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November’s upside surprises in surveys (PMI and IFO in particular) are unlikely to dissuade ECB policymakers that more needs to be done at their December 3 meeting. November’s euro area business surveys highlighted that the recovery continues to be largely led by domestic strength. In terms of countries, German surveys (PMI, IFO) surprised on the upside, whereas in France, surveys (PMI, INSEE) were less upbeat than in the previous month, partly reflecting the loss of confidence after the...

Macroview There is an ongoing debate about whether the world is facing secular stagnation and deflation. In the inflation/deflation debate, we are in the deflationist camp. If economic mechanisms are left unchecked, deflationary forces will rise. DM central banks will struggle to hit their 2% inflation targets. The inflation targeting monetary policy style of the 1990s and early 2000s was followed by the quantitative easing (QE) style after the 2008-11 US subprime and euro area debt...

Macroview In 2016, we forecast global economic growth of 3.3%, slightly better than in 2015. This will be a ‘goldilocks’ environment (not too hot, not too cold), that allows continued supportive monetary policy. Macroeconomy  US real GDP growth will be above potential at 2.5% (against potential growth of 1.8%), but with an absence of momentum. Growth will be driven by domestic demand. Euro area growth will accelerate modestly, to 1.8%, from an estimated 1.5% in 2015. Domestic demand is...

Today's preliminary GDP reports came in broadly in line with expectations and are therefore unlikely to alter the ECB’s assessment of economic activity. We continue to forecast a gradual pick-up in the pace of economic expansion, largely led by domestic strength. According to Eurostat’s preliminary estimate, euro area real GDP grew by 0.3% q-o-q (1.2% q-o-q annualised; 1.6% y-o-y) in Q3, below consensus expectations (0.4%), thus marking a gentle slowdown from the 0.4% q-o-q recorded in Q2...

Today’s retail sales report was rather disappointing. Nevertheless, we continue to expect overall consumption to grow robustly in Q4 and in 2016. Nominal total retail sales increased by 0.1% m-o-m in October, below consensus expectations (+0.3%). Total sales were dented by a 0.9% m-o-m fall in nominal sales at gasoline stations and a 0.5% decline in nominal auto sales. This latter decrease came as a surprise as already published data on unit car sales (real) had shown a 0.5% rise m-o-m...

Despite a 1% weaker EUR/USD than three months ago, the ECB is likely to announce new easing measures at its 3 December meeting, for several reasons. Firstly, Mario Draghi effectively made a pre-commitment to further easing at the October meeting and he is unlikely to risk disappointing the markets. Secondly, and more fundamentally, we expect the new set of staff forecasts to lead to a downward revision to the 2017 HICP inflation median projection, to 1.6% (see chart and assumptions below),...

Just 11 days after Portuguese Prime Minister Pedro Passos Coelho took office, the new left-wing majority yesterday voted down the government’s programme leading to the collapse of the minority centre-right coalition (PàF). In the general election on 4 October, the PàF coalition, led by Pedro Passos Coelho, claimed the largest share of the popular vote (38.4%), but failed to retain its parliamentary majority as it obtained just 107 seats of the 230 seats in parliament. The Socialist Party...

Yesterday, November 9th, the Catalan parliament voted to formally begin the process of breaking away from Spain. A resolution in the Catalan parliament laying out an 18-month road map for the region's independence was passed by 72 to 63, backed by MPs from the pro-independence “Junts pel Si” coalition and the smaller far-left Popular Unity Candidacy (CUP). The resolution calls for further laws to facilitate the creation of an independent social security system, a Catalan tax authority...

We believe however that the pace of rate tightening after the initial hike will be rather pedestrian. October’s employment report was more robust on all fronts. Job creation came in above expectations, the unemployment rate touched 5.0%, wages increased by a solid 0.4% m-o-m and the proxy for household wage incomes rose markedly m-o-m. We now believe the most likely scenario is that the Fed will hike rates in December. Non-farm payroll employment rose by a solid 271,000 m-o-m in October...

Macroview Global managers are developing a pronounced bearish stance towards China, while several local managers are building up their exposure to Chinese equities, arguing the rest of the world is far too pessimistic. China has been slowing down and the outlook for emerging markets is far from positive. Summer events in China shook markets worldwide and the consensus is that the worst is yet to come. Chinese economic data has been below expectations for the past year and a half, with the...