, the UK ran a trade deficit of £61bn with the EU in 2014.
    Almost 10% of the UK labour force is linked to commerce with EU. Both the coalition and the previous Labour government estimate that around 3m people earn their living by producing goods and services that are exported to the EU.

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  • 27.03.2015 — HAPPY CONSUMERS, HAPPY ECONOMY

    Have money, will spend: Only a few things are inevitable in life: death, taxes and UK consumers spending money. So here we are with booming retail sales in the UK.

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  • 20.03.2015 — UK LABOUR MARKET: YOUR FLEXIBLE FRIEND

    Plenty of jobs but soft wages: In days gone by, rip-roaring inflation would have accompanied the employment surge the UK has seen recently. Not this time. A greater proportion of the population are in work than at any point since records began in 1971, but inflation is nearly zero. What is going on? For markets and the BoE, the answer to this puzzle is key.

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  • 13.03.2015 — DO NOT EXPECT A BIG PRE-ELECTION GIVEAWAY

    We expect Chancellor George Osborne to announce small giveaways in his final budget on 18 March.

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  • 20.02.2015 — UK: INVESTMENT CYCLE WILL CONTINUE

    Strong investment: The urban myth holds that Britain’s recent upturn has been driven by an unsustainable consumption splurge that will end in tears.

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  • 06.02.2015 — UK: DELEVERAGING WILL NOT HOLD BACK THE RECOVERY

    Debt still rising: McKinsey this week updated its debt analysis, reporting that every industrialised country has more debt than in 2007. Should that be worrying from a UK perspective?

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  • 09.12.2014 — UK MACRO UPDATE: HAPPY DAYS

    What a Christmas present. Thank you oil men of Dakota. Cheap oil, cheap food, and cheap money give us all the reasons we need to forecast continued strong UK growth and low inflation. We cannot know how permanent the fall in oil prices will prove to be but the further Brent falls, and the longer it stays low, the bigger the upside risks to our already above consensus call for 2.9% UK growth in 2015 become.

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  • 05.12.2014 — I WILL GO COLD TURKEY... TOMORROW

    Chancellor George Osborne has allowed himself a little pre-election fiscal stimulus (Chart 1). Weak wages suggest sins of omission rather than commission. But Osborne has cut corporation and personal taxes, with the latter costing more than expected.

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  • 03.12.2014 — UK MACRO UPDATE: HELP FOR LENDING IN CONSTRAINED AUTUMN STATEMENT?

    Another day, another set of leaks about Chancellor George Osborne’s Autumn Statement – his mid-year mini-budget – later today. That hyperactivity in pre-announcing policies is probably intended to distract from the big picture.

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  • 01.12.2014 — UK MACRO UPDATE: FISCAL, OIL

    Read the leaks of the possible policy measures coming in Chancellor George Osborne’s mini-budget on Wednesday and you could be forgiven for thinking the deficit had already been eliminated. Papers widely report a £15bn road building programme (already announced by Prime Minister David Cameron), £2bn for the National Health Service and more funding for so-called ‘catapult’ innovation centres.

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  • 28.11.2014 — TAX CUTS ALL ROUND

    Growth boost: Consumers and many UK firms should be happier after oil’s recent drop. Cheaper petrol frees up spending power for Christmas presents and cuts input costs. Along with declining food prices and lower mortgage costs driven by falling inflation, that should help UK growth recover its fizz.

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  • 28.11.2014 — UK MACRO UPDATE: IMMIGRATION, SCOTLAND

    David Cameron's widely anticipated attempt to crack down on EU immigration, due in a speech today, could help his party gain a little support in the near-term, but it may also bring Brexit closer. It is a very dangerous tightrope to be walking.

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  • 27.11.2014 — UK MACRO UPDATE: NEAR-TERM CAUTION, LONG-TERM OPTIMISM

    Is the UK recovery fizzling out now after investment fell in Q3 for the first time in five quarters? No, there were plenty of positive signals from the GDP details published yesterday that keep our forecast on track. We look for growth to slow a little further to 0.6% qoq in the fourth quarter, before the further stimulus in the pipeline and fading worries over geopolitical tensions push growth back up to 0.8% qoq by the middle of next year.

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  • 27.11.2014 — UK MACRO UPDATE: NEAR-TERM CAUTION, LONG-TERM OPTIMISM

    Is the UK recovery fizzling out now after investment fell in Q3 for the first time in five quarters? No, there were plenty of positive signals from the GDP details published yesterday that keep our forecast on track. We look for growth to slow a little further to 0.6% qoq in the fourth quarter, before the further stimulus in the pipeline and fading worries over geopolitical tensions push growth back up to 0.8% qoq by the middle of next year.

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  • 03.11.2014 — DANGERS FROM APING UKIP

    Copying United Kingdom Independence Party (UKIP) policies comes with consequences. Over the weekend, Der Spiegel reported, citing sources in the government, that German Chancellor Angela Merkel considers it possible that the UK could leave the EU. A mild statement, but with the implicit message that there are clear limits to how far she would go to keep Britain in. Ultimately, we expect the UK to remain in the EU.

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  • 23.10.2014 — UK MACRO UPDATE: ANOTHER BIG ELECTION COMING

    Is a victory for the opposition Labour party in the May 2015 general election becoming more likely? The battle in Rochester is one key event that could raise those chances. A ComRes poll last night gave the United Kingdom Independence Party (UKIP) a 13 point lead over the ruling Conservatives ahead of a 20 November by-election in the Kent constituency.

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  • 20.10.2014 — UK MACRO UPDATE: HEADING FOR THE EXIT?

    Is the UK heading for a life of isolation out of the EU, heard by no-one and nursing a damaging economic model? Those risks will be raised if reports over the weekend turn out to be true, and David Cameron does soon propose undermining the free movement of people across the single market by imposing effective limits on immigration from the EU.

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  • 10.10.2014 — UK MACRO UPDATE: ELECTORAL UNCERTAINTY

    The United Kingdom Independence Party’s (UKIP) landslide win in Clacton and surge in Heywood last night adds to the uncertainty about next May’s General Election. Former Conservative MP Douglas Carswell triggered a by-election in his Clacton constituency by defecting to UKIP. He won nearly 60% of the resulting vote last night to return to parliament as a UKIP MP.

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  • 09.10.2014 — UK MACRO UPDATE: GROWTH SLOWING, HOUSING STABILISING, ELECTIONS TONIGHT

    GROWTH SOFTENING A LITTLE
    We cut our UK growth forecasts a little in early August as the economic fall-out from geopolitical tensions threatened to spread to the UK via manufacturing. The third quarter British Chambers of Commerce (BCC) survey, published this morning, confirms that process is underway, mirroring the message from the latest PMIs.

