Alongside today’s decision to cut the deposit rate from 2.75% to 2.50%, the ECB adjusted its messaging to signal that the outlook for monetary policy has become less clear. We still think that the Bank will lower interest rates further but now forecast …
6th March 2025
The unravelling of US exceptionalism in stock markets since Donald Trump returned to the White House on 20 th January has been mainly driven by concerns about the US’ dominance of AI and the relative health of its economy (which has also dragged down …
An immersive, interactive guide to the most pressing issue facing the global economic outlook. Click below to start exploring and learn which economies are most exposed to higher tariffs, which are most vulnerable to them, and the steps that could be …
Trade deficit hits all-time high as importers continue to rush to beat tariffs The ballooning of the trade deficit to a record high of $131.4bn in January once again stemmed from a huge surge in imports as businesses rushed to fast-track orders before new …
Exports to the US reach a record high amid tariffs The huge increase in exports in January was in line with the timely advance US data released last week and implies US importers looked to front-run tariffs ahead of Donald Trump’s return to the Oval …
Period of unanimous support for rate cuts is over The ECB’s decision to cut its deposit rate from 2.75% to 2.50% today came alongside new language which shows that policymakers are becoming less certain about the future path of interest rates. Looser …
Although our forecast for first-quarter GDP growth is now down to -1.9% annualised, we still believe that, on balance, the US economy will escape recession and rebound in the second quarter, as the distortion caused by the unseasonably severe winter …
In this Update , we put into context the recent surges in Bund yields, German equities, and the euro that have been triggered by expectations of a significant loosening of fiscal policy in Europe’s biggest economy. We have discussed here the economic …
CBRT cuts again, easing cycle has further to run The communications accompanying the decision by the Turkish central bank (CBRT) to cut its policy rate by 250bp again today, to 42.50%, suggest that policymakers were reassured by the fall in inflation in …
Retail sales drop at the start of 2025 January’s fall in retail sales adds to the impression that the euro-zone economy started 2025 on a weak footing. We expect consumer spending growth to be subdued in the coming quarters. The 0.3% m/m fall in euro-zone …
Higher costs drive construction activity to post-pandemic low The headline CIPS construction PMI dropped to 44.6 in February, from 48.1 in January, which was the lowest reading since May 2020. Part of the decline was due to a sharp fall in the volatile …
Vietnam has seen a surge in exports to the US in recent years and arguably emerged as the biggest winner of Trump’s first trade war with China. However, Vietnam’s huge bilateral trade surplus with the US makes it a likely target for penal tariffs in …
Shunto set to result in stronger pay hikes than last year With Japan’s trade unions requesting an even larger pay hike in this year’s spring wage negotiations (Shunto) than they did a year ago, we now expect the negotiations to result in a base pay hike …
Rates on hold (again), no change likely this year Bank Negara Malaysia (BNM) today left its main policy rate unchanged at 3.0%, and once again made clear that it was in no rush to adjust its monetary policy settings anytime soon. The decision comes as no …
Rebound in inflation this year means no further Riksbank cuts CPIF inflation rose in February to 2.9%, supporting our view that the Riksbank’s loosening cycle is over. CPIF inflation (2.9%) and CPIF inflation excluding energy (3.0%) were both stronger …
President Donald Trump's decision to grant a one-month exemption to the Big Three Automakers (Ford, GM & Stellantis) is something of a disappointment given the earlier heavy hints from his Commerce Secretary Howard Lutnick that more widespread relief was …
5th March 2025
Notice: This publication was revised on 07/03 to accurately reflect the deficit on the funds budget in 2024, taking into account the funds used for the local government refinancing scheme that year. The original version of the publication stated that …
While the 0.1% q/q rise in GDP in Q4 of last year was stronger than we and most other forecasters expected, the combination of higher taxes for businesses announced in last October’s Budget, a lingering drag from the previous interest rate hikes and …
Five years ago, we were downbeat about the immediate prospects for the largest city real estate markets, the so-called gateways, and that view has proved correct. But we also argued that this malaise would be short lived and strong fundamentals would be …
February’s batch of PMIs across the Gulf were generally softer and we think that non-hydrocarbon sectors in the Gulf will record weaker growth this year. In contrast, Egypt’s economy appears to be recovering from its slowdown last year induced by shift …
Services sector holding up despite policy uncertainty After the slew of weaker activity and survey data in recent weeks, the small rise in the ISM services index in February should provide some reassurance that the floor is not falling from under the …
Although industrial metals prices have risen following the National People’s Congress (NPC) in China, we still think that prices will fall over 2025 and 2026 given that the policies outlined do not go far enough to address the structural headwinds facing …
The agreement on a reform of the national fiscal rule reached by Germany’s likely next coalition partners suggests they will implement a significant fiscal stimulus of perhaps around 1% to 2% of GDP over the next two years. This could lift GDP growth by …
Fall in applications signals a weak Spring sales outlook The sharp fall in home purchase mortgage applications in February confirms that the rebound in mortgage rates late last year is suppressing home purchase demand. Recent declines in Treasury yields …
