Labour market resilient, but small cracks emerging The decline in full-time positions in April means that the large rise in total employment was weaker than it looks. Hours worked only crept up during the LFS reference week and, given the public sector …
5th May 2023
April strength offset by downward revisions to earlier months The 253,000 gain in non-farm payrolls in April suggests that the labour market remains resilient despite the banking sector turmoil and broader signs of an economic slowdown. Nevertheless, that …
Hard data released this week paint a more downbeat picture of the euro-zone economy than the latest surveys. Three points are worth highlighting. First, the data confirm that the 0.1% q/q rise in euro-zone GDP in Q1 masks a greater weakness in domestic …
Note: We’ll be discussing the upcoming Thai general election and the country’s near to long-term economic risks in a 20-minute online briefing at 09:00 BST/16:00 SGT on 11th May . Register now. Headline and core inflation both falling The April …
The April PMIs , the last of which was published today, suggest that while the reopening rebound in manufacturing stalled last month, the recovery in services was still going strong. That’s also the takeaway from the five-day Labour Day holiday which …
Divergence opens up between housing and commercial construction The April CIPS Construction PMI showed a growing divergence between the housing and commercial sectors, with activity in the latter seeing a gradual recovery while the former declined to a …
Although rent growth has been resilient, as the Swedish economy enters recession and employment contracts, we think the recent slowdown in Stockholm office occupier demand will persist. And with new office supply set to reach record highs in the next few …
Business surveys released this week suggest that Sweden’s economy started Q2 on the back foot. The Manufacturing PMI for April was unchanged at a very low level (45.5), consistent with output falling. And although the Services PMI rose, it was still close …
PMIs continue to be at odds with hard data The PMI surveys for April released this week suggest that both the manufacturing and services sectors in India started Q2 on a strong footing. The manufacturing PMI reached a 4-month high while the services PMI …
Headline inflation falls sharply, but core rate unchanged Falling headline inflation in Switzerland will provide relief to consumers but does not change the picture for the SNB. Underlying price pressures remain near all-time highs, which will convince …
The Thai economy is poised for recovery this year, but before that the country faces a contentious general election on 14th May which could be a trigger for fresh political unrest. Beyond the near term, the country’s economic potential looks set to be …
We think that the tailwinds supporting the rebound in the euro against the US dollar have largely run their course, and still forecast the EUR/USD rate to return to parity as advanced economies fall into recessions later this year. Even after falling …
Economic growth in Indonesia was unchanged at 5.0% y/y in the first quarter of the year, but we think growth will slow over coming months as tight monetary policy and weaker exports drag on activity. Before the pandemic GDP growth was very close to 5.0% …
Wage pressures bubbling up Data released earlier in the week showed that pay increases under newly-inked enterprise bargaining agreements (EBAs) have started to surge in Australia. Employees covered by new EBAs received an annualised pay hike of 3.0% in …
Growth likely to slow ahead The economy grew by 5.03% y/y in the first quarter of the year, which was almost the same pace of expansion as that in Q4 2022 (5.01%), but we expect growth to slow in the coming quarters as tight monetary policy and weaker …
Pay at small firms not keeping up with large firms While wage growth has been very strong by historical standards in recent months, wages have risen faster for employees of larger firms than at smaller firms. (See Chart 1.) Chart 1: Labour Cash Earnings …
Euro-zone retail sales probably fell again in March (10.00 BST) We think growth in US non-farm payrolls moderated to 180,000 in April (13.30 BST) While in Canada, we expect employment to have risen by 25,000 last month (13.30 BST) Key Market Themes The …
4th May 2023
The manufacturing PMIs for April suggest that industrial activity softened in most EMs last month and that external demand generally remained weak. The one crumb of comfort is that price pressures eased further last month. The aggregate Emerging Market …
Will 4.50% be the peak? Markets and economists have come round to our view that rates will rise to 4.50% 4.50% may well be the peak Risk is that resilient economy and sticky inflation prompt rise to 4.75% or 5.00% With the financial markets and other …
We forecast small further falls in the yields of long-dated US Treasuries and euro-zone sovereign bonds between now and the end of next year, as disinflation picks up steam and central banks turn more dovish. Investors largely shrugged off this week’s …
In theory, there is plenty of scope for those countries set to age most rapidly over the coming few decades to cushion the impact on their workforces via migration and a rise in both female and older participation rates. However, in many cases, this will …
Today’s 25bp decision was in line with market expectations and the views of most forecasters polled by Reuters – though we had been in the minority forecasting 50bp. The move marks a slowing in the pace of policy tightening and suggests at face value that …
While food CPI inflation remains very high in all major advanced economies – and especially so in Europe – we expect it to fall sharply in the coming year. Energy and labour costs have been key in keeping consumer food inflation so high, but these props …
We’ve been surprised that the rise in Bank Rate from 0.10% in November 2021 to 4.25% hasn’t triggered a contraction in GDP at the start of this year. Indeed, while higher interest rates were a further drag on net mortgage lending in March, the …