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  • 03.10.2014 — TOPPING OUT

    Third quarter looks strong: UK manufacturing is suffering from weak growth overseas, as Chart 1 shows. But the services and construction sectors have continued to power ahead, supported by low interest rates and rising confidence.

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  • 02.10.2014 — CAMERON'S CUTS

    Headline grabbing tax cuts, but how to pay for them? UK Prime Minister David Cameron yesterday tried to show some light at the end of the austerity tunnel. In his annual speech to the Conservative Party Conference yesterday Cameron committed a future Conservative government to tax cuts once the government budget is balanced, which the Conservatives plan to achieve in 2018.

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  • 15.09.2014 — MACRO UPDATE: SCOTLAND

    Scottish polls are tight heading into the finishing straight. The anti-independence campaign leads by an average of three points after a rash of polls over the weekend.

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  • 09.09.2014 — MACRO UPDATE: SCOTLAND, UKRAINE

    A new TNS poll released overnight put the anti-independence campaign in the lead by just one point ahead of the 18 September referendum on Scottish independence. That is a sharp narrowing from TNS’s previous poll in early August that had shown a 17 point lead for the No camp (excluding don’t knows).

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  • 08.08.2014 — UK OFF-BALANCE BUT ON TRACK

    PMIs seem to be overstating growth in some countries: Italy returned to recession in Q2 despite improving survey readings. German manufacturing growth has disappointed too. If a similar disconnect opens in the UK, our forecast would be at serious risk.

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  • 25.07.2014 — UK EDGING TOWARDS A NOVEMBER RATE HIKE

    On track for a November rate hike: Buoyant leading indicators suggest the UK can maintain the 0.8% qoq growth pace registered in Q2, in our view. Along with the appearance of more reasons to hike rates in this week’s minutes of the Bank of England’s (BoE) early July rate setting meeting, that leaves our call for a November rate rise on track.

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  • 07.07.2014 — UK: STRONG OUTLOOK BUT WITH POLITICAL RISKS

    The UK outlook is strong, but the extended period of upside growth surprises may be coming to an end according to the quarterly Deloitte survey of UK CFOs.

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  • 03.06.2014 — UK HOUSE PRICES SHAKE OFF WOBBLES

    Tighter regulations have squeezed the number of mortgage approvals but house prices have ploughed on regardless. The BoE should act this month to cut the risks of price rises spiralling yet higher.

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  • 03.06.2014 — UK HOUSE PRICES SHAKE OFF WOBBLES

    Tighter regulations have squeezed the number of mortgage approvals but house prices have ploughed on regardless. The BoE should act this month to cut the risks of price rises spiralling yet higher.

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  • 29.05.2014 — UK MACRO UPDATE: RATES NEED TO RISE SOONER RATHER THAN LATER

    If the BoE wants to increase rates gradually, then it should start the process “sooner rather than later.” That was the opinion of Martin Weale, one of the nine members of the Monetary Policy Committee (MPC), in an FT interview published today.

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  • 08.05.2014 — UK: Central bank readying for housing action?

    The Bank of England (BoE) is sounding off about housing market risks. As we have expected for some months now (see our Global Outlook 2014 note, 13 December 2013), the central bank will soon have to take action to rein in the upside risks to house prices.

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  • 08.05.2014 — The great tightening experiment: BoE policy

    Back to normal: As the recovery gains momentum, the Bank of England (BoE) will need to raise rates within the next 12 months. We still expect the first hike in Q1 2015. But the strength of the recent data means we raise the chance of a Q4 2014 hike from 30% to 35%.

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  • 16.04.2014 — UK: LIFT OFF AS EMPLOYMENT BOOMS AND WAGE GROWTH RISES

    The UK seems to be booming. The usual caveats apply, of course. The economy is recovering from a bad few years, unemployment is still higher than it was and real wages have been weak. But the economy is heading in the right direction, fast.

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  • 08.04.2014 — FIRMS PLAN FOR EXPANSION

    Optimism about the UK optimism is driving big firms to ramp up their investment plans. The Deloitte CFO survey, which this quarter got responses from 126 CFOs of major UK companies, reported strengthening investment intentions. 

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  • 28.03.2014 — UK MACRO UPDATE: IS THE BOE GETTING NERVOUS?

    There seems to be growing concern about the housing market inside Threadneedle Street. But it is much less obvious what they will do about it.

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  • 18.03.2014 — UK: SHAKE-UP AT THE BOE

    A shake-up at the top of the BoE was announced today. It represents a significant break with the past. two key Deputy Governor roles being taken by excellent candidates who have spent most or all of their career outside of the BoE.

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  • 17.03.2014 — UK MACRO UPDATE: MORE HELP FOR BUILDERS

    The Chancellor committed to extending his help for new home-buyers until 2020, in an interview on Sunday. It is the wrong solution to the problem at hand. In our view, both aspects of the “Help-to-Buy” scheme –help for buyers of new houses, plus the much larger mortgage guarantee scheme available to most borrowers – should be cancelled immediately.

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  • 12.03.2014 — UK MACRO UPDATE: EU REFERENDUM, BOE

    The opposition Labour party have some potentially damaging economic policies. But unlike the conservatives, they are not committing to an EU referendum by 2017.

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  • 11.03.2014 — UK: MANUFACTURING LEADING THE WAY

    The UK rebound continues apace, with manufacturing output rising 0.4% mom in January, a little above consensus expecta-tions, and 3.3% yoy. That is the strongest annual growth in around three years. The troubles in Ukraine, emerging market wobbles or, more parochially, the weather are not likely to derail this recovery, which should continue and possibly strengthen.

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  • 11.03.2014 — UK MACRO UPDATE: POLITICAL RISK

    Political uncertainty is a key risk to the UK’s increasingly solid recovery. There is plenty happening, not all of it good, on all three key events over the next year or so. We do not expect European elections (22 May), Scottish referendum (19 September) or the general election (7 May 2015) to derail the UK recovery.

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Global Macro Update

  • 06.05.2016 — Forecasts at a glance - Modest growth amid serious political risks

    Outlook: Developed world continues to recover, emerging markets hit bottom
    ●   US: Consumption and housing solid, exports and investment weak
    ●   China: Decelerating growth but no hard landing
    ●   Japan: Struggling to grow, yen strength hurts
    ●   Eurozone: Modest but largely balanced recovery continues
    ●   UK: Moderate economic recovery continues, 35% Brexit risk

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  • 03.05.2016 — Forecasts at a glance - Modest growth amid serious political risks

    Outlook: Developed world continues to recover, emerging markets hit bottom
    •      US: Sound fundamentals, domestic demand resilient but exports drag
    •      China: Decelerating growth but no hard landing
    •      Japan: Struggling to sustain growth, reforms needed
    •      Eurozone: Modest but largely balanced recovery continues
    •      UK: Moderate economic recovery continues, 35% Brexit risk

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  • 18.03.2016 — ECONOMIC CALENDAR - WEEK OF 20 MARCH

    • GE, IFO business climate/current assessment/expectations (22 March)
    • US, Arizona primary, Utah caucuses and Idaho Democratic caucus (22 March)
    • US, GDP/personal consumption (25 March)
    • US, Alaska, Hawaii and Washington State Democratic caucuses (26 March)

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  • 15.03.2016 — US consumption will remain healthy

    Retail sales dipped by 0.1% in February, but “core” sales, excluding motor vehicles, gasoline and building materials, rose by 0.2% and are up by 3.5% year-over year. Like other high-frequency data, these monthly retail sales bounce around a lot.

