reports
- Bastien AILLET
- Dirk Schumacher
German elections: the centre barely holds
The outcome of this Sunday’s election narrowed the range of potential coalition s down to a single option : a CDU/CSU – SPD government with CDU chairman Merz as the next chancellor. Coalition talks are likely to be difficult but the surge in the far-right AfD as well as the escalation of tensions with the US government and the dismal economic situation will help to focus the minds of both sides. Given these internal and external pressures , w e see a chance for some meaningful refo...
- Dirk Schumacher
First take on German elections:difficult coalition talks ahead
The centre -right CDU/CDU was the relative winner of this Sunday’s election coming in, based on the number available so far, slightly below 30%. The next government will be consequently led by Friedrich Merz. Depending on what the final result will be , different coalitions may be formed . Assuming that only five parties make it into the Bundestag – which seems currently the most likely outcome – a coalition between the CDU/CSU and the centre -left SPD would command a sufficient number...
- Dirk Schumacher
ECB January meeting: disinflation remains on track
Today’s ECB meeting confirmed that the ECB’s b aseline scenario remains in place : growth will pick-up and wage growth and services inflation will come down. T his leaves , i n sum, further room for rate cuts by the ECB and we continue to expect three more 25bp cuts until the terminal rate of 2% is reached in June.
- Dirk Schumacher
Germany: Can the next government reignite growth?
Suffering from its longest stagnation period in decades , the German economy is desperately in need for a genuine re boot. Whether the next government can engineer such a re boot is, however, anything but clear. For one, there is disagreement among the main parties about the root cause of the stagnation and, consequently, how to address these. Moreover, some of the structural challenges the German economy faces are arguably very difficult to tackle and may need a lot of political ...
- Dirk Schumacher
Euro area: Composite PMI improves further in January
The composite PMI came in above expectations in January on the back of an improvement in the manufacturing sector. The details of the survey were also quite encouraging and the January report is consistent with a (moderate) reacceleration of economic activity in the euro area at the beginning of this year.
- Dirk Schumacher
ECB preview: a cut despite sticky services inflation
We expect the ECB to cut rates by 25bp at its meeting next week and to signal that the terminal rate has not been reached yet. While it is true that services inflation remains uncomfortably high, a majority of G overning Council members will interpret this a s a lagging indicator of future inflation dynamics. We continue to expect the ECB to cut its deposit rate by 25bp in the upcoming meetings until it reaches 2% in June. Recent comments from several GC members seem to be consistent with a te...
- Dirk Schumacher
Euro area composite PMI rebounds in December
The composite PMI reco r ded a solid gain in December, defying expectations of a stable reading. While the level of the index remains low (49.5 after 48.3 ), today’s number are nonetheless signaling that the economy is not about to keel over, but rather re-gaining some (moderate) momentum at the end of the year.
- Dirk Schumacher
ECB December meeting: inflation on track to target
As widely expected, the ECB cut its deposit rate by 25bp. The overall tone of the press conference was rather neutral with respect to the next steps. While President Lagarde stressed that the “direction of travel” was clear, there was no guidance on neither the speed of rate cuts n or the eventual landing zone. We continue to expect 25bp rate cuts in the upcoming meeting s until the deposit rate reaches 2% in June .
- Dirk Schumacher
Euro area outlook: Another year brings old and new challenges
2024 proved to be a challenging year for the euro area and there are plenty of reasons to believe that 2025 will present yet another set of fresh new challenges . These range from US tariffs, fiscal consolidation and a potential escalation in trade tensions with China. In addition, there is uncertainty with respect to the outcome of the elections in Germany and the political path taken in France. Bu t just as the euro area managed to grow, albeit only moderately, in 2024 we expect it to ...
- Dirk Schumacher
- Dirk Schumacher
ECB preview: Gradual easing continues
We expect the ECB to cut its deposit rate by 25bp at next week’s meeting. A 25bp cut seems to us a good compromise between a fragile growth outlook and still high wage growth and services inflation. Not least because of the mixed picture , we also don’t expect the ECB to ditch its “ data-dependence “ when deciding on its next step.
- Dirk Schumacher
Euro area : decline in PMIs underscores downside risks
The November composite PMI surprisingl y declined against expectations of a stable reading. The negative surprise c ame mostly from a drop in services sector sentiment , though manufacturing sentiment also recorded a small decline. While these figure s should not be taken at face value, they nevertheless reflect the growing downside risks to the euro area economy.
- Dirk Schumacher
Germany: Scholz alone at home
The dismissal of finance minister Lindner by Chancellor Scholz has led to the collapse of the German government at a rather inopportune time . That said, the in - fighting in the coalition had reached a point at which little common ground was left. The Chancellor is aiming at this point for early elections in March next year and to lead a minority government until then . It is conceivable that he still may find a majority in parliament for some of the pending laws already agreed by th...
- Dirk Schumacher
Euro Area PMI: Sentiment stabilizes - country differences prevail
PMI business sentiment stabilizes in October and the forward - looking indicators in the report point to a slight improvement in the coming months. At a minimum , today’s numbers suggest that the cyclical momentum is stabilizing and not getting worse. That said w hether this is the start of a genuine improvement remains to be seen.
- Dirk Schumacher
ECB meeting: “Disinflationary process well on track”
As widely expected, the ECB cut its deposit rate by 25bp at the October meeting. While President Lagarde was at pains to stress that there was no pre-commitment with respect to the next step, the ECB seems now more confident that underlying inflation is heading towards target next year. We continue to expect a 25bp cut in December and a terminal rate of 2% by June next year .
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