The European cement sector has had a strong start to 2025 compared to its US equivalent. As the chart shows, European cement stocks have been outperforming the broader euro area market since January 2023; but this year’s growth has been particularly strong, with the Datastream euro area cement index climbing around 45% since January to reach a new all-time high on 14 March — while its US counterpart has only registered 3% growth in the same period. As a result, the total market value of the US cement index relative to the euro area cement index has shrunk, falling from

Faced with uncertainty over the new administration’s tariff policy, US stock markets are weakening. As outlined in Fathom’s Global Outlook, Spring 2025, European economies could also be hit hard due to American tariffs. However, despite this lingering threat, mid-to-large cap German stocks have outperformed (as have small caps, albeit to a lesser extent). Most recently, discussions of loosening a long-held ‘debt brake’ to boost defence and infrastructure spending has further supported financial markets in Germany. Across the Atlantic, tariffs on Canada, Mexico and China have resulted in a sharp decline in US stocks, as threats of a trade war and

As 2024 comes to a close, economic and political volatility seem to be at the forefront in the euro area, but in the US the economic outlook appears optimistic. On Thursday 5 December, Michel Barnier resigned as French Prime Minister following an overwhelming no-confidence vote against him which was supported by 331 MPs. The vote was submitted on Monday by the far-right National Rally party after Mr Barnier attempted to use Article 49.3 of the French Constitution to force a budget through parliament without a vote. The budget, which fell through, had included tax hikes and spending cuts to the

In our Global Outlook, Autumn 2024, we argued that the euro area was much more likely than the US to go ‘Back to BC (before COVID)’, with interest rates, inflation and economic growth rates converging more rapidly towards their pre-pandemic levels. Emerging data since we put that forecast together do not challenge this view. One of the key characteristics of the pre-pandemic economic environment was real (inflation-adjusted) interest rates in negative territory. Rates went even further below zero during COVID as inflation rose, forcing a synchronised policy-tightening by major central banks. However, as the chart below shows, the expected real

Investor expectations of where the US policy rate is likely to be in December 2025 have moved around a lot this year. In January the expected rate started at 3.2%, before steadily rising on the back of unexpectedly high inflation and continued strong economic conditions. After peaking at 4.5% in April, it has steadily declined. As of August 9, it was back to 3.2% as recession fears unwound. The FOMC is widely expected to commence its rate-cutting cycle in September. However, the scale of its easing remains uncertain. Traditionally, the FOMC has cut aggressively, with easing cycles often coinciding with

Euro area annual headline inflation was unchanged in April at 2.4 per cent while underlying inflation (headline excluding energy, food, alcohol and tobacco) fell 0.3 percentage points to 2.7 per cent, the lowest recorded figure since January 2022. Compared with March, headline prices rose 0.6 per cent, slightly more than the historical average for this month, driven by higher-than-normal rises in the price of services. The inflation print was broadly in line with the European Central Bank’s March projections (which see both measures of inflation returning to the two per cent target around the middle of next year). Fathom’s Global

According to Fathom’s Global Outlook, Spring 2024, advanced economies will avoid recession over the forecast horizon (which goes up to the end of 2026), with the global economy showing resilience against inflation and high interest rates. There has however been a divergence in the performance of major advanced economies, which Fathom expects to continue. Looking at growth in real GDP, the US has outperformed both the euro area and the UK, with positive growth recorded in each quarter since 2022 Q3. The euro area and the UK experienced slightly negative growth in 2023 Q3 and Q4. According to the conventional

The euro area’s headline annual inflation rate was 2.4% in March, according to estimates released by Eurostat on 3 April, with the core inflation rate at 2.9% — both down 0.2 percentage points since February. With headline inflation approaching the 2% target, if core inflation continues decreasing the European Central Bank might soon start cutting rates. Services inflation remains at 4%, however, so the central bank may well be cautious about cutting rates at its next meeting, on 11 April. But records from the ECB’s March meeting state that the central bank is increasingly confident that a rate cut is

The cost-of-living crisis has yet to trigger a pronounced recession in the world’s leading economies. However, high interest rates to curb inflation are likely to push the euro area into recession in 2024. Another possible effect of higher rates is increased fiscal fragility. As interest rates increase, so does the cost of government borrowing. Loose fiscal policy due to the cost-of-living crisis and COVID-19, combined with increased interest rates to curb inflation, have increased fiscal risk. It is notable therefore that, as can be seen from Fathom’s market-implied probability of default indicators in the chart below, this increased risk does

According to the flash estimate released on 31 July, the euro area returned to growth during the second quarter of this year, with economic activity increasing by 0.3%. In our latest Global Outlook Summer 2023, finalised early June, we changed one of our key calls and we no longer anticipate a global recession this year. The sharpest falls in real wages are now behind us and, in the US, real wages are rising. With a few exceptions, most major economies look to have navigated through the cost-of-living crisis while avoiding a period of economic contraction. They have dodged one bullet,

Newly revised data from Eurostat show that the euro area[1] has recorded two consecutive quarters of negative growth, and is now in technical recession. Downward revisions in the GDP numbers for Germany and Ireland helped to ensure real GDP across the then 19-country currency bloc fell by 0.1% in both 2022 Q4 and 2023 Q1, thus just about meeting the definition. In fact, there are multiple definitions of a recession, and an economy does not necessarily have to experience two quarters of negative economic growth to enter one. In 2001, the euro area went into recession without meeting the definition

Euro area GDP expanded by 0.2% in the third quarter, confounding Fathom’s expectations that the currency bloc was already in recession. Strong household consumption in Germany helped to boost activity, but with 11.7% inflation in October, this appears to be an unsustainable source of growth. Indeed, momentum has clearly eased across the bloc, from a 0.7% quarterly average in the first half of the year. Fathom’s view that the euro area was in recession may have discounted the strength in services spending, including tourism, following two years of heavy restrictions. It’s also possible that an historically higher savings rate will