Baltics Q1 GDP update: Growth holding up
GDP growth is holding up surprisingly well in the Baltic countries, according to the recently released flash GDP estimates. This reduces fears that the slowdown in the euro area would weigh significantly on the Baltic economies this year.
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The Swedish economy almost stagnated in the first half of the year. GDP rose by a mere 0.2% q/q in Q2 after the dip by 0.1% in the first quarter. The outcome for Q2 was clearly weaker than expected.
LFS unemployment in May was lower than expected and is on the strong side to Norges Bank’s forecast. The indictor is volatile, but if anything this reduces the chances of a rate cut
US expands sanctions against Russia Sharp drop in Japanese industrial production
Mixed figures.Overall indicator (ESI) edged down a bit in July. Suggest growth but no boom in Q3.
Although our forecast for Q2 GDP growth implies barely positive growth in the last two quarters combined, we do not believe the H1 average is a fair measure of the state of the economy as the GDP data look implausibly weak relatively to a broad range of activity indicators for Q1.
Since the Fed chair Yellen is not holding a press conference after today's FOMC meeting, the Fed is not expected to stray from the current policy course. This means the central bank will slow its bond buying, but make no changes to its forward guidance. The FOMC statement will likely assume a slightly more positive characterisation of the labour market, which should be enough to put some upward pressure on yields and further strengthen the USD.
The latest Euro Rates Update is now available
Core bonds rally – German 10-year yield with a new record low. Intra-Euro-zone spreads mostly narrow further. Bonds to feel some pressure for a change today. Further sizable sanctions imposed on Russia. US housing market still struggling – consumer confidence surges. German inflation numbers and the Fed’s message to push yields higher. US GDP and the ECB’s lending survey with something positive to say. US and Italian auctions ahead.
We expect GDP to have expanded by 0.9% q/q in Q2. The second quarter is characterised by strong consumption growth, subdued exports and higher productivity. Our forecast is above the Riksbank’s view. The text has been changed on Tuesday 29 July 13.00.*
Further sanctions against Russia Israeli PM preparing for long-term conflict
Core bond yields edge higher – yields with some more upside potential today. Spanish and Italian 10-year yields hit record lows. US housing market continues to struggle – confidence indicators positive. Russian sanctions on the agenda again. US house prices and consumer confidence ahead.
The latest Euro Rates Update is now available
Europe’s debts at record level Higher rating for Portugal
If you are just back from holiday, here are a few bullets on what happened while you were busy …
Bonds rally again ahead of the weekend, but core yields to creep higher today. Equities under pressure on Friday. German Ifo disappoints – UK growth still strong. The surge in LTRO repayments not repeated. Portugal receives good news from Moody’s. What is with Germany and a tighter EU? A huge week ahead: the Fed, US GDP, Euro-zone inflation and payrolls. Italian & US auctions and plenty of coupons and redemptions.
Today Bank of Russia Board of Directors decided to raise the key rate by 50 b.p. to 8%. RUB may find support, but geopolitics will remain the focal point for the Russian currency market.
Big week in the US with GDP, Fed, ISM and payrolls. Flash estimates on July inflation will be out for the Euro Area and ECB will publish the Bank Lending Survey on Wednesday. In Norway the labour market will be in focus. Sweden will be out with both PMI and GDP Q2 (early estimate)
Strong GDP growth continued in the UK economy in Q2, with growth coming in at 0.8% q/q, in line with expectations, which was enough to lift the y/y rate to 3.1%, the highest since the last quarter of 2007. On a q/q basis, growth has been running at 0.7-0.8% for five consecutive quarters already, a remarkably stable performance.
Holger Sandte @HolgerSandte Jul 30
RT @JanVonGerich: #ECB lending survey with a positive message: credit standards were eased in all loan categories, while net loan demand in…
Jan von Gerich @JanVonGerich Jul 30
#ECB lending survey with a positive message: credit standards were eased in all loan categories, while net loan demand increased.
…nevertheless private consumption grew by almost 3% y/y.
Swedish GDP Q2 below our forecast due to lower than expected private consumption and fixed investments. Exports a bit better than expected