Daily Insight
Group Economics Macro & Financial Markets Research Aline Schuiling & Nick Kounis
Early signs of more QE
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9 June 2015 • • •
ECB weekly purchase data show tentative signs of firmer pace... …signalling QE likely to be stepped up in June, while net supply will fade Meanwhile, German economy starts Q2 on a strong note
ECB purchases on track to accelerate in June
Net supply of German government bonds
The ECB published its latest report on its asset purchases on
EUR bn
Monday. Although total weekly purchases slowed slightly compared to the week before, the ECB remains on track to
15 10
step up QE if it maintains the current pace of bond buys.
5
Public sector purchases up, ABS and covered bonds
-5
week. This means that over that week, purchases amounted to
Dec
Nov
Oct
Sept
Aug
July
June
amounted to EUR 159.6bn up from 146.8bn in the previous
May
-15
Apr
As of the 5 June, the ECB’s settled public sector purchases
March
-10
Jan
down
Feb
0
EUR 12.92bn, compared to 12.45bn previously. Meanwhile, total covered bond purchases (up to EUR 87.28 bn from 85.11)
Source: ABN AMRO Group Economics
and ABS (EUR 7.5 bn from 7.2) slowed over the week. This meant the total weekly purchase amount eased slightly to EUR
Germany starts Q2 on strong note, due to exports…
15.37bn from 15.74bn.
Following a weaker than expected first quarter, Germany’s economy seems to be heading for a stronger Q2. Industrial
Total purchases could reach EUR 68bn in June
production increased by 0.9% mom in April, bouncing back
If the same daily pace is kept up during the course of June, we
from a 0.4% contraction in March. Meanwhile, exports rose by
estimate that total monthly purchases this month will amount to
1.9% mom in April, building upon a 1.3% expansion the month
around EUR 68bn. This would be up from EUR 63bn in May
before. Both industrial production and exports were stronger
and the normal targeted monthly amount of EUR 60bn. As
than the consensus forecast. Although surveys for Germany’s
such, we are seeing some early signs of the frontloading of
manufacturing sector (PMI, Ifo) moved a bit lower in May, they
purchases that the ECB indicated would take place in May and
have remained at levels consistent with ongoing robust
June.
expansion in the coming months. Exports and industrial production will continue to benefit from a weak euro, low oil
Net supply of government bonds to dry up
prices and historically low interest rates.
At the same time, the net supply of government bonds is likely to become significantly negative again in the next few months.
… and domestic demand
Net supply of core government bonds jumped in May, but this
Although Germany’s industrial output is largely export-
is actually a rare phenomenon as the general trend for this
orientated, healthy growth in domestic demand is supporting
year is one of very weak net supply (see chart for the case of
production as well. Earlier reports showed that retail sales
Germany). In addition, once the ECB purchases are taken into
bounced back in April, gaining by 1.7% mom, up from -1.4% in
account, the available outstanding amount of core government
March. Meanwhile, consumer confidence is well above the
bonds will shrink considerably.
long-term average level and consistent with ongoing strong expenditure. All in all, we expect GDP growth in Germany to bounce back in Q2 after the weak 0.3% expansion in Q1. The German economy should also grow more strongly than the eurozone again.