Red-hot labour market will prompt further RBA tightening February’s strong labour force figures will prompt the Reserve Bank of Australia to press ahead with another 25bp hike at its April meeting despite mounting signs of strain in the global banking …
16th March 2023
Rebound doesn’t change recessionary outlook The trade deficit narrowed in February as export volumes picked up and import volumes continued to fall. “Core” machinery orders surprised to the upside in January, but that still points to a fall in capital …
Economy is tipping into recession With the New Zealand economy in for more pain on the heels of the Q4 GDP decline, we expect the RBNZ to start cutting rates towards the end of the year. The -0.6% q/q drop in production GDP was weaker than most had …
15th March 2023
RBNZ will cut rates by year-end as recession takes hold The -0.6% q/q contraction in production GDP was weaker than most had expected, but a tad stronger than our forecast (Refinitiv Consensus: -0.2%; CE: -1.5%). And crucially, it was much weaker than the …
We think Japan’s exports rebounded by 7.0% y/y on February (23.50 GMT) The ECB may not hike rates tomorrow due to fears of a banking crisis (13.15 GMT) Sign-up here for our US Drop-in on our outlook for the US economy (15.00 GMT) Key Market Themes The …
Tentative signs of stabilisation, but risks abound House prices fell at a slower pace in February and the sharp improvement in the sales-to-new listing ratio offers some hope that they will soon stabilise. While the turmoil in the global banking sector …
The Budget has taken a bit of a backseat given the renewed worries about the health of the global banking system, but the Chancellor, Jeremy Hunt, was a bit more generous than we expected and probably plans to splash more cash ahead of the 2024/25 …
Crude stocks rise, but all eyes are on the banks Commercial crude stocks rose this week, but product stocks fell. That said, the bigger picture remains one of subdued domestic demand, which we expect to remain the case for some time yet. After a dip in …
Fed has difficult decision to weigh financial stability needs against inflation target. On balance, we think the Fed will still push ahead with a 25bp hike. But inevitable pull-back in bank lending means Fed should be cutting before year-end. The Fed …
January surge mostly sustained The 0.4% m/m fall in retail sales in February only partly reversed the 3.2% surge in January, suggesting that real consumption growth will accelerate to at least 3.5% annualised in the first quarter. But to the extent that …
Just when financial markets appeared to be calming down after the SVB saga, the sell-off in European bank shares has resumed this morning due to concerns about the viability of Credit Suisse. At this stage, a huge amount is unclear, but a few points are …
January surge mostly sustained The 0.4% m/m fall in retail sales in February only partly reversed the 3.2% surge in January, suggesting that real consumption growth will accelerate to at least 3.5% annualised in the first quarter. But there is a risk …
Economy likely to remain weak despite some encouraging signs GDP figures released today for Sri Lanka highlight the scale of the economic damage caused by last year’s political crisis and debt default. While there are some tentative signs that the worst …
Chancellor a bit more generous, but may fall short on long-term growth Today’s Budget has taken a bit of a backseat given the renewed worries about the global banking system, but the Chancellor was a bit more generous than we expected and we suspect he …
A preferential rate to facilitate wine exports is the latest addition to Argentina’s myriad exchange rates, but it doesn’t address the fundamental problem that the peso is overvalued. We estimate that the currency needs to fall by around 30% to restore …
SA economy in less dire straits; Inflation in Nigeria at new 17-year high January’s hard activity figures out of South Africa came in stronger than expected, reducing the chances of a technical recession. But momentum remains extremely weak. Elsewhere, …
Resilience in January unlikely to last The rise in industrial production in January was entirely due to strong growth in Germany and Ireland, with all other major euro-zone economies recording a fall in output. We expect industry to struggle this year as …
Even as the economy has slowed nominal all-property rental growth has held up relatively well. But that largely reflects the impact of high inflation, which is now falling. In any event, underlying supply and demand conditions are ultimately the more …
Investment outlook still gloomy despite upside machinery orders surprise The trade deficit narrowed in February as export volumes picked up and import volumes continued to fall. “Core” machinery orders surprised to the upside in January, pointing to a …
The fracturing of strategic supply chains into US and China trade blocs threatens Australia’s existing significant trade with China but also presents Australia with an opportunity to align its trade relationships with its existing security …
This report has been updated with additional analysis and a table and chart of key data. Inflation past its peak Saudi Arabia’s headline inflation rate slowed to 3.0% y/y in February on the back of an easing of both food and non-food inflation. We think …
Soaring core inflation adds to pressure on the Riksbank Although it was partly due to higher food prices, the jump in the “core” measure of inflation in Sweden to 9.3% will reinforce policymakers’ determination to raise rates further. We expect another …
Vietnam’s central bank unexpectedly lowered interest rates late yesterday as it aims to support the struggling economy which has been hit hard by the downturn in global demand and problems in the property sector. We think the central bank will tread …
This year’s Shunto should result in the strongest negotiated pay hikes in decades. But the average Japanese employee will have little to rejoice in. Weaker corporate profits as well as a likely loosening of labour market conditions on account of a …
