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Downside surprise makes a 50bp cut next week look likely The downside surprise to headline inflation in September and muted monthly gains in the CPI-trim and CPI-median core measures support our view that the Bank of Canada will choose a more aggressive …
15th October 2024
This page has been updated with additional analysis since first publication. Further easing in wage growth supports case for more interest rate cuts The further fall in wage growth in August, together with signs that the labour market continued to loosen …
In light of both Hurricanes Helene and Milton we are flagging notes where we highlighted the physical climate risks facing the US. Ranking metros by physical climate risks to real estate Elevated insurance premiums continue to hit valuations Unpriced …
14th October 2024
PPI points to 0.24% m/m increase in core PCE Based on the combined CPI and PPI data, we now calculate that the Fed’s preferred core PCE deflator price measure increased by 0.24% m/m in September which, at 2.9% annualised, is a little hotter than we’ve …
11th October 2024
Stronger employment gain unlikely to be repeated The stronger rise in employment and fall in the unemployment rate in September were largely due to a seasonal quirk, as the weak summer jobs market meant that fewer young workers left positions than usual …
This page has been updated with additional analysis since first publication. Modest economic growth more likely than another recession this year The 0.2% m/m rise in GDP in August (consensus and Capital Economics 0.2%), which came on the back of the …
Core CPI consistent with another muted gain in core PCE Although core CPI prices increased by 0.3% m/m for a second consecutive month in September, our calculations suggest that core PCE prices increased by 0.20% m/m which, at an annualised pace, is only …
10th October 2024
Fed split on whether to kick off with 50bp or 25bp rate cut last month The minutes of the mid-September FOMC meeting reveal that support among Fed officials for kicking off the loosening cycle with a bigger 50bp rate cut was a little weaker than the lone …
9th October 2024
RBNZ hands down a dovish 50bp cut The RBNZ is likely to hand down a couple more 50bp rate cuts over the next few months . And we think it will end up cutting rates more aggressively than most are predicting. The RBNZ’s decision to cut its Official Cash …
Boost from net trade to be offset by weaker domestic demand Despite the trade deficit widening in August, developments earlier in the quarter means that net trade looks set to support GDP growth in the third quarter. With most of that positive …
8th October 2024
Rise in exports suggest stronger GDP growth The trade deficit narrowed to $70.4bn in August, from $78.9bn, as exports grew by 2% m/m and imports declined by 0.9% m/m. Exports, especially in real terms, were stronger than the advance goods data had implied …
RBA softens its tightening bias Although the RBA is becoming more attuned to downside risks to its outlook, we still think it will wait until early next year to cut rates. The minutes of the RBA’s September meeting confirmed that the RBA has in fact …
Regular earnings growth will remain close to 3% Base pay rose the most since 1992 in August and we think it will continue to surge in the coming months. According to today’s preliminary estimate, labour cash earnings rose by 3.0 y/y in August. That result …
This page has been updated with additional analysis since first publication. Confirmation house prices rebounded in Q3 The third consecutive monthly rise in the Halifax house price index in September provides further evidence that the falls in mortgage …
7th October 2024
Labour market strength rules out another 50bp rate cut Looking at the labour market strength evident in September’s Employment Report, the real debate at the Fed should be about whether to loosen monetary policy at all. Any hopes of a 50bp cut are long …
4th October 2024
Service sector on fire; but price pressures could be rebounding The surge in the ISM services index to a 17-month high of 54.9 in September, from 51.5, is a good reminder that the contrasting weakness in manufacturing is not a systemic threat to the …
3rd October 2024
Sharp fall in mortgage rates lifts applications The impact of lower mortgage rates was finally evident in mortgage applications in September, with applications for home purchase rebounding to a three-month high. With mortgage rates falling to little more …
2nd October 2024
This page has been updated with additional analysis since first publication. Consumer rebound not as strong as it seems The solid pickup in retail sales in August was driven in part by temporary factors, meaning that the underlying momentum behind …
1st October 2024
Tankan points to continued recovery This website has been updated with additional analysis since first publication. The slight rise in business conditions across all firm sizes in the latest Tankan suggests that the robust rebound in activity in Q2 will …
This page has been updated with additional analysis since first publication. Fading drag on credit from higher interest rates is supporting the economy August’s money and lending data provide further evidence that the gradual improvement in credit demand …
30th September 2024
This page has been updated with additional analysis since first publication. Softer rebound in activity, but another major downturn unlikely Q2 GDP growth of 0.5% q/q was a bit weaker than the previous estimate of 0.6% q/q, but the ONS also confirmed …
This page has been updated with additional analysis since first publication. House prices rise in Q3 and will rise further next year September’s 0.7% m/m rise in Nationwide house prices suggests that August’s 0.2% m/m fall was just a blip and that the …
Economic recovery lost some pace in Q3 While the plunge in industrial production in August creates some downside risks to our forecasts, the continued strength in consumer spending is encouraging. According to the preliminary estimate, industrial …
Core price pressures easing; Q3 consumption growth solid As we calculated based on the earlier price data releases, the core PCE deflator increased by a muted 0.13% m/m in August, with the headline deflator up by 0.09% m/m. Admittedly, although the …
27th September 2024
Stronger monthly GDP growth will be short lived Although the rise in GDP in July was stronger than expected, the preliminary estimate of unchanged GDP in August suggests that the momentum was short lived and puts third-quarter growth on track to surprise …