Strength of exports and unit labour cost growth unlikely to last A rebound in exports drove a sharp narrowing of the international trade deficit to a four-month low of $64.2bn in March, from $70.6bn in February, but the surveys continue to suggest that …
Downside risks to first-quarter GDP growth despite export outperformance The small rise in export volumes and slump in imports in March confirms that net trade improved last quarter. However, the weakness of imports means there is a risk that the …
The underperformance of the US stock market seen last year has generally paused so far in 2023, as returns have been propped up by mega-cap “growth” stocks. That may continue over the rest of the year, especially if advanced economies enter recessions. …
Downside risks to Q1 GDP growth The small rise in export volumes and slump in import volumes in March confirms that net trade boosted GDP growth last quarter. However, as lower imports are likely to be reflected in slower inventory building – which the …
Strength of exports and unit labour cost growth unlikely to last The sharp fall in the international trade deficit to $64.2bn in March, from $70.6bn in February, was driven by a rebound in exports, but the surveys continue to suggest that renewed declines …
The idea of a new BRICS currency to settle trade or hold in reserves instead of the dollar has been doing the rounds recently. This could be modelled on the IMF’s Special Drawing Rights. But getting India on board with China would be difficult. And if the …
The key message from the latest China PMIs is that whilst China’s economy is likely to grow strongly this quarter, momentum is fading. This will be one factor weighing on commodity prices in the near term. China’s Caixin manufacturing PMI fell from 50.0 …
Note: We’re holding a special 20-minute online briefing all about EM debt risks this Thursday at 10:00 EDT/15:00 BST . Register now . Oil prices: “Don’t get cocky OPEC+” The price of oil has dropped sharply this week on fears about the health of the …
ECB slows the pace and signals peak is close The decision to raise the deposit rate by 25bp to 3.25% today was in line with market expectations and was predicted by 57 of the 69 forecasters polled by Reuters. (We had forecast 50bp.) This marks a slowing …
The latest RICS Construction Survey showed an improvement in construction workloads and surveyors’ expectations also brightened. That is in line with other data showing the economy is proving more resilient than expected. That said, we still expect a mild …
Decline in bank deposits doesn’t look like a bank run March’s money and credit data showed that the collapse of the US bank SVB and the takeover of Credit Suisse in early March triggered a small withdrawal of funds from the overall UK banking system. …
Net lending stable as investors wait for the bottom Even as commercial property investment has collapsed, net lending to property has been stable at close to zero since the start of the year. That suggests investors are building up war chests to snap up …
Recovery unlikely to continue The rise in mortgage approvals in March was stronger than consensus expectations, reflecting the reversal of the spike in mortgage rates since the autumn. However, we don’t think that mortgage rates can fall any further …
The Norges Bank raised its policy rate by 25bp today, to 3.25%, but unlike the Fed we think the tightening cycle in Norway has further to run. That said, we think that inflation will fall more quickly than the central bank anticipates next year, allowing …
Brazilian policymakers gave a firm push back against any expectations for imminent monetary easing at yesterday’s central bank meeting, supporting our view that interest rates will be lowered a bit more slowly over the next 6-12 months than most expect. …
The market has finally come round to our long-standing view that Bank Rate will rise to 4.5%, with the Bank of England to likely to deliver another 25 basis point hike when it meets on 11 th May. But what will follow? Resilient activity data and …
Over the past year, Spanish households have seen a bigger increase in their cost of borrowing than those of any other large euro-zone economy, but the increase in the interest paid on deposits has been tiny. This is squeezing households’ disposable …
The slowdown in regular earnings at the start of the year largely reflects sampling changes, with an unchanged sample of firms reporting continued strong wage growth. However, with inflation set to come off the boil before long and the labour market …
Net exports won’t have boosted GDP in Q1 The widening of the trade surplus in recent months belies the negligible contribution that net exports will have made to Q1 GDP. Indeed, we think the weakness in import values last quarter primary reflected …
This page has been updated with additional analysis and charts since first publication. Growth still strong but slowing The latest survey data add to wider evidence that while China’s recovery remains robust, it is losing some momentum. In particular, the …
Net exports won’t have boosted GDP in Q1 The wide trade surplus belies the negligible contribution made by net exports to Q1 GDP. The widening of the trade surplus to $15.3bn in March, from an upwards-revised $14.2bn in February, was in contrast to what …
The Fed’s new policy statement provides the clearest hint yet that the 25bp rate hike today is likely to be the last. We expect economic weakness and a sharper-than-expected drop back in core inflation to convince officials to start cutting rates again …
3rd May 2023
Fed’s focus will turn to policy loosening before long The Fed’s new policy statement provides the clearest hint yet that the 25bp rate hike today is likely to be the last. We expect economic weakness and a sharper-than-expected drop back in core inflation …
Economy posts strong growth in activity in Q1 Industrial production and retail sales continued to recover strongly in Russia in March and suggest that GDP growth may have accelerated in Q1. The economy appears to be receiving a boost from the recent surge …
