Archive

September 20, 2021
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Germany: Traffic signals ahead

  • Ahead of elections on 26 September, the SPD has moved ahead in the polls, and a three-party SPD-Green led coalition now looks to be the most likely outcome.
  • The SPD and Greens look like natural partners. The major stumbling block to any coalition will be the deal with a third party – i.e. a Traffic Light arrangement with the FDP, or a more controversial tie-up with the ex-communist Linke party.
  • A policy programme billed as an investment in decarbonisation and digital infrastructure could be a key source of unity for a Traffic Light government.

September 17, 2021
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EA: missing clothing sales in Aug-21

  • EA HICP inflation for Aug-21 was confirmed at a low 3.0% y-o-y, while the ex-tobacco index printed at 107.54 (0.03 below our forecast). Clothing caused more of the rise than we expected amid missing sales, offset by less strength in housing and transport.
  • The lack of discounting means there is less room to normalise higher, so we trim our Sep-21 forecast by 6bps to 3.2% y-o-y. Our forecast remains above the consensus and ECB from Nov-21 onwards, but we still see it slipping below the target through H2 2022.

September 16, 2021
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Inflation expectations start stretching

  • New price shocks stretch the peak and persistence of excess inflation. Although we still see this pressure as transitory, we are mindful of the risk expectations might shift. The responsiveness of inflation forwards to spot changes is most concerning.
  • Wage negotiations will be the ultimate check, albeit lagging behind expectations and our statistical measures of underlying inflation. Wages corroborate hawks in Norway, less dovish pressure in the UK and Sweden, while the Euro area remains in a low rut.