Eurozone | Energy prices put another dent in near-term recovery
The surge in European gas and electricity prices over recent months pushed energy prices to an all-time high in August, amplifying a pickup in inflation and pointing the Q4 2021 headline rate towards 4%. This will squeeze households’ disposable income, push up industry’s already proliferating cost base, and possibly accelerate the withdrawal of stimulus by the ECB next year.
What you will learn:
- Strong demand and a combination of supply-side factors have caused a surge in wholesale energy prices, with the near-term outlook subject to significant uncertainty.
- Passthrough to consumer prices varies widely across countries owing to the local energy market structure as well as the scale and type of policy response.
- We estimate the lift to inflation will be between 0.2pp and 0.3pp this year and next.
High debt costs suggest European office price correction
Our analysis suggests a 10% correction is needed on average for the major office markets in Europe to compensate for the higher cost of debt, with prime yields required to soften by 10bps-75bps to generate a low-risk interest coverage ratio at a reasonable LTV.Find Out More
Why an ageing population doesn’t mean soaring inflation
What’s the future for inflation? Joachim Nagel, the new president of Germany's central bank, believes the rapidly ageing global population will play a key role – ramping up pressure on prices in the medium term. While we agree slowing labour supply will stifle output growth, in his recent discussion Nagel failed to fully consider the demand side of the argument.Find Out More