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Nadia Gharbi

Nadia Gharbi

Nadia Gharbi is economist at Pictet Wealth Management. She graduates in Université de Genève, Les Acacias, Canton of Geneva, Switzerland Do not hesitate to contact Pictet for an investment proposal. Do not hesitate to contact Pictet for an investment proposal. Please contact Zurich Office, the Geneva Office or one of 26 other offices world-wide.

Articles by Nadia Gharbi

Europe chart of the week – UK GDP growth

8 days ago

Short-term rebound in the UK, driven by services.
The Office for National Statistics (ONS) published this week a new rolling monthly estimate of UK GDP. The release pointed to a rebound of growth in Q2 (quarterly data will be published on August 8). According to the ONS, the rolling three-month growth to end-May was 0.2%, compared to 0% in the three months to end-April (see chart below).
Looking at the details, the services sector (79% of the economy) grew by 0.3% in the three months to end-May and was the only positive contributor to GDP growth. Services enjoyed a boost from temporary factors such as the warm weather and the royal weeding. By contrast, industrial production (14% of the economy) and construction

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Europe chart of the week – UK GDP growth

8 days ago

Short-term rebound in the UK, driven by services.The Office for National Statistics (ONS) published this week a new rolling monthly estimate of UK GDP. The release pointed to a rebound of growth in Q2 (quarterly data will be published on August 8). According to the ONS, the rolling three-month growth to end-May was 0.2%, compared to 0% in the three months to end-April (see chart below).Looking at the details, the services sector (79% of the economy) grew by 0.3% in the three months to end-May and was the only positive contributor to GDP growth. Services enjoyed a boost from temporary factors such as the warm weather and the royal weeding. By contrast, industrial production (14% of the economy) and construction (6% of the economy) detracted from GDP growth.The recent data releases,

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Euro area: a slight rebound

13 days ago

Overall, June saw a halt to recent declines in euro area business sentiment survey.
The final reading for the euro area composite Purchasing Managers’ Index (PMI) rose from 54.1 in May to 54.9 in June, slightly higher than the initial estimate of 54.8. However, the manufacturing PMI fell further, to an 18-month low of 54.9, due to weakness in France and Germany. Growth remains decent in the sector but, as Markit noted, the decline in business optimism “reflects rising trade worries, political uncertainty and the impact on ongoing capacity constraints”. On a brighter note, the services PMI jumped to 55.2 from 53.8 in May, boosted by strong data in Germany, France and Italy.
The robust headline PMI in June was partly

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Euro area: a slight rebound

15 days ago

Overall, June saw a halt to recent declines in euro area business sentiment survey.The final reading for the euro area composite Purchasing Managers’ Index (PMI) rose from 54.1 in May to 54.9 in June, slightly higher than the initial estimate of 54.8. However, the manufacturing PMI fell further, to an 18-month low of 54.9, due to weakness in France and Germany. Growth remains decent in the sector but, as Markit noted, the decline in business optimism “reflects rising trade worries, political uncertainty and the impact on ongoing capacity constraints”. On a brighter note, the services PMI jumped to 55.2 from 53.8 in May, boosted by strong data in Germany, France and Italy.The robust headline PMI in June was partly due to calendar effects. Markit noted that the number of holidays was

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Europe chart of the week – Bank credit flows

22 days ago

ECB’s M3 and credit report for May showed a large rebound in long-term bank loans to corporates.The ECB’s M3 and credit report for May published this week was pretty strong overall and confirmed that lending dynamics in the euro area are in good shape. Bank credit flows to non-financial corporations (NFC, adjusted for seasonal effects and securitisations) amounted to €22bn in May, much more than the April figure of €11bn. Corporate-sector lending increased 3.6% year-over-year in May, its fastest rate since May 2009 and up from 3.3% in April.One factor that could partly explain the rebound is the lower issuance activity after the surge seen in Q1. On a country-by-country basis, the rebound was particularly strong in Germany (+€8bn) and in France (+€7bn). Flows to NFC were also positive

