When Europe features prominently in client questions it is not normally a good sign. The past few days have been no exception. The immediate concern is France, where the government of Michel Barnier was toppled last week after failed efforts to push …
9th December 2024
Leadership alters formal characterisation of monetary policy The Politburo has just concluded its December meeting, which focuses foremost on economic affairs. After 14 years of monetary policy being officially characterised as “prudent”, the meeting …
This page has been updated with additional analysis since first publication. Stimulus is propping up inflation Headline CPI inflation fell but this was mainly driven by easing upward pressure on food prices. Core inflation edged up and PPI deflation …
We think the rally in 10-year Treasuries over recent weeks reflects both the incoming US economic data and changing perceptions towards Trump’s policy agenda. But we don’t expect this rally to continue. The November employment report, released today , was …
6th December 2024
Despite a small rebound in the wake of another solid non-farm payrolls release , the US dollar is broadly unchanged on the week as the recent consolidation phase in currency markets continues. Neither another tariff threat from president-elect Trump (this …
Pick-up in the survey indicators Recent Bank of Canada communications have been keenly attuned to the downside risks to inflation and economic activity, concerns which seemed justified after last week’s disappointing GDP report, which showed third-quarter …
Cut or skip? This week, Governor Christopher Waller signaled support for continuing the loosening cycle, but noted he could favour a pause this month if “our forecasts of slowing inflation and a moderating but still-solid economy are wrong”. While that …
Another twist in Romania’s election rollercoaster Romania’s constitutional court unexpectedly announced today that it will annul the first round of the presidential election , which took place on 24 th November and saw independent far-right candidate, C …
GDP growth picked up in Q3 but timelier data suggest that it has slowed in Q4. We expect growth to remain sluggish next year regardless of whether President Trump raises tariffs on imports from Europe. We also think that inflation will be below 2% in …
Upward trend in consumer confidence continues While the headline University of Michigan Consumer Sentiment Index remains below its average over the first half of the year, the jump in December suggests that household spending growth is likely to remain …
The end of Michel Barnier’s administration after just three months on Wednesday was something of an anticlimax for bond markets as it had already been discounted by investors. Spreads on French bonds have actually narrowed this week. There remains a lot …
Strong employment gain more important for the Bank than jump in unemployment rate We disagree with the market reaction to November's Labour Force Survey, implying that the jump in the unemployment rate makes a 50bp cut much more likely. A slowdown in …
Brazil’s overheating eroding bumper trade surplus Brazil’s Q3 GDP figures released this week showed that the economy is overheating and unbalanced. Consumption and investment growth accelerated compared with Q2. Headline GDP growth was only weaker than …
South Africa GDP miss to be followed by rebound The 0.3% q/q fall in South Africa’s GDP in Q3 was disappointing, but it was largely driven by a slump in agriculture that should unwind. Along with low inflation and continued monetary easing, we expect the …
The government’s new “mission” to deliver “higher living standards…through higher real household disposable income (RHDI) per person and GDP per capita by the end of the parliament” is not ambitious. Real GDP per capita has grown by 1.9% a year on average …
Reversal of disruptions lifts payrolls The solid 227,000 gain in non-farm payrolls in November was driven partly by the reversal of the disruptions that weighed on hiring in October, but still implies that underlying employment growth was a touch stronger …
Prolonged crisis would weigh on the economy The easiest way out of the political crisis that Korea finds itself in would be for President Yoon Suk Yeol to resign. A resignation would trigger a presidential election within 60 days. Given the extent of …
The decision by OPEC+ to delay unwinding some of its oil production cuts until April 2025 appears to have provided food for thought to both oil bulls and bears. In fact, oil prices yo-yoed as news on the decision trickled in, before falling a touch to …
Data released today show that euro-zone household consumption rose strongly in Q3. But slowing real income growth means that we expect spending growth to be subdued in the coming quarters. Meanwhile, investment and exports were weak in Q3 and the outlook …
Rupee at record low belies exchange rate stability On the face of it, the recent moves in financial markets pose a dilemma for the Reserve Bank’s MPC, which earlier today voted to keep the repo rate unchanged at 6.50%. (See here for our initial response …
New rules are more restrictive but leave loopholes The updated US semiconductor export controls published on Monday will further limit China’s ability to manufacture advanced semiconductor chips. The 200+ pages of legislation contain many intricacies, but …
The Reserve Bank of India’s (RBI’s) decision to keep the repo rate unchanged at 6.50% today highlights its unease at the current rate of headline inflation. Admittedly, the lowering of the cash reserve ratio does show that it is turning more concerned …
This page has been updated with additional analysis since first publication. Post-Budget relief rally more than offsets higher mortgage rates The leap in Halifax house prices in November mirrors the jump in the Nationwide measure and suggests that some …
