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 …
This page has been updated with additional analysis since first publication. Inflation falling but services disinflation stalls January’s euro-zone inflation data were a little stronger than we had expected after the data for Germany and France were …
South Africa makes a poor start to 2024 South Africa’s manufacturing PMI recorded a sharp drop in January as logistics problems and weak demand weighed on activity. We still expect growth to pick up over the course of this year, but this latest data …
CEE industry still struggling, input prices diverge in Turkey and Russia The manufacturing PMIs out of Central and Eastern Europe (CEE) for January remained soft and haven’t changed the broad picture that the region’s industrial sectors continue to …
Riksbank on track for May rate cut The Rikbsank signalled in today’s policy statement that interest rates may be cut sooner than they previously anticipated, supporting our view that the first cut is likley to be in May. The decision to leave the key …
This page has been updated with additional analysis since first publication. Manufacturing activity likely to remain robust The final manufacturing PMI reading for January suggests that activity got off to a strong start this year. Looking ahead, while …
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 …
This page has been updated with additional analysis since first publication. Fall in inflation brings rate cuts nearer National data published so far suggest that headline and core inflation in the euro-zone came down a little more than we had expected in …
This page has been updated with additional analysis and charts since first publication. City’s recovery continues to disappoint Hong Kong’s growth picked up only marginally in Q4, underperforming most expectations. And although we foresee some further …
Soft annual figure suggests weak end to 2023 The weaker-than-expected 0.2% expansion in Polish GDP over 2023 as a whole suggests that the economy struggled at the end of the year. We think this weakness will prove temporary and that activity should …
GDP growth in Taiwan accelerated further in Q4 and we expect growth to remain strong over the coming quarters, with robust growth in exports of artificial intelligence related goods to more than offset the drag from slower private consumption. According …
2023 a poor year for the Kingdom’s economy, but the recession is over The flash estimate of Saudi Arabia’s GDP for Q4 of last year showed that the economy expanded by 0.4% q/q, the first positive outturn since the period a year before. We expect 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 …
GDP growth remained well above trend in Q4 but we don’t expect this strength to last as the deceleration in credit growth feeds through to domestic demand while the external sector continues to struggle. According to the data published today, GDP rose by …
This report was first published on Wednesday 31st January covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Thursday 1st February and the Caixin services and composite PMIs on Monday 5th February. Surveys starting to …
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
Sharp slowdown increases chances of Banxico cut next week The sharper-than-expected slowdown in Mexico’s GDP growth, to just 0.1% q/q in Q4, is likely to be followed by continued sluggish growth over the coming quarters. At the margin, the data increase …
This page has been updated with additional analysis since first publication. Regional recovery continues The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) were a mixed bag in January, but our regional measure …
This page has been updated with additional analysis since first publication. Economy to remain stagnant The euro-zone economy stagnated in Q4 and we think that it will flat-line in the first half of this year too as the effects of past monetary tightening …
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 …
The start of a slow recovery The meagre 0.2% q/q expansion in Czech GDP in Q4 confirms that the economy contracted over 2023 as a whole, and we think that this is likely to be followed by tepid growth this year. We maintain our below consensus GDP …
Euro-zone in or close to recession Fourth quarter GDP data published for for France and Spain this morning were a little better than we had anticipated. However, provided there is no revision to the “very preliminary” estimate that the German economy …
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 …
Bank of Ghana starts its easing cycle The Bank of Ghana kicked off its easing cycle with a 100bp cut, to 29.00%, today and an improving balance of payments position alongside further falls in inflation mean that more cuts are on the cards over the coming …
29th January 2024
MAS keeps policy unchanged but loosening likely in April. The Monetary Authority of Singapore (MAS) kept monetary policy settings unchanged today which was in line with expectations, but we think weaker incoming activity data and easing concerns about …
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
Fall in inflation keeps another 50bp cut on the cards The slightly larger-than-expected decline in Brazilian inflation in the first half of this month, to 4.5% y/y, seals the deal on another 50bp cut in the Selic rate (to 11.25%) at next week’s central …
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 …
SARB holds again, replaying inflation risk concerns The South African Reserve Bank resisted responding to last month’s fall in inflation with an interest rate cut, leaving the repo rate unchanged at 8.25% today. The MPC’s message was little changed, …
Today’s decision to leave interest rates unchanged, and the tone of the press release, were as expected. In the forthcoming press conference, Christine Lagarde is likely to push back against expectations for policy rates to start falling in April. It came …
Hiking cycle at an end, rates to stay high The 250bp interest rate hike from Turkey’s central bank (CBRT) today, to 45.00%, marks an end to its tightening cycle. Encouragingly, the communications were relatively hawkish and suggest that policymakers …
Germany starts year in recessionary conditions The fall in the Ifo Business Climate Index in January suggests that Germany started the year as it ended 2023 – in recessionary conditions. We think the economy will contract again in Q1 and forecast zero GDP …
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 …
Economic growth in Korea held up better than expected in Q4 but we expect the economy to grow below trend over the next couple of quarters as export growth softens in near term while tight fiscal and monetary policy continue to curtail domestic demand. …
24th January 2024
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 …
Inflation jumps, February cut in balance The jump in Mexico’s inflation to a higher-than-expected 4.9% y/y in the first half of January was entirely due to a particularly sharp rise in agricultural goods inflation. But it probably means the chances of …
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. PMIs remain consistent with recession January’s euro-zone Composite PMI, published this morning, remained consistent with the economy contracting by around 0.2% q/q. The tick up …
Sharp inflation fall not enough to encourage early rate cuts South Africa’s headline inflation rate fell back further to 5.1% y/y in December but this is unlikely to be enough to convince the Reserve Bank to start an easing cycle tomorrow. November’s …
The central bank (BNM) left the overnight policy rate unchanged (at 3.0%) today and we think monetary policy is set for an extended pause as policymakers attempt to strike a balance between supporting the economy and combating inflation. The decision …
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 …
