Key views Global Monthly June 24

Macro

Eurozone – Growth is expected to remain positive in Q2 but edge lower compared to the strong Q1 reading. We have penciled in 0.2% of qoq growth in Q2. Overall, the eurozone economy is slowly regaining its footing, economic activity is expanding in the services sector while manufacturing continues to bottom out. Growth is expected to remain below the trend rate over 2024. In May, core inflation surprised to the upside due to strong services inflation, in part driven by the pass-through of wages. Leading indicators however suggest disinflation will broadly continue in the coming months.

The Netherlands – Despite the contraction in Q1, GDP growth is expected to pick up and to average 0.5% in 2024. Government spending and household consumption are the drivers of this gradual growth. The stimulus measures in the newly announced coalition agreement led us to slightly raise our growth forecast for 2025 from 1.2% to 1.3%. Inflation is continuing its downward trend. However, the price trend of components with a large wage element – such as labour-intensive services – is slowing the path downward. Inflation is expected to average 2.5% in 2024 and 2.1% in 2025.

UK – The election is expected to have no implications for growth and inflation, despite the expected change of government. This is due to the lack of fiscal space and the limited appetite to re-open Brexit policy. The economy is recovering from a prolonged period of stagnation on the back of high rates. Disinflation is continuing, but services inflation is stubbornly high, due to wage growth that is still well above levels consistent with 2% inflation. The return to 2% inflation will take longer than in other advanced economies, due to historically higher inflation expectations in the UK.

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