A stronger start to 2023 Activity data for the first two months were broadly as expected, showing a jump in consumer spending coupled with modest gains in investment and industrial output. High-frequency data suggest that this recovery has continued in …
The Canadian banking sector is heavily concentrated, reducing the risk that deposit runs at small lenders might trigger a broader crisis of confidence for the entire sector. As things stand, the chance of the Bank of Canada soon cutting interest rates – …
14th March 2023
OPEC sticks together and will keep output constrained OPEC’s monthly report for March noted that the group has stuck to the production targets agreed in October last year. Accordingly, we have revised down our forecasts for the group’s output in 2023. The …
Stronger-than-expected economic data in January led to a rebound in market interest rate expectations and a jump in mortgage rates from 6.2% at the start of February to 6.8% in March. That drove mortgage applications for home purchase lower and means …
At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario …
Euro-zone industrial production probably edged up in January (10.00 GMT) The UK’s Spring Budget may contain limited short-term fiscal loosening (12.30 GMT) We think that US retail sales fell by 0.8% in February (12.30 GMT) Key Market Themes How the …
Given the large amount of uncertainty about how the fallout from SVB’s collapse will evolve, we have grouped possible outcomes into three broadbrush scenarios. Only in the worst scenario of financial problems spreading overseas will the global effects …
Starting with the ECB today, some major central bank decisions are due in the shadow of recent banking sector turmoil. Will policymakers press ahead with their fight to rein in inflation, or will the risk of financial instability inject caution into their …
Strong start to the year but risks on the horizon The manufacturing sector made a stellar start to 2023, but the surveys suggest growth will soon slow and the banking sector problems in the US could weigh on manufacturing demand over the rest of the year. …
Strong inflation data counter financial stability concerns The 0.5% m/m rise in core consumer prices last month adds to the evidence that inflation remains stubbornly high, but the ongoing fallout from the SVB crisis over the coming days is still likely …
Strong inflation data unlikely to outweigh financial stability concerns The 0.5% m/m rise in core consumer prices last month adds to the evidence that inflation remains stubbornly high, but the ongoing fallout from the SVB crisis over the coming days is …
Latest figures confirm plummeting demand during Q4 The detailed mortgage lending data for Q4 showed a slump in demand, as rising mortgage rates began to bite. The latest MLAR data confirmed the sharp turnaround in market conditions and suggest that, with …
This checklist helps clients keep track of the key forecasts announced during the Spring Budget at 12.30pm (GMT) on Wednesday 15 th March. Our more detailed preview is here . We will send a Rapid Response shortly after the speech, we are hosting a “Drop …
Wage growth eases despite labour market remaining tight The labour market remained tight in January. Even so, the Bank of England will breathe a sigh of relief as wage growth is easing. Together with the collapse of a couple of US banks having tightened …
Australian banks are unlikely to experience the same valuation losses that resulted in the demise of Silicon Valley Bank. The biggest risk is that a freezing up of overseas bond markets shuts down funding avenues for the major banks, but the Reserve Bank …
Even if the collapse of several mid-tier banks doesn’t develop into a full-blown systemic crisis, it will more than likely trigger a credit crunch. That raises the risk that the economy will suffer a harder landing, which would accelerate the needed …
13th March 2023
Clients can find our coverage on the SVB collapse on our designated landing page here … …and sign-up here for our Drop-In on the policy outlook for the ECB (10.00 GMT) We think US consumer price inflation fell only slightly, to 6.1%, in February (12.30 …
The restoration of diplomatic ties between Saudi Arabia and Iran adds to signs that geopolitical tensions in the Middle East are easing, which may help to reduce risk premia in financial assets in the region as well as the oil market. Tensions will not …
Could turmoil in the US banking sector mark the end of Fed rate hikes? What are the contagion risks from the collapse of SVB and Signature Bank? What will the regulatory response look like? This is a special Capital Economics Weekly Briefing episode all …
This Global Economics Update answers 5 key questions about the fallout from SVB’s collapse. While the situation remains in flux, there are good reasons to think that it does not call into question the solvency of the US or wider global financial system …
Construction slump holds back industry Mexico’s industrial sector stagnated in January as a slump in construction output offset solid increases in output in other subsectors. Early evidence suggests that activity held up well last month but, with the US …
Slight uptick in February’s lending, but still below 2022 average Net commercial real estate lending ticked up in February following a slowdown the month prior. That said, monthly lending activity across all sectors remained below the average for 2022. …
Drop in headline inflation not large enough to prevent April rate hike The slight drop in headline CPI inflation in February won’t have been enough to ease the concerns of the hawks on the MPC and, as a result, we now expect another 25bp hike to the repo …
It started with Silicon Valley Bank’s collapse, but has spread to Europe. Worries about the health of bank balance sheets have fuelled turmoil in global markets amid fears that this could mark the start of the next financial crisis. This dedicated page is …