GDP revision shows stronger income growth; core orders rally At first glance the annual revision to the national accounts doesn’t appear to have had much of an impact – with second-quarter GDP growth left unchanged at 3.0% and core PCE inflation unchanged …
26th September 2024
Small fall in new home sales not a worry New home sales dropped back slightly in August, which always seemed likely after the 10% surge in transactions the month before, driven by pent-up buyers responding to lower borrowing costs. Still, new home demand …
25th September 2024
This page has been updated with additional analysis since first publication. Disinflation gathers pace The Reserve Bank of Australia will look past the sharp fall in headline inflation in August, given that the plunge was driven in large part government …
House prices lose further momentum Another muted 0.2% rise in house prices in July adds to the sense that the housing market is cooling amid weak buyer demand and growing supply. As price growth continues to moderate quickly with no signs of a turnaround …
24th September 2024
RBA will only cut in first half of next year The RBA sounded marginally less hawkish today but we still expect the Bank to only lower interest rates in Q2 2025. As widely anticipated, the Bank kept its policy rate unchanged at 4.35%. The key elements of …
Flash PMI suggests continued rebound in activity The composite PMI remained at healthy level in September which suggests that the strong rebound in activity that started last quarter will continue across the second half of the year. Today’s flash estimate …
This page has been updated with additional analysis since first publication. Growth slowing, not collapsing The fall in September’s composite flash PMI is probably not a sign that the economy is on the cusp of another downturn, but instead is further …
23rd September 2024
Stronger third quarter consumption The rebound in retail sales volumes in July will be welcome news to the Bank of Canada, which has been concerned about the downside risks to the economy. With the outlook for sales positive, there is a better chance …
20th September 2024
Retail sector on track to support consumer spending in Q3 The unexpected large rise in retail sales volumes in August came on the back of a 0.7% m/m increase in July (revised up from 0.5% m/m) and lends some support to our view that the recent stagnation …
This page has been updated with additional analysis since first publication. Borrowing disappoints but backdrop not as dire as Chancellor suggests August’s public finances figures continued the recent run of bad news on the fiscal position, with public …
The Bank of Japan kept policy unchanged today as widely anticipated and we’re sticking to our forecast that it will deliver another 25bp rate hike at its October meeting. As correctly anticipated by all analysts polled by Reuters, including ourselves, the …
Underlying inflation will hover around 2% until early-2025 Underlying inflation rebounded in August and will remain close to the BoJ’s 2% target until early-2025, triggering another rate hike by the Bank at its October meeting. The 2.8% annual rise in …
Sales slump, but signs of life emerging The slump in existing home sales in August shows that the sharp fall in mortgage rates since late-July is yet to stimulate the market, although the signs of life in last week’s purchase mortgage applications data …
19th September 2024
For our more detailed analysis of the Bank's September policy announcement, see here . BoE underlines that interest rates will be reduced gradually By leaving interest rates at 5.00% the Bank of England showed it is more like the ECB than the Fed and is …
Unemployment rate will approach 5% next year The labour market and population data released today are consistent with our view that the Reserve Bank of Australia will only lower interest rates in Q2 2025. For a start, the 47,500 rise in employment in …
This page has been updated with additional analysis since first publication. RBNZ still on course to loosen policy aggressively Economic activity in New Zealand last quarter wasn’t quite as weak as most had anticipated. However, we still think there’s a …
A hawkish 50 The Fed did cut its policy rate by a bigger 50bp, to between 4.75% and 5.00%, but the vote was not unanimous and the new rate projections only shows an additional 50bp of cuts between now and the end of this year. Accordingly, today’s …
18th September 2024
Rebound in housing starts The large rise in housing starts in August was due to a rebound in starts in the south, confirming that the July slump was a temporary disruption caused by Hurricane Beryl. The increase in permits, particularly in the …
This page has been updated with additional analysis since first publication. Rise in services inflation makes September rate cut even less likely CPI inflation stayed at 2.2% in August (consensus & CE 2.2%, BoE 2.4%), but the rise in services inflation …
Drag from net trade will moderate Q3 GDP growth Even though the trade balance held up much better than most had anticipated in August, net trade will still provide a large drag on Q3 GDP growth. The 5.6% y/y rise in export values was much weaker than the …
Manufacturing output rebounds, but challenges remain Manufacturing output rebounded strongly in August as the temporary disruptions to production from the previous month were reversed. Together with last month’s solid gain in control group retail sales, …
17th September 2024
Consumers remain resilient The stronger-than-expected retail sales data for August suggest that, boosted by rapid wealth gains and falling energy prices, consumers continue to spend freely despite the labour market slowdown. With control group sales …
Mission almost accomplished The return of headline inflation to the 2.0% target in August was mainly due to favourable base effects and is likely to be short-lived, with inflation rebounding to as high as 2.5% by the turn of the year. Nonetheless, the …
A brief respite for the manufacturing sector The 0.9% m/m rise in manufacturing sales volumes in July implies there are upside risks to the flash estimate that total GDP was unchanged at the start of the third quarter, although the negative tone of the …
16th September 2024
Consumer mood improves, but remains sour Despite the small rise in the University of Michigan consumer sentiment index in September, consumer confidence remains in a slump. At face value, weak sentiment points to softer consumer spending, but confidence …
13th September 2024