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  • 07.03.2016 — ECONOMIC CALENDAR - WEEK OF 7 MARCH

    • Britain beware: the power of trade diversion
    • European migrant crisis: Crunch time ahead
    • UK manufacturing: Signs of strain
    • Eurozone outlook: Back to trend growth by mid-2016
    • UK services PMI sinks to near 3 year low

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  • 01.03.2016 — Low inflation worries are excessive

    The low inflation has been a positive for economic performance. The US and Europe benefit from lower energy prices and technology innovations that have reduced prices of goods and services.

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  • 24.02.2016 — ECONOMIC CALENDAR - WEEK OF 22 FEBRUARY

    • EZ, PMI manufacturing (22 February)
    • EZ, ECB Lautenschläger speaks in Stuttgart (22 February)
    • GE, GDP/IFO business climate (23 February)
    • UK, BOE Carney speaks before UK parliament committee (23 February)
    • US, FED Fischer speaks in Houston (23 February)
     UK, GDP (25 February)
    • EZ, CPI (25 February)
    • US, GDP (26 February)
    • US, South Carolina Democratic primary (27 February)

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  • 15.02.2016 — ECONOMIC CALENDAR - WEEK OF 15 FEBRUARY

    • UK, CPI/CPI core (16 February)
    • EZ, ZEW survey expectations  (16 February)
    • GE, ZEW survey current situation/ZEW survey expectations (16 February)
    • US, Industrial production (17 February)
    • US, CPI (19 February)
    • EZ, Consumer confidence (19 February)

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  • 15.02.2016 — FORECASTS AT A GLANCE: TEMPORARY DENT TO GROWTH AS TURMOIL TAKES ITS TOLL

    Outlook: Developed world slows temporarily, emerging markets hit trouble
    ●   US: Sound fundamentals, domestic demand resilient but exports drag
    ●   China: Decelerating growth but no hard landing
    ●   Japan: Struggling to sustain growth, reforms needed
    ●   Eurozone: Near-term dent to growth as market turmoil hits confidence
    ●   UK: Moderate economic recovery continues, 35% Brexit risk

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  • 12.02.2016 — ECONOMICS - FORECAST UPDATE: TURMOIL TAKES ITS TOLL

    Fundamentals in the Western world remain positive. The stock market correction dampens the near-term outlook but chances of a recession are low. Fundamentals point to sustained moderate economic growth driven by domestic demand. Real incomes and employment are rising on both sides of the Atlantic, monetary policy is accommodative and the Eurozone benefits from a fiscal stimulus of some 0.3% of GDP in 2016. We detect no domestic imbalances or credit excesses serious enough to require a cleansing recession in the Western world.

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  • 10.02.2016 — BOJ's NEGATIVE RATES: LESSONS FOR MONETARY POLICY

    What are the implications of the Bank of Japan (BoJ) joining the European Central Bank and central banks of Sweden, Denmark and Switzerland to impose negative rates on new excess bank reserves? The BoJ’s negative rates are more a reflection of Japan’s poor policies and economic performance than a cure. They do not address Japan’s problems and have unintended negative side effects. This sends an important lesson to global monetary and economic policymakers.

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  • 05.02.2016 — ECONOMIC CALENDAR - WEEK OF 8 FEBRUARY
    • GE, Industrial production/Trade balance (9 February)
    • GE, GDP (12 February)
    • IT, GDP (12 February)
    • Eurozone, Industrial production/GDP (12 February)
    • US, Retail sales advance/U. of Mich. sentiment (12 February)
    • JP, GDP (14 February)
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  • 01.02.2016 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble

    • US: Solid domestic demand, exports drag
    • China: Decelerating growth but no hard landing
    • Japan: Struggling to sustain growth, reforms needed
    • Eurozone: Periphery firm, core suffers near-term dent from export drop
    • UK: Economic recovery continues, 35% Brexit risk
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  • 29.01.2016 — ECONOMIC CALENDAR - WEEK OF 1 FEBRUARY
    •  China, PMI manufacturing/Non-manufacturing/Caixin manufacturing (1 February)
    • Eurozone, PMI manufacturing (1 February)
    • US, ISM manufacturing (1 February)
    • Eurozone, Unemployment rate (2 February)
    • US, ISM non-manufacturing composite (3 February)
    •  UK, BoE bank rate (4 February): Dovish minutes
    • US, Change in nonfarm payrolls (5 February): Key Fed data
    • China, Foreign reserves (7 February)
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  • 27.01.2016 — BREXIT UPDATE: EXIT RISK INCREASES TO 35%

    Negative shifts in the opinion polls since last summer should remind us that our biggest risk for the UK in 2016 – voting to “leave” in the EU referendum – needs to be watched carefully. With this, we increase our risk of a Brexit from 30% to 35%. 

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  • 22.01.2016 — ECONOMIC CALENDAR - WEEK OF 25 JANUARY

    • Fed, FOMC interest rate decision (27 January)
    • UK, Q4 GDP (28 January): Downside risk
    • Eurozone, Economic confidence (28 January): Turbulence hurts
    • France/Spain, Q4 GDP (29 January)
    • Eurozone, CPI/CPI core (29 January): Downside risk
    • US, Q4 annualised GDP (29 January): Inventory correction

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  • 19.01.2016 — POLITICAL RISKS IN EUROPE

    To understand Europe, we have to think politics first. In this report, we look at the key political risks ahead in Europe. We assess the impact of the inflow of refugees and of potential terror risks; we discuss the role of Turkey and examine political risks in key European countries including Germany, France and Italy as well as Greece, Finland and Spain. The risks are serious, but probably manageable.