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Buying more time

24 days ago

Switzerland: monetary policy
At its quarterly monetary policy assessment last week, the Swiss National Bank (SNB) kept unchanged the target range for the three-month Libor at between -1.25% and -0.25% and the interest rate on sight deposits at a record low of -0.75%. The SNB reiterated its willingness to intervene in the foreign exchange market if needed. The central bank’s assessment of the Swiss franc also remained unchanged from its previous meeting in March, stating that it continued to see the currency as “highly valued” and the “situation on foreign exchange markets as fragile”. The SNB made a specific reference to political uncertainty in Italy as well.
A dovish ECB, political uncertainties in Europe and the

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Buying more time

25 days ago

Clear signs from the ECB that it won’t raise rates until H2 2019 mean we are revising our expectations for monetary tightening in Switzerland.The Swiss National Bank’s (SNB) monetary meeting was held last week. The press release was little changed from the previous one. The SNB reiterated its willingness to intervene in the foreign exchange market if needed. The central bank’s assessment of the Swiss franc also remained unchanged, stating that it continued to see the currency as “highly valued” and the “situation on foreign exchange markets as fragile”.During the press conference, SNB president Thomas Jordan remained cautious overall. Importantly, the 2020 inflation forecast was revised down to 1.6% from 1.9%.A dovish ECB and political uncertainties in Europe as well as the SNB’s downward

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European cars at a crossroad

June 18, 2018

Falling momentum in new car sales, together with the threat of US tariffs is adding to the uncertainty facing the European car industry.

The motor vehicle industry is of major importance to the EU economy and to global trade.

According to Eurostat, total exports (to countries outside the EU) amounted to EUR205bn in 2017. Germany accounted for 52% of total motor exports. The US was the largest destination for EU motor vehicle exports (24% of the total in 2017).

Mr Trump’s hint that the White House could impose import tariffs on cars and car parts would strike at the heart of Europe’s manufacturing industry, in particular German firms.

It is quite difficult to isolate the effect of a potential one-off increase

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European cars at a crossroad

June 15, 2018

Falling momentum in new car sales, together with the threat of US tariffs is adding to the uncertainty facing the European car industry.Last weekend’s G7 summit in Canada ended badly, with President Trump withdrawing his support for the summit’s final statement. Heightening tensions between Europe and the US are Trump’s hints that the White House is considering import tariffs on cars and car parts.German firms would be the most impacted if such tariffs were introduced. According to Eurostat, Germany accounts for 52% (or EUR107bn) of the EU’s car total exports, many of which go to the US (EUR28bn). This is adding to uncertainty for an industry already grappling with the implications of Brexit for sales to the UK and the car emissions scandal. Given the complexity of the global auto supply

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Europe chart of the week – Spanish growth

June 5, 2018

Amid domestic political uncertainty, Spanish growth remains strong.
This week saw the final release of Spanish GDP growth for Q1. The economy again managed to post robust growth, the highest among the four largest euro area economies (+0.7% q-o-q versus 0.4% q-o-q for the euro area). The breakdown of figures showed that domestic demand was once again the main growth driver. The carryover effect for 2018 reached 2.8%, meaning that even with zero growth in the remaining three quarters of 2018, Spanish GDP would grow by 2.8% on average this year. Leading indicators, such as the European Commission’s economic sentiment index, point to broadly strong growth in Q2 (see chart), helping offset domestic political instability.

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Spain Snap Elections in Sight

June 2, 2018

Political instability in Spain has added to turmoil in other peripheral countries. The situation is not comparable with the one that Italy is experiencing at the moment, but since it comes at the same time it is increasing market volatility.
Last Friday, Spain’s main oppositionparty, the Socialist party (PSOE) filed a no confidence vote against Prime Minister Mariano Rajoy. The debate will start on May 31 with a vote probably on June 1.
All major opposition parties are calling for Rajoy to step down. Rajoy survived a no-confidence vote in June 2017 called by Podemos, but this time is different. The motion comes just after a high court found Rajoy’s Popular Party (PP) guilty of involvement in a bribes-for-contracts

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Europe chart of the week – Spanish growth

June 1, 2018

Amid domestic political uncertainty, Spanish growth remains strong.This week saw the final release of Spanish GDP growth for Q1. The economy again managed to post robust growth, the highest among the four largest euro area economies (+0.7% q-o-q versus 0.4% q-o-q for the euro area). The breakdown of figures showed that domestic demand was once again the main growth driver. The carryover effect for 2018 reached 2.8%, meaning that even with zero growth in the remaining three quarters of 2018, Spanish GDP would grow by 2.8% on average this year. Leading indicators, such as the European Commission’s economic sentiment index, point to broadly strong growth in Q2 (see Chart), helping offset domestic political instability. Indeed, this week, Spanish politics was back in the spotlight.Mariano