We don’t see anything in the outcomes of China’s NPC meetings to abandon our upbeat near-term view on the country’s stock market. China’s equities have been pushed in all sorts of directions lately, albeit more up than down. Late last year there was the …
This page has been updated with additional analysis. Risks of deflation easing While we still think the SNB is most likely to err on the side of caution and cut its policy rate by a further 25bp on the 20 th March, higher than expected inflation in …
Prabowo Subianto came into office in Indonesia in October pledging to raise economic growth to 8%, up from around the 5% rate it has been stuck at recently. However, the policy changes he has introduced so far risk causing trend growth to slow. One of …
Little prospect of a reflationary rebound Chinese policymakers have stuck with an ambitious target for real GDP growth but have become more cautious on the outlook for nominal growth and inflation. And while they did deliver some increase in fiscal …
Weak productivity growth will tie the RBA’s hands Although activity picked up firmly in Q4, private demand remained relatively sluggish. Even so, with productivity growth dismal and unit labour cost growth accelerating, the RBA is unlikely to loosen …
Germany loosens the purse strings The announcement by Germany’s Chancellor-in-waiting, Friedrich Merz, that the parties which are likely to form the next government have agreed to substantially boost defence and infrastructure spending is a major policy …
4th March 2025
President Trump’s decision to follow through with tariffs on Canada, Mexico and China, combined with further weak economic data in the US, has resulted in a further flight to safety across financial markets. That may well prove an overreaction – Trump …
The ‘race for space’ following the pandemic and shift to remote work is evident in both the UK and US, with houses becoming more expensive relative to flats. And that premium for larger homes looks set to endure. While there may be a further small …
The news that Aramco, Saudi Arabia’s state-owned oil company, will cut its dividend payout this year will put a dent in the Kingdom’s public finances and, together with a likely decline in the state’s oil revenues, may ratchet up pressure for more fiscal …
Tariffs have already boosted commodity prices in the US, and the risks to global prices and trade flows will only grow if tariffs become more widespread. Our Oil and Metals Tariff Impact Trackers are the go-to resources to keep up with the impact of …
OPEC+’s plan to increase oil output by 2.2m barrels per day over the next 18 months or so risks saturating the global market and highlights the downside risks to our already below-consensus oil price forecasts. Despite ongoing tensions within OPEC+ about …
The 25% tariff on all US imports from Mexico that came into force today will, if it stays in place, knock Mexico’s economy into recession in the coming quarters. A contraction in GDP this year of 1% would be plausible. And unlike Canada and China (also …
The events of the past two weeks have called into question whether the US is severing ties not just with adversaries such as China but also allies, including Canada, Mexico and the European Union. This would radically alter the shape of the fractured …
If the US tariffs remain in place, Canada will undoubtedly fall into recession. The limited decline in the loonie so far suggests markets are still pricing in a quick U-turn from the Trump administration. But even if the tariffs are soon lifted, their …
In light of Donald Trump's decision to push the button on tariffs on China, Mexico and Canada, Group Chief Economist Neil Shearing joins a special episode of the Weekly Briefing from Capital Economics to talk about whether this signals the start of a …
This page has been updated with additional analysis since first publication. Weak growth will push unemployment higher The euro-zone’s unemployment rate in January remained unchanged at its record low of 6.2% for a fourth consecutive month, but other data …
Our senior economists hosted this special online briefing all about the latest tariff announcements from the White House, their macro and market implications, and what comes next. During this 20-minute briefing, the team answered questions from the …
End-year rebound sets stage for stronger 2025 The 0.6% q/q rebound in South Africa’s economy in the final quarter of last year came on the back of an upwardly-revised 0.1% q/q contraction in Q3 and suggests that the recovery is back on track. We expect …
Japanese firms will suffer some collateral damage from the 25% US tariff on imports from Canada and Mexico. And if Trump presses ahead with tariffs on imports from Japan, carmakers would be most affected. Nonetheless, we suspect that the sales of Japanese …
This page has been updated with additional analysis since first publication. Consumer rebound has further to run Today’s retail sales release should mollify the RBA’s concerns that the pickup in consumer spending last quarter may have been a one-off. …
RBA will only deliver shallow easing cycle The minutes of the RBA’s February meeting are consistent with our view that the Bank will continue to ease policy but won’t cut interest rates very far. It came as no surprise that the Board debated the decision …
President Donald Trump’s has claimed that there is “no room left’ for Canada and Mexico to avoid the imposition of 25% across-the-board tariffs at midnight tonight and he has reportedly signed a separate Executive Order raising the tariff rate on Chinese …
3rd March 2025
Our updated analysis of the most attractive apartment markets for remote workers sees Austin nudge Nashville into second place after two years at the top of the table, with San Antonio climbing to third. On the other hand, Tampa fell from fourth to …
While the prospect of more defence spending in Europe is pushing up government bond yields there, we still expect Bund yields to fall back. Meanwhile, even if defence stocks in Europe kept outpacing those in the US, we doubt that would prevent the overall …
The small uptick in the EM manufacturing PMI in February appears in part to be a result of the front-running of US tariffs, and is unlikely to be sustained. For now, the surveys continue to point to weak goods price inflation across the emerging world. …