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  • 18.01.2016 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit risk

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  • 15.01.2016 — ECONOMIC CALENDAR - WEEK OF 18 JANUARY

    • China, GDP Q4 (19 January)
    • UK, CPI/CPI core (19 January)
    • UK, labour market (20 January)
    • ECB, policy decision and press conference (21 January)
    • Eurozone/Japan/US, PMI data (22 January)

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  • 12.01.2016 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit risk

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  • 08.01.2016 — ECONOMIC CALENDAR - WEEK OF 11 JANUARY

    • UK, industrial production (12 January)
    • Eurozone, industrial production (13 January)
    • BoE, MPC meeting, rate decision and minutes (14 January)
    • ECB, minutes of December meeting (14 January)
    • US, retail sales (15 January)
    • US, industrial production (15 January)

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  • 04.01.2016 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit risk

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  • 31.12.2015 — ECONOMIC CALENDAR - WEEK OF 04 JANUARY

    • US, ISM manufacturing (04 January)
    • China/Eurozone/UK, PMI data (04 January)
    • Eurozone, CPI/CPI core (05 January)
    • Fed releases minutes (06 January)
    • Eurozone, confidence data (07 January)
    • US, labour market (08 January)

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  • 24.12.2015 — ECONOMIC CALENDAR - WEEK OF 28 DECEMBER

    • US, consumer confidence (29 December)
    • Eurozone, M1/M3 money supply (30 December)
    • Eurozone, Private sector loans (30 December)
    • China, PMI non/manufacturing (01 January)

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  • 23.12.2015 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit risk

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  • 18.12.2015 — ECONOMIC CALENDAR - WEEK OF 21 DECEMBER

    • Spain, general election (20 December)
    • Eurozone, consumer confidence (21 December)
    • US, final  Q3 GDP (22 December)
    • France, final Q3 GDP (23 December)
    • UK, final Q3 GDP (23 December)
    • Japan, industrial production (27 December)

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  • 18.12.2015 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit risk

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  • 15.12.2015 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    • US: Solid domestic demand, exports drag
    • China: Decelerating growth but no hard landing
    • Japan: Struggling to sustain growth, reforms needed
    • Eurozone: Periphery firm, core suffers near-term dent from export drop
    • UK: Economic recovery continues, 30% Brexit risk

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  • 14.12.2015 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit risk

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  • 11.12.2015 — ECONOMIC CALENDAR - WEEK OF 14 DECEMBER

    • Eurozone, industrial production (14 December): modest pickup
    • US/UK, CPI/CPI core (15 December)
    • Eurozone, PMI data (16 December)
    • UK, labour market (16 December): upside surprise
    • Fed FOMC interest rate decision (16 December): first rate hike
    • Germany, IFO business climate (17 December)

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  • 04.12.2015 — ECONOMIC CALENDAR - WEEK OF 07 DECEMBER

    • Germany, industrial production (07 December)
    • China, CPI (09 December): modest pickup
    • Germany, Trade balance (09 December)
    • BoE, policy decision (10 December): 7-2 vote
    • US, retail sales (11 December)
    • China, industrial production/retail sales (12 December)

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  • 04.12.2015 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit ris

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  • 27.11.2015 — ECONOMIC CALENDAR - WEEK OF 30 NOVEMBER

    • China, PMI non/manufacturing (01 December)
    • US, ISM manufacturing (01 December)
    • Eurozone, unemployment rate (01 December): improving trend
    • Eurozone, CPI/CPI core (02 December)
    • ECB policy decisions (03 December): ECB stimulus ahead
    • US, labour market (04 December): key Fed data

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  • 27.11.2015 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit risk

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  • 20.11.2015 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit risk

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  • 19.11.2015 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    US: Solid domestic demand, exports drag
    China: Decelerating growth but no hard landing
    Japan: Struggling to sustain growth, reforms needed
    Eurozone: Periphery firm, core suffers near-term dent from export drop
    UK: Economic recovery continues, 30% Brexit risk

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  • 16.11.2015 — FORECASTS AT A GLANCE: SUSTAINED GROWTH

    Outlook: Developed world largely resilient, emerging markets hit trouble
    • US: Solid domestic demand, exports drag
    • China: Decelerating growth but no hard landing
    • Japan: Struggling to sustain growth, reforms needed
    • Eurozone: Periphery firm, core suffers near-term dent from export drop
    • UK: Economic recovery continues, 30% Brexit risk

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  • 13.11.2015 — ECONOMIC CALENDAR - WEEK OF 16 NOVEMBER

    • Eurozone, CPI/CPI core (16 November): supports ECB easing
    • Eurozone, ZEW expectations (17 November)
    • Germany, ZEW expectations/current situation (17 November): modest rebound
    • US/UK, CPI/CPI core (17 November)
    • US, industrial production (17 November)
    • UK, retail sales (19 November): solid trend
    • Eurozone, consumer confidence (20 November): still high, small drop

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  • 30.10.2015 — ECONOMIC CALENDAR - WEEK OF 02 NOVEMBER

    • US, ISM manufacturing (02 November)
    • EZ/UK, PMI manufacturing (02 November)
    • EZ/UK, PMI services (04 November)
    • UK, BoE bank rate (05 November)
    • GE, Industrial production (06 November)
    • US, Change in non-farm prayrolls and unemployment rate (06 November)

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  • 23.10.2015 — ECONOMIC CALENDAR - WEEK OF 26 OCTOBER

    • Germany, IFO (26 October)
    • EZ, money supply M1, M3 (27 October)
    • UK, GDP Q3 (27 October)
    • Fed, FOMC interest rate decision (28 October)
    • EZ, confidence (29 October)
    • US, GDP Q3 (30 October)

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  • 16.10.2015 — ECONOMIC CALENDAR - WEEK OF 19 OCTOBER

    • China GDP (19 October): slowdown, no crash
    • Eurozone consumer confidence (22 October): small dent, still high
    • ECB policy decisions (22 October): hint at December ease?
    • Eurozone PMIs (23 October): almost stable
    • German PMIs (23 October): PMI manufacturing takes a hit

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  • 09.10.2015 — ECONOMIC CALENDAR - WEEK OF 12 OCTOBER

    • German ZEW survey expectations and current situation (13 October): significant drop in expectations
    • US Retail sales (14 October): modest gain
    • UK ILO unemployment rate (14 October): upside risk

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  • 02.10.2015 — ECONOMIC CALENDAR - WEEK OF 05 OCTOBER

    • Portuguese parliamentary elections (04 October)
    • G-20 finance ministers and central bank governors meeting in Lima (08 October)
    • BoE monetary policy committee meeting and rate decision (08 October)
    • ECB minutes of previous meeting to be released (08 October)
    • Fed publishes FOMC meeting minutes (08 October)

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  • 25.09.2015 — ECONOMIC CALENDAR - WEEK OF 28 SEPTEMBER

    • Catalan regional elections (27 September): no convincing vote for independence
    • Eurozone unemployment rate (30 September): slow improvement
    • Eurozone CPI estimate and core (30 September): cheap oil
    • US change in non-farm payrolls (02 October): solid trend
    • US average hourly earnings (02 October): slow increase

