Euro area annual inflation up to 2.3% - Industry roundup: 2 December
by Ben Poole
Euro area annual inflation up to 2.3%
Euro area annual inflation is expected to be 2.3% in November 2024, up from 2.0% in October, according to a flash estimate from Eurostat, the statistical office of the European Union.
Looking at the main components of euro area inflation, services is expected to have the highest annual rate in November (3.9%, compared with 4.0% in October), followed by food, alcohol & tobacco (2.8%, compared with 2.9% in October), non-energy industrial goods (0.7%, compared with 0.5% in October) and energy (-1.9%, compared with -4.6% in October).
“While this data is unlikely to derail expectations for a December rate cut by the ECB, even if October shows an acceleration, it may temper prospects for further easing in 2025, lending modest support to the euro,” said Michel Lowy, co-founder and CEO of SC Lowy. “However, persistently elevated inflation could prompt the ECB to maintain or resume rate hikes, driving up borrowing costs. This, in turn, may lead banks to tighten lending criteria or scale back market activity to manage risk.”
Harry Woolman, Associate at Validus Risk Management, noted that “…core inflation, often the bugbear of central bankers, came in under expectations at 2.7%. ECB policymakers remain under pressure to deliver a larger 50 bps rate cut on 12th December, with current pricing assigning a 57% chance of such an outcome. Though the pressure for an oversized cut is waning, the probability is down from 75% last week. As such, we have seen a bounce in the euro versus the dollar, up from the recent lows of near 1.04 to close to 1.06. Nevertheless, the outlook for the continent remains tenuous, with French political uncertainty, geopolitical tensions and underwhelming economic performance proving to be key drivers of near-term sentiment. We expect any short-term boost to the common currency to remain limited.”
US Black Friday retail sales up 3.4% in 2024
According to preliminary insights from Mastercard SpendingPulse, U.S. retail sales, excluding automotive, were up 3.4% on Black Friday, 29 November, compared to Black Friday 2023. Mastercard SpendingPulse measures in-store and online retail sales, representing all payment types, and is not adjusted for inflation.
Over the last several years, Black Friday has become more than just one day, but instead, a window of time for shoppers to find value. While consumers were enticed by early deals in the days leading up to the Thanksgiving holiday, Black Friday continued to reign as one of the biggest days of the season. Focusing on Black Friday, the Mastercard data showed that online retail sales increased 14.6%, while in-store sales were up a more modest 0.7% compared to Black Friday last year. Jewellery, Electronics and Apparel remain the top gift sectors for the holidays, with particular strength in e-commerce for Apparel on Black Friday.
“Black Friday was a good indicator of how the holiday season is positively shaping up,” said Michelle Meyer, chief economist, Mastercard Economics Institute. “Our real-time insights show that consumers are comfortably in the gift-giving spirit as price reductions and deals occur across sectors, supporting budgets for holiday shopping.”
S&P 500 forecast to return 10% in 2025
The S&P 500 is forecast to have its third-straight year of gains amid solid economic expansion and steady earnings growth, according to Goldman Sachs Research (GSR).
The benchmark index of US equities is projected to rise to 6,500 by the end of 2025, a 9% price gain from its current level and a 10% total return, including dividends (as of November 26), David Kostin, chief US equity strategist at Goldman Sachs Research, wrote in the team’s report. Earnings are predicted to increase by 11% in 2025 and 7% in 2026.
Corporate revenue growth (at the index level) is typically in line with nominal GDP growth, according to Goldman Sachs Research. GSR strategists’ estimate of 5% sales growth for the S&P 500 is consistent with its economists’ forecasts for 2.5% real GDP growth and for inflation to cool to 2.4% by the end of next year.
GSR’s S&P 500 EPS forecasts for 2025 and 2026 are $268 and $288, in line with the median top-down consensus estimates of $268 and $288. However, these are below the bottom-up consensus (based on individual company earnings estimates made by equity analysts) of $274 and $308.
According to Goldman Sachs Research’s baseline macroeconomic outlook, the economy and earnings will continue to grow and bond yields will remain around current levels in the coming years. However, there are a number of risks heading into 2025, including the potential threat of an across-the-board tariff and the potential of higher bond yields. At the other end of the spectrum, a friendlier mix of fiscal policy or more dovish policy from the Federal Reserve could result in higher returns.
European Payments Council publishes 2025 payment scheme rulebooks
The European Payments Council (EPC) has published the five 2025 EPC payment scheme rulebooks and the related Implementation Guidelines (IGs). These rulebooks enter into force on 5 October 2025.
This exceptional October entry-into-force date – deviating from the usual end of November entry-into-force date - has been chosen in light of the entry-into-force dates of Regulation (EU) 2024/886, regarding instant credit transfers in euro, also known as the Instant Payments Regulation (IPR), amending Regulation (EU) 260/2012, also known as the SEPA Regulation. The same entry-into-force date has been selected for all relevant EPC schemes in order to facilitate the implementation preparation for Payment Service Providers (PSPs), Clearing and Settlement Mechanisms (CSMs) and other technical service providers.
The IPR sets out several obligations for PSPs based in the European Economic Area (EEA)1 whereby some of them already enter into force for euro area-based PSPs (other than Payment Institutions and Electronic Money Institutions) on 9 January 2025 and 9 October 2025 respectively.
The EPC emphasises that EPC payment scheme participants and their technical service providers will have less time available to implement the 2025 EPC payment scheme rulebooks compared to a normal EPC payment scheme rulebook release and implementation cycle.
The 2025 rulebooks introduce the possibility for payment end-users to provide an address of the payer and/or of the payee in a hybrid format alongside the already existing possibilities of submitting an address either in a fully structured format or in an unstructured format.
However, as of 22 November 2026, the provision of an address in an unstructured format will no longer be allowed. As of that date onwards, only the fully structured and hybrid address formats will be allowed.
Norway joins TIPS, adding the krone to Eurosystem’s instant payment service
The European Central Bank (ECB) and Norges Bank have signed an agreement for Norway to join the Eurosystem’s TARGET Instant Payment Settlement (TIPS) service. This will make the Norwegian krone the fourth currency available for settlement in TIPS, in addition to the euro, the Swedish krona and the Danish krone, which is scheduled to join in April 2025.
The inclusion of the Norwegian krone in TIPS, which is part of the Eurosystem’s TARGET Services, is planned for the first half of 2028 and will enable market participants in Norway to settle payments instantly, around the clock and in central bank money. Norwegian citizens and businesses will, therefore, become part of the European community of TIPS service users. The ongoing work towards implementing a cross-currency settlement service in TIPS, allowing funds to be transferred between all TIPS currencies, will also encompass the Norwegian krone.
TARGET Services are developed and operated by the Eurosystem and rely on central bank money to facilitate transfers between banks, businesses and individuals. All TARGET Services have multicurrency capabilities. TIPS, which operates around the clock, already settles instant payments in two currencies, the euro and the Swedish krona, and will also settle in Danish krone as of April 2025.
“Norway is the first non-European Union country of the European Economic Area to join one of the Eurosystem’s TARGET Services,” noted ECB President Christine Lagarde. “It is an indication of the strengthened economic relations across Europe and the attractiveness of TIPS.”
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