Goldman Sachs On Europe: Nothing To Worry About!

Goldman’s rather amusing Europe analyst, Erik Nielsen, is back from his summer vacation, and we can again enjoy his Sunday letters from his home in Chiswick. I’m not sure where he’s been, but he says; ” My part of the world is still ticking along beautifully.” And here’s how Europe looks to Mr. Nielsen right now.

“The latest published GDP number for the Euro-zone – Q2 – is at 4% annualized growth and available indicators point to only marginally lower growth in early Q3, so any easing is just a sign of some normality setting in. Nothing to worry about!”

Erik Nielsen


“We are heading into survey-week in the Euro-zone. On a sequential basis, we have long been forecasting a slowdown of GDP growth in the second half of this year (to about trend-growth; i.e. 2% annualized), and while the July indicators were a good deal stronger than that (pointing to annualized growth of almost 3.5% in early Q3), we still expect a slowdown and hence somewhat weaker survey data for August,” Mr. Nielsen writes.

Hello from a lovely, if slightly humid, August day in Chiswick; I’ve been back from vacation for a week and “my part of the world” is still ticking along beautifully.

Here is how Europe looks to me:

  • Europe continues to enjoy a robust – and pretty broad-based – recovery, although things are moderating a bit as they should do.
  • The Bundesbank has revised its German 2010 forecast higher while the French government revised their 2011 forecast down (causing new tensions on fiscal policy next year).  We agree on both.  We continue to be happily above consensus for the Euro-zone for both 2010 and 2011.
  • Axel Weber “pre-announced” continued unlimited liquidity by the ECB through year-end, but also reiterated the intended exit strategy for Q1.  The Euro weakened on his statement; beautiful.
  • We are heading into survey week in the Euro-zone; we expect both the PMIs and the Ifo to moderate a bit, but its from very high levels, and nothing to worry about.
  • The UK will publish more details and (possible) revisions of Q2 GDP; we expect a small revision up to 1.2%qoq.
  • Switzerland publishes its August Kof this week; like in the Euro-zone we expect a small decline from the present high level.
  • The Polish MPC meets this week to decide on interest rates (we expect unchanged); maybe they’ll say something about the zloty strength.
  • The Hungarian MPC also meets on interest rates – also unchanged, we think, and also worth listening to their press conference to hear if they have views on the host of present issues facing Hungary.

Here’s a copy of the full European weekly outlook from Goldman Sachs.

(Source: Zero Hedge).

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