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Trade balance back in deficit Net trade appears to have contributed to the likely rebound in GDP last quarter but, with exports falling in December and the survey indicators of external demand still weak, that boost will probably go into reverse this …
7th February 2024
Support to growth from surging exports set to fade A sharp rebound in real exports in December helps explain why net external trade supported GDP growth in the fourth quarter but, with the surveys indicating that external demand is weakening fairly …
Mortgage demand continues to recover The average mortgage rate in January was unchanged from the month before, but that didn’t prevent mortgage applications for home purchase rising for a third consecutive month. And with interest rates set to resume …
This page has been updated with additional analysis since first publication. Industrial recession continues The seventh consecutive monthly fall in German industrial output in December confirms that industry remains a significant drag on growth. We expect …
This page has been updated with additional analysis since first publication. Rise in unemployment has further to run Although the unemployment rate last quarter came in below the RBNZ’s expectations, leading indicators continue to point to a rapid …
6th February 2024
Western metros again at risk from announced layoffs Although December’s average job growth rate of 0.3% 3m/3m across our 30 metros signalled a tepid end to 2023, it brings to a close a surprisingly solid year for total employment. The same can’t be said …
This page has been updated with additional analysis since first publication. Construction PMIs start 2024 in contractionary territory The rise in the headline CIPS construction PMI from 46.8 in December to 48.8 in January was driven by improvements in …
RBA pours cold water on the prospect of early rate cuts Although we're sticking with our view that the RBA is done tightening policy, rate cuts may not be in play until the second half of this year. The RBA’s decision to leave its cash rate on hold at …
This page has been updated with additional analysis since first publication. Further regular wage increases incoming While winter bonus payments increments disappointed in December, regular wage growth accelerated substantially. Looking ahead, we think …
5th February 2024
Services activity apparently gaining momentum Following on the heels of the strong labour market data, the rebound in the ISM services index to a four-month high of 53.4 in January, from 50.5, is another signal that the US economy remains impervious to …
Surging employment may explain Fed’s hawkishness The 353,000 surge in non-farm payrolls in January illustrates why the Fed is apparently in no rush to start cutting interest rates and kills off any remaining chance of a cut as soon as March. Even if that …
2nd February 2024
Manufacturing sector turning a corner The rebound in the ISM manufacturing index to 49.1 in January, from 47.1, indicates that the downturn in the sector is fading and appears to justify the Fed’s view that it can wait a little longer before cutting …
1st February 2024
Cuts may come earlier than the BoE implies While leaving interest rates at 5.25% for the fourth meeting in a row today, the Bank of England sent some soft signals that the next move will be a cut, but it pushed back more strongly against the idea that …
Fed drops its tightening bias The Fed left its key policy rate unchanged at 5.25% to 5.50% today, but dropped its tightening bias, keeping open the possibility of a rate cut at the next FOMC meeting in mid-March. Admittedly, the new policy statement warns …
31st January 2024
Slower wage growth reinforcing disinflationary trend The further slowdown in wage growth evident in the fourth-quarter employment cost index illustrates that easing labour market conditions are helping to push inflation down. With the moderation in job …
GDP growth set to remain well below potential The monthly GDP data imply that the economy returned to growth in the fourth quarter and the strong handover from December reduces the risk of the economy contracting this quarter, despite the weakness of the …
Larger-than-expected increase supports our above-consensus forecast The larger than expected +0.7% m/m gain in house prices in January (consensus: +0.1%, Capital Economics: +0.4%) reflected improving public sentiment about the economy and the housing …
This page has been updated with additional analysis since first publication. With disinflation gathering pace, rate cuts are now in sight The weaker-than-expected Q4 inflation reading paves the way for the RBA to cut interest rates sooner than most are …
This page has been updated with additional analysis since first publication. GDP growth will be positive in Q4 Though retail sales was very weak in December, strong industrial production data to close out the quarter reinforces our view that Q4 GDP growth …
Surprise slowdown in house prices in November The marked slowdown in house price growth in November was the first sign of a response in prices to the spike in mortgage rates a month earlier. The 0.2% m/m rise in the seasonally adjusted national …
30th January 2024
This page has been updated with additional analysis since first publication. A turning point in credit December’s money and credit figures suggest the transition from interest rates being a drag on activity to being a boost is beginning. This lends some …
Resilient lending in December, but anaemic investment volumes Net lending to commercial property increased for the tenth consecutive month in December, but investment sentiment remained downbeat. Looking ahead, we expect investment to slowly recover over …
This page has been updated with additional analysis since first publication. RBA’s concerns about weak household spending will rise The sharp fall in retail sales in December adds to the case for the Reserve Bank of Australia to loosen policy settings …
Seven months of annualised core inflation at target The December income and spending data confirm that core PCE inflation has been running at an annualised pace in line with the Fed’s 2% target for seven months now. This reiterates the message that there …
26th January 2024
Plunge in inflation casts doubt on ending of ultra-loose monetary policy The plunge in inflation to well below 2% in Tokyo last month was broad-based, casting doubt on the Bank of Japan’s willingness to end negative interest rates. Headline inflation …
