Carraighill

European Banks: Deposit growth in the Eurozone remains positive, indicating strong liquidity trends. In January, Austria and the Netherlands recorded YoY growth of 6.8%, rising by 120 and 180 basis points, respectively. Portugal continues to lead the group at 7.3%, despite a MoM decline of 20bps.

European Asset Management: European equities have shown strong performance in recent months. Equity funds represented 95% of total customer flows to Euro-area domiciled investment funds in December 2024. While the S&P 500 rose 24.4% YoY, compared to the STOXX 600's 15.9% gain, the German DAX and Spanish IBEX notably outperformed the S&P 500 over both the 12- and 6-month periods.

UK Households: The latest data continues to show a gradual decline in Household Discretionary Spending Power™ (which is the difference between gross disposable income and essential item expenditure). It has moved from £30,500 per household in the past six months to £29,900. The YoY growth rate has slowed to +5.4%, down from its peak of over 10%. This marks the lowest annual increase since Q2 2023.

UK Housing Costs: Total new house construction costs have risen 4.6% YoY, with labour costs up 6.9%. Continued wage growth is exerting additional pressure on overall costs, with material costs up 1.6% YoY. Since 2019, the cost to build an average home has surged by 28.9%, compared to a 23.7% increase in house prices. Rising replacement costs are pushing property prices higher.

French Banks: According to the latest data, the customer spread in France fell 3bps MoM. Despite this, the average quarterly trend is rising, now 100bps in Q4 2024. During the pre-rate cycle, the average spread was approximately 146bps. 

Sweden: The mortgage stock increased 1.4% YoY, indicating a rebound in loan stock growth. The front book rate dropped by -11bps MoM to 3.38%, with a front-back book rate differential of -0.15%. In Sweden, 87% of new mortgages have a fixation rate below one year. 

European Banks: The latest data shows that deposit growth remains robust within Europe. Portugal remains one of the strongest regions, posting +7.4% YoY in December, the highest recorded figure across our coverage. This was -1.1% in January 2024. France continues to lag, registering zero YoY growth.

European Households: Gross savings rates are still high and influenced by “crowding out” and “Ricardian equivalence”. High gross savings ratios remain a key theme across Europe. As a percentage of gross disposable income, it grew to 15.2% in Spain during Q3 (up from 14.2% in Q1). Pre-pandemic, this was approximately 9%. 

European Asset Management: Hedge funds had a very strong showing in November, with revaluation effects amounting to +€11bn, or 2.87% of opening AuM. This was a standout month for performance. However, Euro-Area domiciled hedge funds have seen significant outflows in recent years (-11% of opening AuM in 2023, and -3% up to Q3 2024). Does this suggest a trend towards net inflows moving forward?

Household Discretionary Spending Power™ (UK): UK Retail sales were relatively weak in December. The index fell 0.4%, following a 0.1% rise in November. When we consider the index excluding fuel, the index is down 0.5% MoM. There had been a sustained upward trend in overall sales volume during 2024. However, this has dipped since September over budget concerns. This adjustment was largely driven by the decline in food stores, -1.2% YoY.