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  • 18.09.2015 — ECONOMIC CALENDAR - WEEK OF 21 SEPTEMBER

    • Greek elections (20 September): too close to call
    • EU holds extraordinary summit on migration crisis (23 September)
    • German IFO business climate (24 September): likely to show some China impact
    • Catalan regional elections (27 September): no convincing mandate for independence

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  • 11.09.2015 — ECONOMIC CALENDAR - WEEK OF 17 SEPTEMBER

    • German ZEW expectations (15 September): likely to show some China impact
    • US retail sales (15 September): firm trend
    • US Fed (17 September): probably no hike yet, but it is a close call

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  • 04.09.2015 — ECONOMIC CALENDAR - Week of 7 September

    Eurozone GDP Q2 (08 September): Upward revision?
    BoE bank rate (10 September): 9-0 vote split (external risks)
    China industrial production (13 September): Gradual slowdown

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  • 27.07.2015 — GLOBAL OUTLOOK: CRUISING SPEED DESPITE GREXIT RISK

    - Reasonable oil prices: nice boost for Western world, tough luck for Russia
    - US: private sector in good shape = trend growth after weak Q1
    - China: sufficient growth despite slowing trend, risks well contained
    - Eurozone: oil, exchange rate and ECB support demand as tail risks fade
    - Euro crisis? Systemic crisis over, Greek crisis remains
    - UK: solid recovery but mind the politics; Brexit risk contained
    - Tail risks: Emerging market crash, Grexit

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  • 24.07.2015 — CHINA SLOWS, IRAN HELPS, EUROZONE EXPANDS, GREECE TALKS

    China: The slowdown continues

    Iran: A little tail wind for the world economy

    Eurozone PMI: Just a small greek impact

    Greece: And now for the hard part

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  • 16.07.2015 — FED HIKE, GREEK CHANGE, ECB SUPPORT, EUROZONE STRENGTH

    FED: on track

    EUROZONE: strong car sales

    GREECE: a broad pro-european alliance

    ECB: a little help for Greece

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  • 26.06.2015 — ECONOMIC CALENDAR - Week of 29 June

    • Eurogroup emergency summit (27 June): Weekend deal or plan B?
    • Greece: €1.5bn loan repayment to IMF and bailout programme expiry (30 June): Will Tsipras finally get real?
    • US Change in non-farm payrolls (02 July): Expect solid job gains

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  • 19.06.2015 — ECONOMIC CALENDAR - Week of 22 June

    • Eurogroup emergency summit (22 June): Will Tsipras get real?
    • German IFO expectations (24 June): Expect small Greek impact
    • US GDP annualised (24 June): Revised up?

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  • 18.06.2015 — MACRO UPDATE: GREECE, US FED, UK

    Greece: no news is bad news at this stage. There is no sign that Greece will shift its position to allow for a deal at today’s Eurogroup meeting of finance ministers.
    US Fed: on track for a September hike.
    UK: Stronger wage growth amid significant gains in employment and the likely upward revision to GDP data for late 2014 and early 2015 should keep the BoE on track for a first rate hike some six months after the Fed.

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  • 12.06.2015 — ECONOMIC CALENDAR - Week of 15 June

     EU Court of Justice (16 June): likely to approve ECB’s OMT programme
    • FOMC meeting (17 June): on track for a September rate hike?
    • Eurogroup meeting (18 June): the moment of truth for Greece?

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  • 12.06.2015 — FORECASTS AT A GLANCE

    Spain: We raise our 2015 GDP call from 2.7% to 3.0%.

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  • 08.06.2015 — TURKEY UPDATE: SHORT-TERM PAIN AHEAD?

    Turkey has elected a new parliament. The ruling Justice and Development Party (AKP) won the election with 40.7%, but failed to secure an absolute majority in parliament.Turkey has elected a new parliament. The ruling Justice and Development Party (AKP) won the election with 40.7%, but failed to secure an absolute majority in parliament.

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  • 29.05.2015 — ECONOMIC CALENDAR - Week of 1 June

    • Greece: 5 June IMF repayment deadline
    • US non-farm payrolls: return to steady jobs growth
    • Italy regional elections: Renzi in charge
    • ECB press conference: no time to let up on stimulus

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  • 22.05.2015 — ECONOMIC CALENDAR - Week of 25 May

    • Eurozone: credit cycle turning, confidence stable
    • US, UK Q1 GDP: downrevision and uprevision, respectively
    • Spain regional elections: has Podemos peaked?

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  • 15.05.2015 — ECONOMIC CALENDAR - Week of 18 May

    • Japan Q1 GDP: moderate growth
    • German Ifo, ZEW, Eurozone PMIs: tailwinds blowing less strongly
    • BoE, Fed, ECB minutes: cautious central bankers

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  • 15.05.2015 — FORECASTS AT A GLANCE

    2015 GDP: US down to 2.3%. Eurozone: Italy up 0.1ppt, Germany down

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  • 08.05.2015 — ECONOMIC CALENDAR - Week of 11 May

    • Greece: no deal at Euro finance minister meeting?
    • Eurozone GDP: firming recovery with plenty of tailwind
    • BoE decision and inflation report: on hold

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  • 30.04.2015 — ECONOMIC CALENDAR - Week of 04 May

     UK elections: decision time, hung parliament?
    • US non-farm payrolls: reassuring rebound after March weakness
    • Greek IMF payments: when is the money running out?

     

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  • 24.04.2015 — ECONOMIC CALENDAR - Week of 27 April

    • UK GDP shows slight loss in momentum
    • EZ Economic sentiment stable at good level, while CPI at 0% due to slight rise in oil prices
    • US GDP hurt by cold winter
    • FOMC rate decision on Wednesday, 29 April: no rate hiking due

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  • 22.04.2015 — GREEK UPDATE: ALEXIS'S CHOICE

    If it can’t go on like this, it won’t. At some point in the next 3-5 weeks, Greek PM Alexis Tsipras will have to make the tough choice: does he want to go down in history as the prime minister who completed the modernisation of his country Or as the one who led his country into the abyss of Grexit?
    Whatever he does, he will get into trouble with major parts of his own power base.

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  • 20.04.2015 — STIMULUS FROM CHINA, MIXED MESSAGES FROM ATHENS

    China:
    • Keeping the orderly slowdown on track: if Chinese growth slows down a bit more than the authorities want, they add a little stimulus.
    Greece:
    • A ray of hope: after a long period of no progress, IMF’s Poul Thomsen detected “a little more momentum” in the talks between Greece and its creditors in the last few days.
    • Murky Russian story: Reports that Greece may get a €3-5bn cash advance from Russia were contradicted, but even if true would not change the underlying situation.

