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Services inflation is breaking lower, notwithstanding Easter distortion
Easter effect exaggerates services inflation drop amid broad downtrend
Nevi Dutch Manufacturing PMI fell slightly
The Nevi Dutch Manufacturing PMI fell slightly, from 50.0 in February to 49.6 in March. After a small increase in the previous month, the number of new orders fell again, but only to a very small extent. At the same time, the Dutch manufacturing industry did increase production for the first time in nine months. However, there is no sign of a strong recovery yet.
The Week Ahead - 31 March - 4 April 2025
These are the Key Macro Events for the upcoming week.
ESG - Green bonds exhibit lower volatility and higher liquidity than non-green bonds
Following the first green bond issued in 2007 by the European Investment Bank, the green bond market has evolved to become what is now a USD 5 trillion issuance market. Green bonds offer several benefits for both issuers and investors, leading discussions amongst academics whether these advantages translate into green bonds trading at tighter spread levels (higher prices) compared to non-green bond. This spread difference is called the greenium and is positive if the green bonds trades at tighter spread levels. In this note, we aim to evaluate this topic and explore potential advantages of green bonds for market participants, such as volatility and liquidity. This note is the first of a series of notes about the greenium.
China - Economy shows some resilience as more US tariff threats loom
Chinese economy shows resilience despite the stepping up of US import tariffs, and targeted retaliation. We expect policy makers to continue with stepwise fiscal stimulus and more monetary easing, although Beijing is keeping part of its powder dry, with more US tariffs threats looming in April.
US - The reports of a contraction are somewhat exaggerated
Import frontloading depresses 2025Q1 GDP nowcasts, while private domestic demand remains solid. This increases the probability of a technical recession, especially if further tariffs arrive later in Q2. Recession probabilities marginally elevated with current policy, with upside risks if tariffs are increased.
The Netherlands - Consumption to lead the charge
The second GDP calculation confirmed the Dutch economy grew by 0.4% q/q in Q4-2024. International developments have been unfolding rapidly, and we will revise our forecasts after April 2nd.
Eurozone - Frontloading at the front of the year
Despite high uncertainty, the eurozone economic recovery is unfolding broadly as expected. The first signs of frontloading are visible, providing a temporary boost to activity. Growth still subdued but on a recovery path, while inflationary pressures continue to slowly ease. The ECB is expected to pause as it nears neutral, though the April meeting will be a close call.
Global Monthly - This is getting complicated
The outlook is getting muddied by rising US recession risk on the one hand, and eurozone defence spending on the other. In the near-term, growth is being distorted by trade frontloading. This is leading to a partial unwind of the Fed-ECB policy divergence narrative that was driving markets. Despite the massive policy shifts of the past month, we are keeping our forecasts unchanged for now, and plan to do a full review after the US’s so-called ‘Liberation Day’ tariff announcement on 2 April. Spotlights: 1) Are tariffs really the end game? We explore the feasibility of a ‘Mar-a-Lago Accord’; 2) Will defence spending revitalise eurozone growth? We think it could, but from 2026 onwards.
Key views Global Monthly 26 March 2025
US tariff threats have surprised even our pessimistic expectations, with the most important announcement still to come on 2 April. China, the EU and the US’s neighbours are expected to bear the brunt. For the eurozone, a new upside risk comes from likely significant increases in defence spending, and in Germany new infrastructure spending. This will blunt the impact of tariff rises. Global trade and growth are also initially benefiting from a frontloading ahead of tariff rises, but a sharp slowdown is expected later in 2025. Domestic demand is in the meantime recovering in the eurozone and China, helped by falling interest rates, and in China, targeted fiscal measures. Inflation in the US is expected to reaccelerate, but to fall below target in the eurozone. This is likely to drive a divergence in Fed & ECB policy, with Fed policy staying on hold from here, and the ECB continuing to cut rates.