Italy’s gamble

M5S/Lega government plan calls for tax cuts and additional spending If implemented, fights await with the EU-system and the euro group… …and downgrades of Italy’s credit rating Banks are likely to be hit on several fronts More market turbulence as the government moves forward   Anti-establishment movements can be forces for good, if they represent…

Higher oil prices reduce demand growth

President Trump’s decision to withdraw from the Iran nuclear deal has sent crude oil prices to the highest level since 2014; Brent crude oil is now at USD77 per barrel with the US WTI at USD70.4 per barrel. The withdrawal is not immediate, and the other signatory countries are now working to preserve the deal.…

Headwinds challenge German growth

Hard data confirm a weak spot in the German economy in Q1/2018 Trade tensions are already affecting corporate behavior Growth in German GDP is likely to undershoot rosy forecasts, despite strong households ECB to stay on course with end to QE this year   Global business confidence stabilized in April after declining during winter, but…

Slowdown in Brexitland

The British economy has shown remarkable resilience in the almost two years since the Brexit referendum in June 2016. Export industries have benefitted from a surge in global demand, and households have compensated for a lack of real wage growth by increasing their debt. However, economic growth has tapered off with quarterly growth in 2017…

Lower inventories support oil prices

Brent crude oil prices are now above USD70 per barrel (70 d/b) as regional tensions in the Middle East have increased supply concerns. However, prices have been moving up since last summer, when demand began to outstrip supply, prompting a steep reduction in global inventories. Crude-oil inventories in the OECD-countries (the best proxy for global…

Short-term US growth outlook remains favorable

The US economy continues to expand at a moderate pace, although it still exhibits some of the usual Q1 softness (even seasonally adjusted). My GDP-indicator, based on consumer and business confidence, has declined in recent months, but the level still points towards higher growth. Like confidence indicators globally, the surge in late-2017 indicated an increase…

Strike and counter-strike

On 3 April, US Trade Representative (USTR) Lighthizer released the list of Chinese goods President Trump plans to hit with a 25% tariff. The list includes 1,300 product categories, totaling about USD50 billion worth of imports. The proposal is now subject to a public hearing running through 22 May. If China has not offered concessions…

China in the crosshair

On 22 March, President Trump initiated the expected bilateral trade confrontation with China, but almost simultaneously scaled back the simmering trade conflict on steel and aluminum as the EU, Australia, Brazil, Argentina and South Korea gained temporary exception from the tariffs, joining the Nafta-partners Canada and Mexico. Japan is now the odd man out in…

Brexit milestone reached

It was all smiles in Brussels on 19 March, when the two chief Brexit negotiators presented a draft withdrawal agreement. The 129-pages document is by no means finished, indeed the text was color coded to highlight the different levels of agreement: green – the text is agreed at negotiators’ level, yellow – policy agreed, but…

Federal Reserve’s uncertainty challenge

When Federal Reserve’s monetary-policy committee (FOMC) meets later this week, it marks the changing of the guard at the helm of the world’s most important central bank. The new chairman Powell is expected to continue on the path laid out by Janet Yellen, but there have been substantial changes to the economic framework since FOMC…