Uptick in Eurozone composite PMI in August likely a dead cat bounce driven by Paris Olympics. Nothing good in the details with both manufacturing sector and Germany slipping further into contraction, falling new orders, souring outlook and job losses. The recovery that never was.

Since just before covid, CEE economies were among the fastest growing. But their growth has been much slower than prior to the pandemic, implying a slowdown in convergence. The real growth champions are in the Balkans (🇬🇷🇭🇷🇷🇸) whose growth accelerated despite the headwinds.

Germany has been the weak link in Europe with real GDP almost 10% below its pre pandemic trend = €300bln loss in constant prices. The weakness has been broad-based across components apart from.. government consumption. Everything is flat or shrinking apart from the size of govt.

Eurozone private sector credit flow still tepid in July, significantly below the pre-pandemic normal. Still no pick-up in long-term lending to corporates, which would be a positive signal for fixed investment. Mortgage lending to households also weak.

EU gas consumption and supply remains ~15% below pre-war levels, allowing storages to be refilled ahead of winter. However, wholesale gas prices and supply remain prone to disruption (Russia's share in total supply up), while a lot again depends on how cold the winter will be.

The Financial Times showed how US GDP releases tend to be revised down (optimists) while German/Eurozone GDP tends to be revised up (pessimists). In Sweden, it's total doom and gloom. Should be a complete and utter ban on Sweden's flash releases until we figure out what the hell is going on.

Where Germany's inflation goes, the Eurozone tends to follow. Today's drop to just below 2% (and a downside surprise in Spain) is setting up a soft Eurozone print (out tomorrow). With a drop in negotiated wages and downside risks to growth, a September rate cut seems a done deal.

Inflation in the Eurozone a whisker away from the 2% target with goods running at 0% and services at 4%. These are relative price changes (services getting more expensive versus goods), while the European Central Bank targets headline inflation. With the target met, rate cuts should follow.

In August, 40% of Eurozone economies had headline inflation below 2% (and Germany at 2%). A year ago, none of them did. Yes, core inflation is sticky, due to services. But it is a lagging component (and not the target), while the economy is crying out for rate cuts.

Ukraine stopping oil transit through Druzhba will mean a significant supply shortfall for 🇭🇺&🇸🇰 unless they find alternative sources, which is easier said than done as both are landlocked. Coincidentally, the two have the most Russia-friendly governments in the EU.

We are also importing more from the US recently, thanks to LNG.

Diverging trends in 🇪🇺 fixed investment: Never-ending misery in 🇩🇪; fake IP investment propping up total in 🇫🇷; Superbonus-driven surge plateauing in 🇮🇹; and an apparent gradual pick-up in 🇪🇸&🇳🇱. Clear investment has been one of the main casualties of high rates and weak demand.

France officially has near US-levels of IP investment. Is France known to be an innovation powerhouse like the US or for stifling big government that's impossible to reform? Clearly French numbers on IP investment have a flawed methodology...

Italy's industry flatlined around 2000 (hmm, what happened then) and never recovered after the global financial crisis. The recent energy price shock eroded Germany's cost competitiveness while a new China shock threatens its main industries. Will Germany follow Italy..?

With almost all European economies publishing Q2 GDP data, the growth pecking order has not changed much at the top, but it did at the bottom with 🇪🇪 replacing 🇫🇮 as the worst performing economy since just before Covid. Top 3 performers continue to be 🇭🇷🇵🇱 & Novo Nordisk.

Over the last two years, more than 80% of Denmark's growth was due to the pharma industry (Novo Nordisk). This year won't be much different probably.

Almost 11 million foreign tourists arrived in 🇪🇸 this July, an all-time high. No wonder there is mounting backlash in local hotspots. Shaping up to be a record year for Southern Europe, but with risks of overdependence on tourism - labour intensive with low pay & productivity.

After years of extraordinary fiscal measures (pandemic, energy crisis), government deficits are wide in many European countries. Absent a growth miracle, govts will face difficult decisions on how to narrow them - as finance ministers in 🇬🇧&🇫🇷 recently warned. Time to pay...

Fiscal policy matters. Solid fundamentals in 🇵🇹 have meant a significant drop in the premium it pays to borrow versus 🇩🇪, even as its debt is rolling off the ECB's balance sheet at the fastest pace. 🇵🇹 is now borrowing for less than 🇫🇷 with its big deficits and political mess.

France has a new PM Michel Barnier who was given an absolute hospital pass. To comply with bitterly fought over EU fiscal rules, he needs to deliver fiscal tightening unmatched in recent 🇫🇷 history. Would be extremely hard even without a fractured parliament packed with extremes.