Cracks in the labour market increase the urgency for more cuts The modest decline in employment and rise in the unemployment rate to 6.4% in June raise the chance that the Bank of Canada will cut interest rates again this month, and makes us more …
5th July 2024
Easing cycle underway, but expect it to be gradual Romania’s central bank (NBR) started its easing cycle at today’s meeting with a 25bp rate cut, to 6.75%. But with inflation and fiscal risks still high, this is likely to be a slow and gradual cycle and …
The latest polls ahead of Sunday’s second round of French parliamentary elections suggest that the far-right National Rally (RN) will win the most seats but fall well short of an absolute majority. (See Chart 1.) This will make it very difficult to form a …
Payrolls beats, but rest of report adds to concerns Although the 206,000 gain in non-farm payrolls in June beat the consensus at 190,000, this was more broadly a disappointing report when we factor in the 111,000 downward revision to past months and the …
This special episode of The Weekly Briefing from Capital Economics presents our Drop-In briefing to clients the morning after the UK general election. Group Chief Economist Neil Shearing spoke to Paul Dales, Ruth Gregory and Ashley Webb from our UK …
Indonesia needs reform not tariffs Indonesia has become the latest country in Asia to announce measures to stem the flow of cheap imports from China. It is planning to impose tariffs of up to 200% on a range of products, including footwear, clothing, …
Hurricane Beryl puts oil and gas supply in peril While Hurricane Beryl took a tragic and heavy toll on communities and economies in the Caribbean this week, its impact on fossil fuel production in the Gulf of Mexico looks set to be relatively small. …
Final preparations are reportedly in place for Prime Minister Modi to travel to Moscow early next week to meet his Russian counterpart Vladimir Putin. This will be Modi’s first trip to Russia since the invasion of Ukraine, though the two leaders did meet …
This page has been updated with additional analysis since first publication. Retail sector probably past the worst Retail sales ticked up in May and we expect them to continue to rise gradually from here. The 0.1% m/m rise in retail sales in May was …
This page has been updated with additional analysis since first publication. German industry still struggling The slump in German industrial production in May fully reverses the increase in output at the start of the year and suggests that German industry …
A strong case for an August hold The minutes of the RBA’s June meeting revealed that the Board hasn’t yet shut the door on another rate hike. In our view, the Bank’s tightening bias is not unwarranted. After all, data published this week showed that …
House prices slip back in Q2 As the first economic data release under a Labour government since 2010, the decline in Halifax house prices in June meant that Labour’s tenure got off to a slightly downbeat start. However, while we expect house prices to …
We’re holding a 20-minute online briefing today (9.30am BST 5 th July) to discuss what a Labour government means for the economy and the financial markets. (Register here .) The big shift in the political landscape that has delivered the first Labour …
Government spending probably fell last year In its April WEO, the IMF estimated that Japan’s budget deficit widened from 4.2% of GDP in 2022 to 5.7% last year and will rise further to 6.5% this year. By contrast, we expect the deficit to have shrunk to 3% …
Drop in long-term yields has made PBOC uneasy On Monday, the PBOC announced that it would start borrowing Chinese government bonds (CGBs) from primary market dealers (i.e. the major banks). While it didn’t elaborate further, the aim is clearly to shore up …
The US ISM services data published yesterday suggested that US economic growth slowed in June. Even so, the S&P 500 index surged on the news. And we think it will rise much further, as stock market performance increasingly decouples from the real economy, …
4th July 2024
We expect that a sustained period of below potential growth will help bring core inflation to the 2% target by the end of the year and persuade the Bank of Canada to cut interest rates further, with the policy rate ending the year at 3.75% and settling at …
The big shift in the political landscape that appears to be delivering a Labour government with a large majority is unlikely to lead to anything like as big a shift in the economic landscape. But at the margin, Labour’s policies generate some upsides to …
Timely estimates of trade through Europe’s busiest seaports so far this year have broadly mirrored relative economic performance across Europe, as volumes through Iberia’s ports have recovered while the major northern ports have seen further falls. With …
A facelift for Egypt’s cabinet, but no shift in policy Egypt’s cabinet was shaken up this week but the new faces are highly unlikely to diverge from the economic policy path their predecessors were on, particularly when it comes to the public finances. …
The headline CIPS construction PMI edged back in June from its two-year high last month, but at 52.2 remains in expansionary territory. Both the commercial and housing balances retreated, with the latter falling back below 50, indicating some contraction …
This page has been updated since first publication. Headline inflation edged down slightly, but unlikely to fall much further this year Switzerland’s inflation rate fell to 1.3% in June from 1.4% in May, but concerningly for policymakers, private services …
Following his disastrous debate performance last week, President Joe Biden’s odds of getting re-elected have gone from bad to worse. Former President Donald Trump is now unequivocally the favourite to win this November, even if the Democrats replace Biden …
3rd July 2024
Minutes feel dated given subsequent signs of economic slowdown The minutes of the Fed’s mid-June policy meeting reveal that, not surprisingly given the split in the interest rate projections released at that time, officials were split on the outlook for …
The stronger-than-expected rebound in GDP in Q1 and the improving outlook for households suggests the next government, which the polls ahead of the election on 4th July imply will be a Labour one, will benefit from the economic recovery being a bit …