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  • 17.04.2015 — ECONOMIC CALENDAR - Week of 20 April

    • EZ Consumer confidence likely to rise: more jobs and cheap oil
    • US durable goods orders: volatile, stronger dollar may hurt
    • EZ Finance Ministers, central bankers meeting in Riga: Greek reform list on agenda

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  • 15.04.2015 — ECB SUCCESS; GREEK LIMBO

    With the ECB no news is good news. After more than a month of full-scale sovereign bond purchases, the ECB’s programme is fully on track.
    No progress has been made in Greece, as it is still shying away from the hard decisions.

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  • 10.04.2015 — ECONOMIC CALENDAR - Week of 13 April

    • Chinese Q1 GDP: slowdown towards 7%
    • ECB: the effectiveness of QE
    • IMF and Worldbank spring meetings: potential growth decline in focus

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  • 07.04.2015 — GREECE THREATS, US HEADWINDS

    The newsflow from Greece over Easter was not encouraging, with snap elections emerging as a new threat. In the US, a cold winter in parts of the country, as well as the strong dollar, trigger a weak jobs performance in March.

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  • 02.04.2015 — ECONOMIC CALENDAR - Week of 6 April

    • Greece: €450m loan repayment to the IMF
    • European industrial production: strong tailwinds
    • Bank of England: on hold

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  • 30.03.2015 — GLOBAL UPDATE: GREECE, FRANCE, GERMANY, IRAN, RUSSIA, PORTUGAL

    Round-up of Greek negotiations, French regional elections, global risks in Russia/Ukraine and Iran, as well as German wage deals and Portuguese regional elections.

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  • 27.03.2015 — ECONOMIC CALENDAR - Week of 30 March

    • US job market data: solid growth
    • German and euro inflation: import price driven rebound
    • Japan Tankan: firming growth on weak yen

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  • 24.03.2015 — MACRO UPDATE: TSIPRAS IN BERLIN, CHINA SLOWING

    Global macro update: Tsipras in Berlin, Chinese PMI falling.

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  • 20.03.2015 — ECONOMIC CALENDAR - Week of 23 March

    • Greece’s make-or-break? PM Tsipras to visit Merkel in Berlin
    • European confidence indicators rising: Ifo, PMIs, German GfK
    • ECB QE effective: Eurozone monetary data
    • UK: low inflation, strong retail sales

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  • 16.03.2015 — MACRO UPDATE: GREEK GAMES; FED’S PATIENCE

    Greece and the Eurozone in different storylines. In the US, the Fed is the short-term issue, the debt limit a medium-term concern.

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  • 09.03.2015 — MACRO UPDATE: GREEK PRESSURE, GERMAN/CHINESE TRADE

    Greeec: Tsipras tunring into Papandreou? German trade weak in January, Chinese exports strong in early 2015.

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  • 09.03.2015 — MACRO UPDATE: GREECE, EMERGING MARKETS, EURO PMIS

    Tsipras plays with the idea of a euro referendum. Germany January trade was weak. Chinese trade in early 2015 was strong.

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  • 06.03.2015 — ECONOMIC CALENDAR - week of 9 March

    • Greece in focus at Euro finance minister meeting
    • China: gradually slowing retail sales, IP and investment growth
    • China, Japan, German trade: impact of currency moves?

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  • 06.03.2015 — FORECASTS AT A GLANCE

    We upgrade German 2015 growth and Eurozone inflation in 2015/2016.

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  • 04.03.2015 — MACRO UPDATE: GREECE, EMERGING MARKETS, EURO PMIS

    Greece remains a big risk, emerging market central banks stimulate a bit, euro PMIs rise, driven by France.

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  • 02.03.2015 — MACRO UPDATE: CHINA, GREECE, UK

    China has all the tools it needs to counteract any slowdown. That much is evident from the PBOC’s action over the weekend to cut interest rates for the second time in three months.

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  • 16.02.2015 — MACRO UPDATE: GREEK TALKS, JAPANESE GROWTH

    For Greece and for Japan it is time to get real. Greece's new government needs to perform a U-turn to avoid the Grexit abyss. Japan needs to shun the temptation of relying only on monetary and fiscal stimulus.

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  • 13.02.2015 — ECONOMIC CALENDAR - Week of 16 February

    • Greek bail-out: the clock is ticking
    • Japan G4 GDP: recession end
    • UK unemployment and inflation: slack falling

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  • 12.02.2015 — PUTIN'S CEASEFIRE

    The new Minsk ceasefire may decrease economic risks emanating from the Russa/Ukraine crisis in 2015. But Putin seems to be getting away with this renewed aggression. Whether or not that will make him more dangerous in the future is an open question.

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  • 06.02.2015 — ECONOMIC CALENDAR - Week of 9 February

    • Greece: Syriza to present programme; reality shock to continue at Eurogroup and EU summit
    • Bank of England inflation report: dovish enough?
    • European Q4 GDP growth: modest, uneven recovery

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  • 05.02.2015 — MACRO UPDATE: ECB REMINDER TO GREECE, GERMAN ORDERS, CHINA

    Greece gets another warning shot from the ECB, German factory orders rise in December and Q4, China adds some more stimulus.

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  • 19.12.2014 — ECONOMIC CALENDAR - 2 weeks from 22 December

    • Greek presidential elections: on the brink
    • Eurozone monetary data: slowly turning credit cycle
    • Global manufacturing PMIs: cheap oil effects?

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  • 18.12.2014 — MACRO UPDATE: US, GREECE

    Amid a rapidly growing economy facing a new boost from cheaper oil, US rate setters finally dropped the "considerable time" language from their post-meeting statement yesterday, instead preferring to say they would be 'patient in beginning to normalise' interest rates.

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  • 16.12.2014 — CHEAP OIL IS THE SOLUTION, NOT THE PROBLEM

    The collapse in oil prices is a game changer for the world economy. Like every major shift in relative wealth and relative prices, it is disruptive. Markets now seem to worry a lot about the temporary negative side effects. That makes little fundamental sense.

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  • 16.12.2014 — GLOBAL MACRO UPDATE: NEW AND OLD RISKS

    A mix of new and old global risks are causing major wobbles in equity markets. The risks are serious, but most have some have positive side-effects, or are self-mitigating.

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  • 09.12.2014 — OIL PRICE ROUT: CHRISTMAS COME EARLY

    The rout in oil prices could be a massive game changer for the world economy. For users of energy, it is equivalent to a huge tax cut. In fact, it's even better than that: the cut will not show up in bigger fiscal deficits and hence future liabilities of the energy users. Instead, Russia and other energy producers will have to foot the bill.

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  • 08.12.2014 — MACRO UPDATE: CHINA TRADE, GREEK BUDGET, UK CONSUMERS

    The latest volatile trade data point to slowing in Chinese spending. Imports fell 6.7% yoy, down from 4.6%yoy growth in October and below consensus. Exports rose 4.7% yoy, weaker than expected and down from 11.6% yoy in October.

