Net trade to boost GDP in Q2 The rise in the import bill in April likely overstates the strength of domestic demand in Australia. The decline in the trade surplus to $11.2bn in April, from a downwards-revised $14.8bn in March, was sharper than most had …
8th June 2023
Bank resumes rate hikes and probably another to come in July The Bank of Canada’s 25bp interest rate hike today is unlikely to be the last, with the rapid turnaround in the housing market and concerning underlying inflation dynamics raising the case for …
7th June 2023
Exports still benefitting from easing supply shortages Easing supply shortages continued to support export growth in April but, with export orders still very weak, that resilience is likely to fade soon. Canada’s goods trade surplus widened from a …
Slump in exports to weigh on Q2 GDP growth The widening in the trade deficit to a six-month high of $74.6bn in April, from $60.6bn, means that net external trade is on track to be a big drag on second-quarter GDP growth, with the latter still tracking …
This webpage has been updated with a table and chart of key data Inflation hits multi-year low, but rate cuts still some way off The fall in Brazilian inflation to 3.9% y/y in May, alongside the government’s new fiscal framework, has strengthened the …
Demand falls to historic low Mortgage applications for home purchase fell to their lowest level in almost 30 years in May, as a renewed rise in mortgage rates weighed on demand. This points to further near-term weakness for home sales, which we think will …
Pause in May will give way to renewed falls ahead House prices were unchanged in May according to Halifax. Given that lack of momentum, the increase in mortgage rates following the bad inflation data published on the 24th of the month is set to tip house …
Weak demand to weigh on industry The 0.3% m/m rise in industrial production in April was much smaller than the 2% rebound we had anticipated and weaker than the consensus forecast (+0.6%). Although the decline in March was revised down to 2.1% (previously …
This page has been updated with additional analysis and charts since first publication. Exports stumbled but imports jumped China’s exports contracted year-on-year in May for the first time in three months, with export volumes falling below their …
Flagging productivity raises risk of higher terminal interest rate Although the economy is clearly slowing, dismal productivity gains raise the risk that the RBA will have to raise interest rates above the 4.35% peak we have pencilled in. The 0.2% q/q …
NBP remains on pause The National Bank of Poland (NBP) left its main policy rate on hold again today, at 6.75%, and we think that rates will remain unchanged for at least the next few meetings. While we maintain our forecast that interest rates will be …
6th June 2023
This webpage has been updated with a table and chart of key data Technical recession dodged, but outlook bleak The 0.4% q/q rise in South Africa’s GDP in Q1 means that the economy once again skirted a technical recession, but the outlook remains bleak. …
The headline CIPS construction PMI increased for a second month in a row in May to 51.6, indicating a small rise in activity. But in line with last month there was a marked difference between the commercial and housing sectors, with the former rising to …
RBA will deliver another 25bp hike next month The Reserve Bank of Australia lifted the cash rate by 25bp today and the hawkish tone of the statement suggests that the risks to our terminal rate forecast of 4.35% are tilted to the upside. Today’s decision …
Wage growth still set to fall sharply in H2 Labour cash earnings rose by 1.0% y/y in April, marking a slowdown from 1.3% in March. That was due to a 0.3% fall in overtime pay and bonus payments staying virtually flat with just a 0.2% rise. By contrast, …
ISM surveys suggest economy has stalled In contrast to the strength of payroll employment growth last month, the fall in the ISM services index to a five-month low of 50.3 in May, from 51.9, suggests the economy is barrelling towards recession. On past …
5th June 2023
Despite strength of employment, unemployment rises and wage growth moderates The bigger-than-expected 339,000 increase in non-farm payroll employment in May will dominate the headlines, but the employment report was not all positive – with a big drop in …
2nd June 2023
Largest minimum wage hike in 41 years adds pressure on RBA The 5.75% increase in the minimum wage is the largest on record and adds to the case for the RBA to raise interest rates further. The Fair Work Commission today announced that both the minimum …
ISM survey suggest recession risks remain high The slight decline in the ISM manufacturing index to 46.9 in May, from 47.1, reinforces our view that the jump in manufacturing output in April won’t be sustained. But the bigger news was the renewed plunge …
1st June 2023
The renewed decline in mortgage approvals in April will have dashed hopes that the jump in March marked the start of a recovery. Moreover, with mortgage rates now on their way back up, lending is likely to remain weak throughout the second half of the …
Core inflation coming down, but won’t stop further ECB tightening May’s decline in euro-zone core inflation to a four-month low left it below the published consensus forecast and was driven in part by lower services inflation. While further gradual …
Higher interest rates start to weigh more heavily on bank lending While the £7.3bn rebound in total UK bank deposits in April followed the £16.1bn decline in March and suggests that concerns over the stability of UK banks have faded, the more interesting …
Net lending to property staged a recovery in April, rising to a 10-month high of £1.18bn. Both standing and development lending increased, with the latter now positive for each of the past three months. The pick-up in lending is in line with the Q1 RICS …
House prices flattened off in May after a rise in April. But with mortgage rates now on their way back up we suspect that the stabilisation in prices over the last couple of months will soon give way to renewed falls. The -0.1% m/m fall in house prices in …
Job growth holding up across metros; southern markets continue to lead Total employment growth reached a solid 0.7% 3m/3m on average in April for the second consecutive month, led by Boston, Las Vegas, Charlotte and Orlando. But for office-based jobs, …