Activity running hot, inflation rising further The latest activity data suggest that Russia’s economy continued to motor along in May, driven by stronger growth in industry. The economy is clearly overheating and this continues to fuel inflation …
The overarching theme of the Labour government’s housing policies will be a rebalancing of rights in favour of tenants and aspiring homeowners at the expense of landowners and landlords. That said, given the incoming government’s commitment to creating a …
China overcapacity fears coming to industrial metals China’s dominant role in the world of commodities is evolving subtly. This is particularly the case for gold, where increased demand by the PBoC and Chinese retail investors has weakened the importance …
Recent developments have brought the global spotlight onto sovereign bonds in India and China. We expect the former to fare the best of the two. We’ve written lately about the relative prospects for equities in India and China, arguing in favour of the …
This chartpack is a new addition to our suite of commercial property analysis, which pulls together our views across the three regions we forecast and provides important context for investors. The slower adjustment to past rises in interest rates and a …
The US dollar has edged higher over the past quarter or so, driven by the twin tailwinds of rising Treasury yields and US equity outperformance. We think these factors may continue to support the greenback over the near term, and the looming prospect of a …
Surveys consistent with softer growth and inflation The decline in the ISM services index to 48.8 in June, from 53.8, takes it to its lowest since the lockdowns in 2020. Alongside a decline in the ISM manufacturing index, these surveys suggest that GDP …
Exporters still struggling The fall in exports in May was largely due to lower commodity exports, which should have performed better in June thanks to the boost to oil exports from the completion of the Trans Mountain pipeline expansion. Cutting through …
No rate cuts for another year or so The decision by Poland’s central bank (NBP) to leave its policy rate at 5.75% today came as no surprise and we doubt that policymakers will have scope to lower interest rates until the middle of next year. The NBP …
External trade continues to drag on GDP growth The trade deficit widened slightly to $75.1bn in May, from $74.5bn, as exports fell by 0.7% m/m, outpacing a 0.3% m/m decline in imports. Nevertheless, the decline in exports was more modest than the advance …
The outperformance of the US economy has supported stronger commercial real estate returns there over recent decades than either mainland Europe or the UK. But will this continue? On the back of the release of our updated global CRE forecasts and newly …
Despite rising in June, mortgage applications consistent with weak home sales The decline in mortgage rates back below 7% helped mortgage applications for home purchase to rise by 5.1% m/m in June. That gain was tiny in the context of the ongoing …
Egypt’s government faces a likely further rise in debt servicing costs over the coming year. But the good news is that the budget for the 2024/25 fiscal year (which started this week) reaffirmed the commitment to fiscal consolidation. So long as the …
One of the takeaways from our latest Emerging Markets Outlook is that the EM business cycle is unusually unsynchronised. We expect some convergence as the effects of the enormous macro shocks of recent years wash out. But by the same token, we shouldn’t …
Inflation on a (bumpy) path down The larger-than-expected decline in Turkish inflation in June marks the start of a new phase of the disinflation process, and we are likely to see much steeper falls in the y/y inflation rate in July and August. But …
We expect the RBNZ to leave rates on hold for a seventh consecutive time at its meeting next Wednesday. To be sure, the Bank will probably strike a hawkish tone out of an abundance of caution. However, with the economy in tatters and inflation on its way …
This page has been updated with additional analysis since first publication. Uptick in retail sales not a gamechanger for the RBA The upside surprise in the May retail sales numbers primarily reflected consumers taking advantage of end-of-financial year …
The rebound in residential investment over the past year will go into reverse in Q2, as housing starts and home sales slump again. We expect this weakness to persist thanks to a coming slump in new multi-family construction, which will soon gradually feed …
2nd July 2024
Despite the continued depreciation of the yen so far this year, we still expect it to rebound against the greenback supported by its relatively low valuation and the start of the easing cycle in the US. Although the yen has remained stable today against …
Despite the modest rise in job openings in May, the big picture remains that labour market conditions continue to slowly normalise, and the low quits rate still points to a sharp slowdown in wage growth. After the sharp fall in April, the marginal rise in …
Across the 17 metros we cover, most will see higher vacancy over the next year or so due to a surge in completions. Atlanta and Houston will be the key exceptions. There new construction has plummeted in response to falling apartment values and higher …
The recently-published fiscal plans of Colombia’s government seem to have alleviated some near-term fiscal concerns, but we think the medium-term budget and debt projections are based on rosy assumptions around growth and oil prices. Policymakers’ (and …
The consensus is still downbeat on the outlook for retail rents, with growth expected to underperform even the struggling office sector. But with a decent consumer recovery on the horizon we think that pessimism is misplaced. As inflation falls back and …
This page has been updated with additional analysis since first publication. Continued strength of services inflation all but rules out July ECB cut It already seemed unlikely that the ECB would cut interest rates at its meeting in July, and June’s …
Concerns about the economy will keep RBA from hiking The minutes of the RBA’s June meeting revealed that the Bank’s tightening bias remains intact. The Board noted that there were a number of factors that supported the case for a rate hike last month. …