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  • 28.11.2014 — ECONOMIC CALENDAR - Week of 1 December

    • ECB meeting: just strong words or action?
    • US non-farm payrolls: robust jobs growth
    • Global PMIs: uneven recovery

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  • 17.11.2014 — MACRO UPDATE; JAPAN GDP, UK VOTE, G20

    Japan fell back in recession with hugely disappointing third quarter GDP. Output contracted 1.6% qoq annualised compared to consensus expectations of a 2.2% fall, marking the return to technical recession. That followed a 7.3% annualised decline in Q2 after the government hiked sales taxes.

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  • 14.11.2014 — ECONOMIC CALENDAR - Week of 17 November

    • Japan Q3 GDP: modest rebound as Abenomics impact fades
    • Fed and Bank of England Minutes: when will rates rise?
    • ZEW and PMIs: German and Eurozone confidence stabilising

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  • 13.11.2014 — GLOBAL MACRO: CHINESE SLOWDOWN, RUSSIAN RISK

    Chinese growth rates slowed in October again, although retail sales strength points to resilient consumption. Russia continues to stoke tensions in Esatern Ukraine, despite more signs of economic troubles at home.

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  • 10.11.2014 — MACRO UPDATE: CHINA, UKRAINE, CATALONIA

    China: resilient. The latest trade data point to continued solid growth in China. Exports rose a solid 11.6% yoy in October, down from 15.3% in September but beating consensus. Imports rose 4.6% yoy, down from 7.0%. That was a little below consensus but far better than the average of 2.8% yoy growth over the past 12 months. The data suggest trade made a solid contribution to Chinese growth in October.

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  • 31.10.2014 — MACRO UPDATE: GERMANY, UKRAINE, JAPAN

    German retail sales drop, but consumption remains fundamentally sound. Ukraine gets Russian gas over the winter. Japan gets more monetary stimulus, but that is not a sustainable way out of the long-run malaise.

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  • 30.10.2014 — DATA WRAP: STRONG US GROWTH, WEAK GERMAN INFLATION

    The US economoy grows strongly in Q3 2014, German inflation falls to 0.7%.

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  • 30.10.2014 — MACRO UPDATE: FED, EUROZONE TRENDS

    The Fed ends QE, but keeps the guidance. In the Eurozone, some positive news, some mixed.

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  • 27.10.2014 — UKRAINE: MODERATE PRO-EU PARTIES WIN ELECTIONS

    The Ukraine risk continues to fade as radical anti-Russian parties fail to gather support.

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  • 13.10.2014 — MACRO UPDATE: EUROZONE, GREECE, CHINA

    France and Germany take spotlight at the Eurozone finance minister meeting. Greece avoided elections for now, but the risk is not over. China's export data should soothe nerves.

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  • 01.10.2014 — GLOBAL MACRO: JAPAN MOMENTUM FADING, CHINA STABLE

    Japan's leading indicator slip at a high level, while China's are stable at a low level. China faces new political risks in Hong Kong.

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  • 05.09.2014 — UNEVEN RECOVERY

    Global Outlook: An Uneven Recovery
    - US: fiscal drag over, economy responds to low rates = solid growth
    - China: sufficient growth, risks well contained
    - Emerging world: the good, the mixed and the ugly
    - Eurozone: crisis over – but Putin shock hits the core, interrupts upswing
    - Britain: back to boom-bust?
    - Tail risk: Russia wages open war against Ukraine?

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  • 04.09.2014 — MACRO UPDATE: GERMAN ORDERS REBOUND; STEADY BANK OF JAPAN

    Brighter news for Germany's manufacturers at the start of Q3 as orders rebound. In Japan, the BoJ resists pressure to do more.

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  • 29.08.2014 — MACRO UPDATE: GERMAN RETAIL SALES; JAPAN WEAKNESS

    Both German retail sales and the Japanese economy had a weak start in Q3.

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  • 26.08.2014 — HOW FAR WILL PUTIN GO?

    How far will Putin go in his semi-covert war against Ukraine? Since March, this has been the key issue clouding the European economic outlook. We do not know the final answer yet, and Putin himself may not have made up his mind yet. But the last few weeks have provided further clues. Some of them are worrying.

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  • 22.08.2014 — FORECASTS AT A GLANCE: AN UNEVEN RECOVERY

    No significant forecast changes

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  • 21.08.2014 — GLOBAL MACRO UPDATE: US FED, CHINA PMI

    The Fed is preparing markets for its exit strategy, while Chinese growth seems to be slowing again after the mini-stimulus.

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  • 20.08.2014 — GLOBAL MACRO UPDATE: JAPAN, UK, UKRAINE

    Japanese exports start well into Q3, UK inflation drop allows BoE to keep rates low, Ukraine battle rages on but some political thawing.

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  • 11.08.2014 — MACRO UPDATE: TURKEY, ITALY, ESTONIA

    Erdogan's election victory is good for short-term stability; Renzi's commitment to the deficit target shows that Italy's problems are not fiscal; Estonia is growing again.

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  • 06.08.2014 — MACRO UPDATE: UKRAINE, GERMAN ORDERS, SCOTLAND

    Tensions in Ukraine rise further, German factory orders dip, Scotland independence risk recedes.

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  • 04.08.2014 — MONDAY MACRO UPDATE: CHINA, PORTUGAL, GREECE

    China: steady as she goes. Portugal rescues Espirito Santo. Moody's finally follows suit on Greece.

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  • 01.08.2014 — FORECASTS AT A GLANCE: UNEVEN GLOBAL RECOVERY

    One big risk: Russia invades Ukraine.

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  • 30.07.2014 — RUSSIAN RISKS AND THE IMPACT OF SANCTIONS

    While the people of Ukraine are the victims, Russia and its president are likely to be the ultimate losers of their covert war against Ukraine.

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  • 25.07.2014 — MACRO UPDATE: UKRAINE CONFLICT, GERMAN CONSUMERS

    The battle lines in Ukraine are hardening. But German consumers are undeterred so far.

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  • 24.07.2014 — CHINA AND SPAIN ON TRACK, PUTIN OFF TRACK

    China rebounds following the government’s mini-stimulus package, Spain has turned into one of the fastest-growing economies in Europe, the risk of serious Russian recession keeps rising.

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  • 21.07.2014 — WHAT NEXT AFTER RUSSIA'S THREE BIG MISTAKES?

    With three bad mistakes, Russia has manoeuvred itself into an uncomfortable corner. Despite its clear military edge on the ground in Eastern Ukraine, its strategic situation looks weak.

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  • 15.07.2014 — MACRO UPDATE: CHINA, JAPAN STIMULUS ON TRACK

    The Bank of Japan kept its asset purchases rate unchanged, while Chinese monetary data shows stimulus reaching the economy.

