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Spain is the first country of the four biggest economies to publish Q3 figures. Its good performance bodes well for the euro area as a whole. According to INE’s flash estimate, Spanish real GDP expanded by 0.8% q‑o‑q (3.4% y-o-y) in Q3, in line with consensus expectations. This comes after GDP grew by 1.0% q-o-q in Q2 and 0.9% q-o-q in Q1. Details of the expenditure breakdown for Q3 are not yet available (to be published on 26 November). Nevertheless, based on monthly macroeconomic...

Whatever the ECB does in the coming months, this threat of “low-flation for ever” is likely to keep the central bank under pressure The euro area HICP flash estimate rebounded to zero in October, or +0.04% y-o-y, after -0.08% in the previous month, as negative energy-related base effects diminished. Looking at HICP components, energy inflation continued to drag the headline rate down, rising only slightly from -8.9% to -8.7% y-o-y as Brent oil prices more or less stabilised in euro terms...

Despite September's setback in credit flows, the credit impulse improved further in Q3, still consistent with growth in domestic demand of close to 2%. Euro area M3 and credit data surprised on the downside in September, contradicting the positive message from the ECB’s Bank Lending Survey (BLS) published last week. Overall, we believe these volatile bank credit flows are likely to rebound strongly in the months ahead, closing the gap with upbeat leading indicators like the BLS (see chart...

The ECB’s increasingly dovish tone continues to support our expectation of a 6-month QE extension to be announced at the 3 December meeting. Mario Draghi was unsurprisingly dovish at today’s policy meeting, bearing our view that more monetary easing is in the pipeline, effectively signalling a move at the 3 December meeting. By saying that “the degree of monetary policy accommodation will need to be re-examined in December” and that the ECB was not in “wait-and-see” but in “work-and-assess”...

The ECB’s October Bank Lending Survey reveals a sixtieth consecutive quarter of net easing of credit conditions and a further increase in credit demand. The ECB’s October Bank Lending Survey (BLS), conducted between 15 and 30 September 2015 and released today, revealed a sixtieth consecutive quarter of net easing of credit conditions as well as a further increase in demand for loans to non-financial corporations. Moreover, forward-looking BLS indicators pointed towards banks expecting to...

The least bad option for the ECB could just be to leave the threat of lower rates hanging in the air while hoping that actually delivering on the threat might not be needed. With a few exceptions, the recent history of ECB easing has been marked by episodes of lengthy bouts of verbal interventions, preparing the ground for actual decisions once a consensus has been reached. Several reasons can be found for the ECB’s slow responsiveness to changes in the macro-financial environment,...

We believe that y-o-y core CPI inflation will remain relatively stable over the coming 6-9 months. Year-on-year headline inflation fell back to zero in September, but core inflation inched up from +1.8% in August to +1.9% in September. The slack in the labour market is diminishing rapidly, and deflation is not really posing a risk in the US. However, with a higher dollar and inflation low worldwide, we believe core inflation will remain relatively stable over the coming months. The...

We are leaving unchanged our euro area real GDP growth forecast of 1.5% for 2015 as a whole. In the euro area, industrial production (excluding construction) dropped by 0.5% m-o-m in August, in line with consensus expectations (0.5%). The July figure was revised marginally up by 0.2 percentage points to 0.8% m-o-m. However, despite August’s decrease, industry is still likely to have fared better in Q3 (+0.3% q-o-q for July-August as a whole) than it did in Q2, when production fell by...

The scandal that has engulfed the VW Group had a big impact on both platinum and palladium as both metals are used in catalytic converters in vehicles. VW’s deceptive practices as regards the real level of nitrogen oxide (NOx) emissions from its diesel vehicles have highlighted the un-ecofriendly features of diesel-powered cars, which can be expected to hit demand. It is also likely to boost the chances of stricter environmental standards on NOx exhaust emissions being pushed through in...

Today’s data on August’s consumer spending were strong, and data for the previous months were revised up. We now expect consumption growth to reach some 3.3% in Q3 and remain robust thereafter. Consumption growth above expectations in August August data on household consumption and income were published today. Real consumption rose by a strong 0.4% m-o-m in August, slightly above consensus estimates (+0.3%). Already published data on retail sales and car sales for August had been quite...