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Tariffs risk recession - a forecast update
President Trump announced sweeping ‘reciprocal’ tariffs based on the size of the bilateral trade deficit. We expect both the US and the eurozone to slow sharply and only just skirt a recession, while the US will also have to deal with higher inflation. Monetary policy divergence is likely to re-emerge as a theme, with the ECB cutting rates further but the Fed remaining on hold. Fiscal stimulus should help drive a eurozone recovery in 2026, but growth improvement in the US next year will be more tepid.
Housing Market Monitor - April 2025 - Summary
We maintain our price forecast, with+ 7% price growth in 2025 and+ 3% in 2026. We increase our transaction growth forecast for 2025 to +5% (was +2.5%). The drivers remain rising wages, lower mortgage rates and the supply shortage.
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.
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.
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.
Macro Watch - Can defence spending revitalise the eurozone economy?
Higher defence spending will likely significantly lift growth in 2026, in both the eurozone and the Netherlands. A lot will depend on how quickly spending ramps up, and the extent to which Europe can re-tool industry. All else equal, this is likely to mean the ECB cutting interest rates less than we currently expect.
Dutch economy in focus - Resilience of internal demand in the face of external uncertainty
The Dutch economy experienced a notable improvement of growth in 2024; government and household demand were the main drivers. Consumption increases despite household pessimism; higher purchasing power, rising house prices and the tight labour market contribute to consumption growth.