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  • 10.07.2014 — MACRO UPDATE: US FED, CHINA TRADE

    The Fed will finish QE in October 2014 and Chinese trade reached growth rates in line with recent averages after weakness earlier this year.

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  • 01.07.2014 — MACRO UPDATE: JAPAN CONFIDENCE EASING, CHINA STABILISING

    Japan's Abenomics is running into tax trouble, while China's mini-stimulus as mini-impact.

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  • 25.06.2014 — MACRO UPDATE: GERMAN CONSUMERS, FRENCH BUSINESS, UK CARNEY

    German consumer get bullish, French business are disappointed and the UK central bank governor strikes a cautious note in interest rates, which earns him being called an "unreliable boyfriend".

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  • 13.06.2014 — CHINA: SHIFT TOWARDS CONSUMPTION

    The rebalancing of the economy away from investment towards more consumption is making progress.

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  • 10.06.2014 — MACRO UPDATE: GREECE, UKRAINE

    While Greece's cabinet reshuffle is a PR gimmick, the serious risks in Ukraine are receding.

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  • 04.06.2014 — PORTUGAL’S COURT DELAYS, US FED DISCUSSING EXIT

    The €700m decision by Portugal's court will not be the last setback to overcome. The Fed's balance sheet would shrink by a mere 0.2% in the first year if it allowed a passive rundown of purchased assets.

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  • 02.06.2014 — MACRO UPDATE: PORTUGAL, SPAIN, CHINA

    Portugal's court strikes again, Spain cuts taxes and Chinese sentiment stablises.

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  • 02.06.2014 — MACRO UPDATE: PORTUGAL COURT, SPAIN BOOST, CHINA SENTIMENT

    Portugal's court strikes again, Spain's government cuts taxes and Chinese economic sentiment stabilises.

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  • 19.05.2014 — GREEK POLL, ECB CUT, IRISH UPGRADE, UKRAINE RISK

    The first round of regional elections produced no clear winner. More importantly, it had no clear loser. At the margin, this reduces slightly the risk that the fragile coalition of centre-right New Democracy with the centre-left Pasok could fall apart after the second round of regional elections coupled with the EU parliamentary elections next Sunday.

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  • 16.05.2014 — FORECAST UPDATE: EUROZONE, ECB, JAPAN

    Yesterday’s data for Q1 GDP data were surprisingly weak. Eurozone growth decelerated slightly to a quarterly annualised rate of 0.76% (0.19% qoq) from an average rate of 0.92% for the three quarters before (0.23% qoq). The Q1 result was well below our 0.4% qoq forecast.

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  • 08.05.2014 — FED YELLEN, UKRAINE IMPACT, GERMAN ORDERS AND TAXES

    As usual, pundits will dissect every word Yellen says at her semi-annual testimony today. But why bother? Even she simply cannot know the precise state of the US economy in late 2014 and early 2015.

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  • 23.04.2014 — PORTUGAL HELP, CHINA STABILISATION

    Portugal’s relatively small 10-year bond auction today is likely to be another milestone on the way to a clean bail-out exit on 17 May. 10-year sovereign bond yields have dropped below pre-crisis levels to 3.7%, only 40bp above their euro era lows of 2005. After Fitch raised the outlook on its BB+ credit rating from negative to positive, Portugal could soon regain its first investment grade rating with one of the major agencies.

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  • 22.04.2014 — UKRAINE RISK, GERMAN TAX BONANZA, SPANISH BANKING

    UKRAINE: NO EASING OF TENSIONS | The pre-Easter Geneva accord seems to have changed little on the ground. Instead, the shootout at a separatist checkpoint in Sloviansk with at least 3 casualties and the refusal of pro-Russian activists to leave occupied buildings threatens to unravel the accord. One small positive is that OSCE monitors are becoming more active in Eastern Ukraine, for example by trying to investigate the events in Sloviansk.

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  • 16.04.2014 — UKRAINE RISK; CHINA SLOWING SOFTLY

    WILL RUSSIA SHOW ITS HAND?
    The Ukrainian government has ordered military action against the Russian-backed insurgents in Eastern Ukraine after several deadlines to vacate public buildings in ten towns went unheeded.

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  • 10.04.2014 — CHINA TRADE, GREEK BOND SALE, DOVISH FED

    Chinese trade unexpectedly declined in March, but the fall exaggerates the underlying slowdown. Exports fell 6.6%yoy in March, well below consensus expectations of a 4.8% rise and the first time since 2009 that they have fallen for 2 months in a row. 

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  • 08.04.2014 — BOJ HOLDS, ECB DEBATES

    Japan’s central bank gave no indication of any imminent additional monetary stimulus after its meeting today. But that could still change once the impact of the April sales tax increase on domestic demand and inflation feeds through to economic data.

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  • 01.04.2014 — FRANCE, RUSSIA RETREAT, CHINA

    President Hollande is visibly preparing France for tough reforms by appointing his tough minister of the interior Manuel Valls to Prime Minister. Valls and his cabinet will have the unpleasant task of spelling out €50bn of spending cuts for 2015-2017 to fund tax cuts and deficit reduction.

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  • 31.03.2014 — MACRO UPDATE: UKRAINE, FRANCE, GREECE

    Two pieces of news suggest a possible easing of tensions around Ukraine. First, Putin called Obama and Russian foreign minister Lavrov then met his US counterpart Kerry for talks about Ukraine, with the US side demanding a withdrawal of Russian troops from the border and Russia suggesting to turn Ukraine into a federation. 

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  • 24.03.2014 — MACRO UPDATE: FRANCE, CHINA

    Heavy defeat in the first round of the municipal elections should serve as another warning shot to French President Hollande. In the best case, it may trigger more reforms. If the government does not manage to boost economic growth and lower unemployment significantly in the next few years, winning another term in 2017 will be impossible.

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  • 12.03.2014 — JAPAN CONSUMERS, ITALY REFORMS

    2014 is shaping up to be a crucial year for Prime Minister Abe. After the easy part of Abenomics, trying to stimulate the economy for a while, the hard work of fiscal and structural reforms needs to begin. Japan’s first major step to reduce the extremely high budget deficit of 10% of GDP in 2013 is a big increase in sales tax from 5% to 8% in April. 

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  • 03.03.2014 — CHINA PMI

    China should expand solidly again this year. The Markit manufacturing PMI was confirmed at 48.5 this morning, down from 49.5 in January. But the non-manufacturing PMI rose to 55.0 from 53.4, not far off its average of the past three years. The official manufacturing PMI, which has a larger sample size than the Markit equivalent, was 50.2 in February, roughly in-line with its average during 2012 when the Chinese economy grew 7.7%. Growth is gradually slowing in China, but it will probably remain strong for the foreseeable future. 

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