25th January 2024
New home sales regain some momentum New home sales rebounded in December, reversing nearly all of their decline in the previous month when mortgage borrowing costs were much closer to their 8% peak. The 8.0% m/m increase in seasonally adjusted new home …
What landing? Although GDP growth came in hotter than expected in the fourth quarter, underlying inflation continued to slow, with annualised core PCE inflation running at the 2% target in the fourth quarter. The upshot is that an early spring rate cut by …
Norges Bank today reiterated that it will leave its policy rate at 4.5% “for some time”. But we think that inflation will fall rapidly this year, so when the Bank does start to cut rates, it will do so more quickly than its forecasts suggest. The decision …
Bank drops its hiking bias The Bank of Canada’s decision to drop its tightening bias today is the first step toward interest rate cuts. We continue to think that the Bank’s forecasts for the economy are too optimistic, and that inflation will slow faster …
24th January 2024
This page has been updated with additional analysis since first publication. Lingering evidence of sticky services inflation may continue to concern the BoE The small rise in the composite activity PMI, from 52.1 in December to 52.5 in January, suggests …
This page has been updated with additional analysis since first publication. Positive signs for this quarter The composite PMI rose for the second consecutive month in January, driven by rises in both manufacturing and services components. And with the …
This page has been updated with additional analysis since first publication. Export growth will be sluggish this year The trade deficit widened in December as import values rose more strongly than export values. But the weakness in net goods trade will be …
This page has been updated with additional analysis since first publication. Inflation continues its rapid descent With inflation falling rapidly, risks are tilted towards the RBNZ cutting rates sooner than Q3, as we’re currently predicting. Consumer …
23rd January 2024
This page has been updated with additional analysis since first publication. More wiggle room for a pre-election splash December’s better-than-expected public finances figures brought some cheer for the Chancellor after the recent run of poor outturns and …
Policy normalisation is in sight Although the Bank of Japan stood pat at its meeting today, we’re sticking with our view that policymakers will soon call time on negative rates. The Bank’s decision to leave its policy rate unchanged at -0.1% was correctly …
2023 saw the lowest number of existing home sales since 1995 A drop in existing home sales in December confirmed that they fell by 20% y/y in 2023 as a whole to their lowest level since 1995. (See Chart 1.) Lack of supply was the main reason existing home …
19th January 2024
Falling inflation finally providing a boost to confidence The surge in the University of Michigan measure of consumer sentiment in January indicates that recent sharp declines inflation are finally feeding through, although we doubt this signals an …
Retail sales volumes rose strongly last quarter Retail sales were weaker than expected in November, but earlier gains and the strong preliminary estimate for December still suggest that sales volumes grew substantially over the fourth quarter. The latest …
This page has been updated with additional analysis since first publication. Bleak end to a dismal year, but a better 2024 awaits The 3.2% m/m fall in retail sales volumes in December was far worse than expected (consensus forecast -0.5% m/m, CE -1.0% …
This page has been updated with additional analysis since first publication. Inflation will rebound early this year Inflation fell again in December, driven by declines in both fresh food and energy inflation. However, the bigger picture is that inflation …
18th January 2024
Reversal of November spike not a sign of weakness Note: We’ll be discussing our above-consensus forecasts for US house prices and construction in an online briefing on 23rd January at 10:00 EST/15:00 GMT. Register now . Housing starts fell last month …
This page has been updated with additional analysis since first publication Labour market will turn faster than the RBA anticipates With labour market data for December disappointing expectations, we’re more convinced than ever that the RBA will take its …
Market was picking up even before latest slide in mortgage rates The December RICS Housing Market survey showed sales volumes rising and buyer demand recovering even before the further sizeable drop in mortgage rates in January. That’s encouraging for our …
Manufacturing sector stagnating The muted rise in manufacturing output in December shows that the sector continues to struggle, even as consumption growth remains strong. The 0.1% m/m increase in manufacturing output in December meant that the …
17th January 2024
Consumers end the year on a high The 0.6% m/m rise in retail sales in December may have been supported by the unseasonably mild weather, but it still means there is no sign that households are buckling under the pressure of higher interest rates with …
This page has been updated with additional analysis since first publication. Downward trend stalls, but drop to below 2% still coming in April The unexpected rise in CPI inflation from 3.9% in November to 4.0% in December (consensus and CE forecast 3.8%) …
Core inflation pressures still too strong Although the rise in headline inflation in December was mainly due to gasoline price base effects, the more worrying development is that the CPI-trim and CPI-median core measures both rose by a larger 0.4% m/m. …
16th January 2024
Tepid lending in December closes a sluggish year for activity Net lending on commercial real estate (CRE) by banks was positive again in December, rising by $4.2bn in the month. (See Table 1.) That said, the monthly change was broadly in line with the …
This page has been updated with additional analysis since first publication. Wage growth fading fairly fast Another big drop in wage growth in November supports our view that domestic inflationary pressures are fading fairly fast. But the ongoing …
Temporary rebound in sales volumes The rebound in manufacturing sales in November was broad-based but, with new orders dropping back and the manufacturing surveys weakening in December, that strength is unlikely to be sustained. The 1.2% m/m rise in …
15th January 2024