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Italian politics: habemus deal

June 1, 2018

Italy finally has a government, but its public finances are likely to be soon back in the spotlight.Following a spectacular U-turn, the Five Start Movement (MS5) and the League reached a deal to form a government under their original candidate for prime minister, Giuseppe Conte.Both parties agreed on a new finance minister, Giovanni Tria, while Paolo Savona, who was blocked by President Mattarella last Sunday, will be minister for EU affairs. M5S leader Di Maio will be minister for labour and economic development. Matteo Salvini, the head of the League, will be interior minister.While calm may be restored in the short term, medium-term risks remain present and Italian public finances are likely to quickly return to the spotlight.Tensions will likely return after the summer: a budget plan

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Italy heads towards new elections

June 1, 2018

Fragmented politics and the risk of a financial crisis continue to hang over the country.
This weekend, the Five Star Movement and the League decided to pull the plug on their attempt to form a coalition government after the President of the Republic Sergio Mattarella vetoed the appointment of anti-euro professor Paolo Savona as minister of finance. Mattarella has granted ex-International Monetary Fund official, Carlo Cottarelli, a mandate to form a caretaker government. Should the caretaker government lose a confidence vote, elections could come in autumn.
One critical question for investors will be whether the League, and to a lesser extent the M5S, manage to gain further support ahead of the next election.

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Winter Olympics in South Korea boosts Swiss growth

May 31, 2018

Q1 growth was very encouraging, with investment in equipment and exports as well as sports driving the economy.According to the State Secretariat for Economic Affairs (SECO) quarterly estimates, Swiss real GDP grew by 0.6% q-o-q in Q1 (2.3% q-o-q annualised, 2.2% y-o-y), closely in line with the previous quarter and above consensus expectations (0.5% q-o-q).Several aspects of the report are worth mentioning. First, growth was underpinned by domestic demand, in particular by investment in equipment. Second, the entertainment industry recorded strong growth thanks to major international sporting events. Excluding sports events, Swiss grew by 0.4% q-o-q in Q1.The Winter Olympics in South Korea early this year had an impact on Q1 GDP, as mentioned by SECO in its press release, where it states

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Spain snap elections in sight

May 30, 2018

A no-confidence motion could see the downfall of the government of Mariano Rajoy. But unlike Italy, any new election should not alter the pro-euro slant of the Spanish parliament.Political instability in Spain has added to turmoil in peripheral euro area countries. The situation is not comparable with Italy’s, but since it comes at the same time as a political crisis in the latter, it is increasing market volatility.Last Friday, Spain’s main opposition party, the Socialist party (PSOE) filed a no confidence vote against Prime Minister Mariano Rajoy. The debate will start on May 31 with a vote probably on June 1.All major opposition parties are calling for Rajoy to step down. Rajoy survived a no-confidence vote in June 2017 called by Podemos, but this time is different. The motion comes

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Italy heads towards new elections

May 28, 2018

Fragmented politics and the risk of a financial crisis continue to hang over the country.This weekend, the Five Star Movement and the League decided to pull the plug on their attempt to form a coalition government after the President of the Republic Sergio Mattarella vetoed the appointment of anti-euro professor Paolo Savona as minister of finance. Mattarella has granted ex-International Monetary Fund official, Carlo Cottarelli, a mandate to form a caretaker government. Should the caretaker government lose a confidence vote, elections could come in autumn.One critical question for investors will be whether the League, and to a lesser extent the M5S, manage to gain further support ahead of the next election. According to the latest polls, since the March 4 general election, the League has

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Spaniards back in the mood to borrow

May 11, 2018

Before the financial crisis, the real estate bubble and the parallel growth in borrowing meant that the indebtedness of Spanish households spiralled ever higher, reaching a peak of 84.7% of GDP in Q2 2010. Since then, Spanish’s households have tightened their belt, with indebtedness falling to 61.3% of GDP in Q4 2017.
However, recent data suggest that the situation might be changing again. Indeed, in 2017, households borrowed net EUR3.1bn to finance spending. After years of saving, this was the first time since 2009 that families had net borrowings.
There are several possible reasons for this turnaround last year. First, the improvement in Spain’s economic outlook could have made households more confident regarding