31st May 2023
Upside surprise further boosts the case for another rate hike The larger-than-expected 3.1% annualised rise in first-quarter GDP and the strong preliminary estimate in April boost the case for another interest rate hike from the Bank of Canada, which …
Good news on inflation but core rate still high The fall in German headline inflation in May along with signs that core price pressures eased echoes the message from the inflation figures for France and Spain and supports the case for the ECB to limit …
Further tightening unlikely The Bank of Thailand (BoT) raised its policy rate by 25bps, to 2.0%, today but given the relatively benign outlook for inflation we think this marks the end of the tightening cycle. In the accompanying statement to today’s …
Encouraging inflation data from France The larger-than-expected fall in headline inflation in France and the fall in both services and core goods inflation bode well for euro-zone HICP inflation which will be published tomorrow and will strengthen the …
Renewed acceleration in inflation will prompt further RBA tightening With inflation set to overshoot the RBA’s forecasts this quarter, the Bank will continue to increase interest rates, perhaps as soon as next week. According to the Monthly CPI …
Further contractions in industrial production in store The weakness in both industrial activity and retail spending in April points to a poor start to Q2 for the economy after it expanded by 0.4% q/q last quarter, posing downside risks to our current …
Fall in inflation much faster in Spain than elsewhere At face value, the fall in Spain’s HICP inflation rate to below 3% in May is encouraging for the ECB. However, it largely reflects country-specific factors which may not be replicated elsewhere for …
30th May 2023
Looming recession will see unemployment rate hit 3% The unemployment rate fell from 2.8% to 2.6% in April, a better outturn than the 2.7% we and the consensus had pencilled in. The job-to-applicant ratio was unchanged at 1.32, arresting a downtrend that …
Although President Joe Biden and House Speaker Kevin McCarthy have finalised a deal to raise the debt ceiling, we wouldn’t be surprised if legislative delays mean that deal doesn’t get passed by Congress until late this week. There is little of any …
29th May 2023
Turkish economy’s day of reckoning may now just be around the corner The victory for President Erdogan in Turkey’s presidential election on Sunday is likely to result in a continuation of distortive economic policies and push the economy down a path …
Core inflation still elevated The 0.5% m/m increase in real consumption in April got the second quarter off to a good start, although that followed two months’ of declines. We now expect second-quarter consumption growth to be around 2% annualised, which …
26th May 2023
Improving outlook for retailers, but higher interest rates to weigh on spending before long The 0.5% m/m rise in retail sales volumes in April was better than we expected (consensus +0.2%, CE -0.5%) and reversed some of the 1.2% m/m fall in March (revised …
Weak consumption adds to case for RBA pause The weakness in retail sales in April supports our view that the Reserve Bank of Australia is done hiking interest rates. Retail sales values were unchanged last month, a weaker result than the analyst consensus …
Inflation has just a bit more to climb Headline inflation in Tokyo fell from 3.5% to 3.2% in May, largely due to a sharp 8.2% fall in energy inflation, which took away almost 0.5%-pts from headline inflation. The drop shows that lower energy import prices …
This webpage has been updated with a table and chart of key data Inflation shows broader signs of easing The surprise fall in Brazilian inflation to 4.1% y/y in the first half of May, coming alongside this week’s approval of the new fiscal framework in …
25th May 2023
Hopes for CBRT rate hikes are evaporating Turkey’s central bank (CBRT) left its key policy rate on hold at 8.50% again today and, with Recep Tayyip Erdoğan in pole position to be re-elected as Turkey’s President this Sunday, the probability of much-needed …
Germany in recession and outlook poor The downward revision to Germany’s Q1 GDP means that the country has fallen into a technical recession and that euro-zone GDP probably stagnated in Q1 rather than expanding by 0.1% q/q. We expect further economic …
Falling inflation to open the door for early rate cut Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%) as was widely expected. With inflation falling and growth easing, we think there is a good chance the central bank could cut …
On hold again, first cut likely in August The Bank of Korea today left interest rates unchanged (3.5%) for a third consecutive meeting, but we don’t think it will be long before the central bank starts cutting interest rates. With inflation falling …
Some officials looking to resume rate hikes The minutes of the early May FOMC meeting reveal that although Fed officials agreed “the extent to which additional increases in the target range may be appropriate after this meeting had become less certain”, …
24th May 2023
Monetary policy to be kept tight despite falls in inflation Mexico’s headline inflation rate fell to a 20-month low of 6.0%y/y in the first half of May and is set to drop further over the coming months. That said, strong wage growth will keep inflation …
This webpage has been updated with a table and chart of key data. Growth slows on back of demonetisation Nigeria’s economic growth slowed to just 2.3% y/y in Q1 as the damaging effects of a botched demonetisation process more than offset an easing of …
Opposing messages from Ifo and PMIs Contradictory messages from the Ifo – which was very weak in May – and the Composite PMI mean the performance of the German economy in Q2 is very uncertain . But regardless of how well the economy held up this quarter, …
This webpage has been updated with a table and chart of key data. Rising core inflation to keep policymakers in hawkish mood South Africa’s headline inflation rate dropped back to 6.8% y/y in April but the further strengthening of core inflation will …
Resurgence in core inflation means BoE to keep its foot on the interest rate brake Note: We’ll be discussing the UK April CPI report in a briefing at 10:00 BST/17:00 SGT on 24 th May. Register here. The smaller-than-expected fall in CPI inflation from …