December still on After a news report on Wednesday poured cold water on the prospect of a rate hike at the Bank of Japan’s upcoming meeting in a couple of weeks, the financial markets now price in only a 40% chance of a hike then, down from 60% last week. …
Repo rate cuts to begin in April The Reserve Bank of India’s decision to keep the repo rate unchanged at 6.50% today highlights its unease at the current rate of headline inflation. We think inflation has now peaked and indeed, the lowering of the cash …
Bank will remain patient Following the release of disappointing Q3 GDP figures this Wednesday, financial markets have started to bring forward their expectations for rate cuts by the Reserve Bank of Australia. (See Chart 1.) They now see a three in four …
Base pay rose the most since 1992 in October and we think it will continue to hold strong through to the end of next year. According to today’s preliminary estimate, labour cash earnings rose by 2.6% in October, which was just a tad higher than the 2.5% …
5th December 2024
Our expectation of rising evidence of distressed assets in 2024 has come to bear, but we think more is still to come over the next couple of years. Some of that will stem from matured loans requiring refinancing, which have already hit an all-time high in …
While today’s decision by OPEC+ to delay the unwinding of some of its oil production cuts until April 2025 buys the group some time, the backdrop of weak global oil demand means that it could easily find itself back in a similar position in three months’ …
Lower interest rates are yet to do much to spur the economy, but green shoots are emerging, with the timely activity surveys picking up and the newly-announced mini-fiscal stimulus expected to boost consumption over the coming months. That said, strong …
This is a special episode of The Weekly Briefing from Capital Economics all about the themes that will shape the global economy in 2025. Group Chief Economist Neil Shearing and Chief Global Economist Jennifer McKeown stepped out of our client event in …
In contrast to market pricing, we think that the SNB will be cautious and cut its policy rate by just 25bps, to 0.75%, next week as the Bank sticks to a gradual approach to loosening monetary policy. That said, the SNB is likely to lower its inflation …
Syria’s rebel advance tests MENA’s geopolitics Over the past week, Syrian rebel forces have retaken significant amounts of territory from President Bashar al-Assad’s regime with little resistance so far. It’s unclear whether the rebels will make further …
Despite their low absolute and relative valuations, we think China’s equities will continue to lag their US counterparts over the coming year . It’s been a good twenty-four hours or so for global equity markets, thanks in part to falling “safe” asset …
Consensus on ECB Governing Council points to 25bp cut next week But we expect policymakers to step up the pace of cuts next year… …and think the deposit rate will be just 1.5% by the middle of the 2025 While there is a strong case for the ECB to …
Retail sales lose momentum October’s decline in euro-zone retail sales followed a good third quarter for retailers. We suspect that the strength in sales in Q3 was just a one off and that growth will be subdued in the coming quarters. The 0.5% m/m fall in …
Jump in commercial activity supports a rise in the headline balance The headline CIPS construction PMI increased to 55.2 in November, from 54.3 in October, indicating an expansion of construction activity. The rise was entirely driven by the commercial …
We think that the shift in the shape of consumer spending over the past few years away from spending on goods towards spending on services is here to stay. While the recent strength in spending on housing rents may not persist, over the next couple of …
After raising interest rates for the first time in 17 years in 2024, we think markets are underestimating just how far the Bank of Japan will go to continue tightening monetary policy in the coming year. Our Japan and Markets economists held this special …
Riksbank will be unfazed by rise in inflation While all three key measures of inflation in Sweden rose in November, this does not change the underlying story that inflation is around its target level and is likely to stay there over the next year. CPIF …
GDP growth has disappointed, but outlook is brighter Core inflation has surprised to the upside of Bank’s forecasts Still a case for another 50bp move, but Governing Council likely to favour 25 bp Although the recent GDP data disappointed, there are green …
4th December 2024
The incoming Trump administration’s proposed crackdown on immigration means labour force growth is likely to slow toward zero. That would pull down potential GDP growth to less than 2% and labour shortages would contribute to increased inflationary …
ISM services index drops back to three-month low The fall in the ISM services index to 52.1 in November is not too concerning, given it was driven partly by a slump in the supplier deliveries index, but it does lend some support to our view that GDP …
NBP leaves rates on hold, little scope for easing in 2025 The National Bank of Poland (NBP) left its policy rate on hold again today, at 5.75%, and a rise in inflation over the coming months means that the monetary easing cycle won’t resume until the …
Purchasing activity rebounds despite higher borrowing costs The rebound in purchase mortgage applications in November shows that there were some signs of life in the market, despite the return of 7% mortgage rates. But taking a step back, activity remains …
Paris retail rents surged in Q3 raising hopes for a sustained revival. But this jump probably reflects a temporary boost from the Olympics and momentum is expected to fade next year. Despite this, we think the French capital will slightly exceed euro-zone …
President Yoon Suk Yoel has rescinded his declaration of martial law, but Korea’s political crisis is far from over. The opposition are now trying to impeach the president, while financial markets remain volatile. This Update answers five key questions on …