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Spaniards back in the mood to borrow

May 11, 2018

After years of frugality, Spanish households are re-leveraging again.Before the financial crisis, the real estate bubble and the parallel growth in borrowing meant that the indebtedness of Spanish households spiralled ever higher, reaching a peak of 84.7% of GDP in Q2 2010. Since then, Spanish’s households have tightened their belt, with indebtedness falling to 61.3% of GDP in Q4 2017.However, recent data suggest that the situation might be changing again. Indeed, in 2017, households borrowed net EUR3.1bn to finance spending. After years of saving, this was the first time since 2009 that families had net borrowings.There are several possible reasons for this turnaround last year. First, the improvement in Spain’s economic outlook could have made households more confident regarding higher

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Switzerland: ‘Sovereign money’ initiative

May 10, 2018

Switzerland: A Test Bed for Radical Ideas
The ‘Sovereign money’ initiative, to be voted on in June, aims at a fundamental reform of the Swiss monetary system. In a nutshell, the initiative asks that the creation of money and the granting of loans be separated by barring commercial banks from creating deposits through lending. According to the initiative’s promoters the “Swiss National Bank (SNB) should be the sole organisation authorised to create money – not only cash and coins, but also the electronic money in our bank accounts”. Moreover, the SNB would be responsible for implementing a form of ‘helicopter money’, distributing funds directly to the federal and cantonal governments and even to individual citizens.
A

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Switzerland: ‘Sovereign money’ initiative

May 9, 2018

An upcoming referendum would change the SNB’s monetary policy and the business model of commercial banks.SWITZERLAND: A TEST BED FOR RADICAL IDEASThe ‘Sovereign money’ initiative, to be voted on in June, aims at a fundamental reform of the Swiss monetary system. In a nutshell, the initiative asks that the creation of money and the granting of loans be separated by barring commercial banks from creating deposits through lending. According to the initiative’s promoters the “Swiss National Bank (SNB) should be the sole organisation authorised to create money – not only cash and coins, but also the electronic money in our bank accounts”. Moreover, the SNB would be responsible for implementing a form of ‘helicopter money’, distributing funds directly to the federal and cantonal governments and

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Euro area growth: somewhere between hard and soft data

May 4, 2018

According to Eurostat’s preliminary flash estimate, euro area real GDP expanded by 0.4% q-o-q in Q1 2018 (1.7% q-o-q annualised, 2.5% y-o-y), in line with consensus expectations (0.4%) and down from an upwardly revised figure of 0.7% q-o-q for Q4 2017.
The implications of the growth slowdown on ECB staff projections should remain limited, in our view. In March, they had pencilled in 0.7% q-o-q GDP growth for Q1, but the starting point was slightly lower before the Q4 2017 figure was revised from 0.60% to 0.67% q-o-q. More importantly, the staff is likely to forecast a rebound in Q2 while leaving their medium-term outlook broadly unchanged. As a result, the 2018 GDP growth projection may be revised only marginally

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Switzerland, still on the monitoring list

April 18, 2018

The U.S. Department of Treasury has just published its semi-annual report on International Economic and Exchange Rate Policies. It comes at a time when the US Administration remains deeply concerned by the significant trade imbalances in the global economy. The report only focuses on the US’s 12 largest trading partners, which collectively account for more than 70% of the US’s trade in goods. Although Switzerland is currently only the United States’ 15th largest trading partner (it used to be among the 12 largest), it still appears on the US Treasury semi-annual report. The main news was the inclusion of India on the department’s monitoring list, together with five other countries (China, Japan, Korea, and Germany,

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Switzerland, still on the monitoring list

April 17, 2018

Switzerland meets two of the US Treasury’s three conditions for being deemed a ‘currency manipulator’.The US Department of Treasury has just published its semi-annual report on International Economic and Exchange Rate Policies. The main news was the inclusion of India on the department’s monitoring list, together with five other countries (China, Japan, Korea, Germany and Switzerland).The Treasury has established three criteria for a country to be deemed a currency manipulator: a bilateral trade surplus of over USD 20 billion with the US, a current account surplus larger than 3.0% of GDP, and persistent, one-sided intervention including net purchases of foreign currency, conducted repeatedly, totalling in excess of 2% of an economy’s GDP over a 12-month period.Switzerland fulfils two of

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Hard data proves soft in the euro area

April 14, 2018

Euro area industrial production (excluding construction) was weak in February (-0.8% m-o-m) and follows the recent release of other disappointing pieces of hard data such as retail sales, German factory orders and trade. Based on available ‘hard’ data, real GDP growth rate in the euro area is projected to be 0.1-0.2% q-o-q in Q1 2018 (see chart below), a sharp slowdown from 0.6% q-o-q in Q4 2017. However, ‘soft’ data, such as PMI surveys, while also down in February and March, point to much stronger growth of 0.60.7% q-o-q. There is therefore a very wide gap between hard and soft data.
Several factors could explain the weakness in hard and soft data for the early months of 2018. Business surveys overstated the pace

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Hard data proves soft in the euro area

April 13, 2018

Signs of a certain loss of momentum may well fuel additional ECB dovishness in the near term, but is unlikely to compromise upcoming policy normalisation.Euro area industrial production (excluding construction) was weak in February (-0.8% m-o-m) and follows the recent release of other disappointing pieces of hard data such as retail sales, German factory orders and trade. Based on available ‘hard’ data, real GDP growth rate in the euro area is projected to be 0.1-0.2% q-o-q in Q1 2018, a sharp slowdown from 0.6% q-o-q in Q4 2017. However, ‘soft’ data, such as PMI surveys, while also down in February and March, point to much stronger growth of 0.6-0.7% q-o-q. There is therefore a very wide gap between hard and soft data.Several factors could explain the weakness in hard and soft data for

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Europe has a lot to lose from trade wars

April 8, 2018

Any estimate of the economic costs of protectionist measures, let alone trade wars, is subject to uncertainty given the complexity of global supply chains. A common assumption is that new tariffs on exports will produce small direct effects on GDP growth but more significant indirect effects in the event of escalating trade conflicts, including on domestic investment. Europe looks particularly vulnerable to such indirect effects given its relatively high degree of openness to trade. For all the talk about ‘Euroboom’, about one quarter of euro area GDP growth in 2017 was driven by net trade.

Euro area exports amounted to 47% of GDP in 2017 compared with 12% in the US. Importantly, the euro area is also highly

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Disentangling the Swiss current account

March 27, 2018

Following the Swiss National Bank’s (SNB) publication of Switzerland’s balance of payments data for Q4 2017, in this note we look deeper into the Swiss current account to try to find out why Switzerland persistently runs a surplus and whether or not the current account balance can be used to assess the fair value of the Swiss franc.
In 2017, the current account surplus stood at around 9.8% of GDP or CHF66bn. This was CHF4bn higher than in 2016. Persistent current account surplus can be explained by demographic trends, industrial structure as well as statistical distortions. As a result, the current account is far from a good proxy to value the Swiss franc.
In recent years, international debate about countries’

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Disentangling the Swiss current account

March 27, 2018

Switzerland’s high current account surplus is far from being a good proxy for assessing the fair value of the Swiss franc.Switzerland has run a current account surplus since the 1980s. In 2017, it stood at around 9.8% of GDP, CHF66bn. This was CHF4bn higher than in 2016.Economic theory suggests that a large current account surplus is a function of an undervalued currency. Based on this premise, there may be question marks over the SNB’s contention that the Swiss franc was “overvalued”.In a speech last year, SNB President Thomas Jordan pointed to structural factors and a number of statistical distortions that contribute to Switzerland’s persistent current account surplus, suggesting the current account is far from a good proxy for determining the fair value of the Swiss franc.The Swiss

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Disentangling the Swiss current account

March 27, 2018

Switzerland’s high current account surplus is far from being a good proxy for assessing the fair value of the Swiss franc.Switzerland has run a current account surplus since the 1980s. In 2017, it stood at around 9.8% of GDP, CHF66bn. This was CHF4bn higher than in 2016.Economic theory suggests that a large current account surplus is a function of an undervalued currency. Based on this premise, there may be question marks over the SNB’s contention that the Swiss franc as “overvalued”.In a speech last year, SNB President Thomas Jordan pointed to structural factors and a number of statistical distortions that contribute to Switzerland’s persistent current account surplus, suggesting the current account is far from a good proxy for determining the fair value of the Swiss franc.The Swiss

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