This report has been updated with additional analysis and a Table and Chart of key data. Inflation edges higher to its peak Saudi Arabia’s headline inflation rate nudged up from 3.3% y/y in December to 3.4% y/y in January, which came on the back of a …
15th February 2023
Moderating services inflation makes Bank of England’s life easier The sharp fall in CPI inflation from 10.5% in December to 10.1% in January (consensus and CE forecast: 10.2%) was the most eye-catching part of today’s CPI release. But it is the easing in …
Core inflation eases only gradually The 0.5% m/m increase in consumer prices in January illustrates that inflation is still declining only gradually, but we still expect that downward trend to accelerate soon, as easing goods shortages feed through and …
14th February 2023
Wage growth continues to accelerate despite cooling labour demand December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continues to support strong wage growth. The Bank of …
Weak investment momentum makes recession even likelier Japan’s economy returned to growth in Q4, avoiding a technical recession after the contraction in Q3. However, the rebound was subdued, let down mostly by contractions in business investment and …
Confidence still near historic lows, despite recent rebound The further modest rise in the University of Michigan consumer sentiment index in early February still only left it in line with its average level during the depths of the financial crisis in …
10th February 2023
Labour market strength eases recession fears The surge in employment and strong rise in hours worked in January suggest that GDP growth will be stronger than we anticipated this quarter. However, the decline in wage growth means that unexpected strength …
CBR changes the script as inflation risks mount Russia’s central bank (CBR) left rates on hold at 7.50% today but its communications were far more hawkish than expected as it talked about a further build-up of inflation risks and the possibility of hiking …
Credit growth is bottoming out After slowing last year, bank loan growth jumped to a 10-month high in January. Broad credit growth looks to have ticked up too after accounting for seasonal effects. We expect the recovery to continue in the near-term as …
The nomination of Kazuo Ueda to lead the Bank of Japan could be read as a sign that the Kishida government is seeking a shift away from ultra-loose policy, but we aren’t fully convinced that this is the case. According to media reports, Japan’s government …
Avoiding a recession in 2023 will prove harder The 0.5% m/m fall in real GDP in December was worse than expected (consensus -0.3%), but the 0.0% change in Q4 (consensus 0.0%, BoE +0.1%) meant that the economy avoided a recession last year by the skin of …
Economy set to struggle over the coming quarters The economy contracted sharply in the final quarter of last year and we think it will remain weak in the coming quarters as elevated interest rates, weak external demand and tepid consumption activity drag …
Inflation ticking up on reopening effects Factory-gate prices continued to decline last month thanks to falling commodity prices and waning supply chain disruption. But at the same time, a jump in demand for travel and other services following the removal …
Banxico hikes by 50bp, and flags another increase Mexico’s central bank delivered a larger-than-expected 50bp interest rate hike, to 11.00%, today most probably because the recent uptick in services inflation spooked the Board. Another rate hike (probably …
9th February 2023
Tightening cycle over, but cuts unlikely until 2024 The National Bank of Romania (NBR) left its policy rate on hold today, at 7.00%, and we think that its tightening cycle is now over. Even so, interest rate cuts probably won’t arrive until 2024. Today’s …
Governor Thedéen steps on the brakes The Riksbank’s decision to raise its policy rate by 50bp today was expected but the decision to begin actively selling government bonds is a surprise. We now think the policy rate will rise a bit further in the coming …
This page has been updated with an additional chart and table of the key data. Inflation jumps to fastest pace since 2017 as food inflation hits record high Egypt’s headline inflation rate climbed from 21.3% y/y in December to 25.8% y/y in January, its …
German inflation statistics debacle continues The main takeaway from German flash inflation figures for January, which were finally released today after a week of delay, is that headline inflation in both Germany and the euro-zone fell further in January, …
Bank balancing risks of sticky services inflation and housing market The Summary of Deliberations reveals that the Bank of Canada is still concerned about the risk that inflation will not decline all the way back to the 2% target, but that it ultimately …
8th February 2023
Rates unchanged, rate cuts possible by year-end Poland’s central bank (NBP) kept its main policy rate on hold at 6.75% as expected today and, with the economy slowing and inflation near a peak, further hikes are unlikely. We expect the central bank to …
RBI’s tightening cycle is probably at an end The RBI further slowed the pace of monetary tightening with a 25bp hike to the repo rate (to 6.50%) today and, though it has left the door ajar for further rate hikes, the softer growth outlook and improvement …
Rebound in autos exports offsets decline in commodity export prices A surge in motor vehicle exports drove overall export volumes higher at the end of 2022, even as lower commodity prices weighed on export values. As the export order surveys are still …
7th February 2023
Deficit rebounds as easing supply shortages boost imports The December trade data show a rebound in both real exports and imports but, with those gains following steep declines in previous months, the data still suggest that domestic and external demand …
Slump in industrial production points to recession After proving resilient for most of 2022, German industrial production slumped in December, adding to the reasons to expect the economy to fall into recession. December’s 3.1% m/m fall in industrial …
RBA signals further interest rate hikes ahead The RBA raised interest rates by another 25bp and signalled that further tightening will be needed. We’re sticking to our forecast that the Bank will lift the cash rate to an above-consensus 3.85% by April. …
Boost from net trade should ensure decent rise in Q4 GDP Export volumes probably edged up last quarter while import volumes plunged so net trade should provide a sizeable boost to Q4 GDP growth. The decline in the trade surplus in December, from $13.5bn …
Decades-high wage growth won’t be sustained The large jump in wage growth in December was mostly due to a surge in volatile bonus payments and it will slow over the coming months. The much quicker wage growth in December, rising from 1.9% y/y to 4.8%, …
6th February 2023
Further slowdown likely Economic growth in Indonesia slowed in the final quarter of last year and further weakness is likely as weak global demand, high inflation and elevated interest rates drag on activity. Today’s figures show that the economy expanded …
ISM suggests strong start to the year in services The rebound in the ISM services index to 55.2 in January, from 49.2, reversed almost all of the sharp drop in December and leaves our composite ISM index at a level usually consistent with GDP growth of …
3rd February 2023
Robust payrolls not preventing wage growth slowdown The robust 517,000 gain in non-farm payrolls in January means that, despite most leading indicators of recession flashing red, the economy is clearly not as close to recession as we had suspected. …
Resurgence in productivity and fading ULC growth add to disinflationary pressures Non-farm labour productivity rebounded by 3.0% annualised in the fourth quarter, which means that, despite Fed Jerome Powell’s insistence at yesterday’s press conference, …
2nd February 2023
Peak rate still some way off Whereas the Bank of England and (arguably) the Fed delivered dovish surprises over the past twenty four hours, we think the ECB’s statement does not amount to a clear change in the policy stance. The 50bp hike today was almost …
Dovish pivot coming soon The Czech National Bank (CNB) delivered no surprises in leaving its policy rate on hold again today, at 7.00%, but we maintain our view that it will cut interest rates a bit more quickly than most others expect. Our current …
Rates closing in on their peak, but rate cuts unlikely to come until 2024 While raising rates by 50bps today, from 3.50% to 4.00%, the Bank of England implied that rates are very close to their peak. We still think that rates may rise to 4.50%, but …
Fed sticks to its guns, but shifting data suggest hiking cycle almost done As expected following a blitz of speeches by officials ahead of the blackout window, the Fed raised its policy rate by a smaller 25bp, to between 4.50% and 4.75%, but tempered any …
1st February 2023
Another recession signal flashing red The further fall in the ISM manufacturing index to 47.4 in January, from 48.4, suggests that the factory sector has received little benefit from the recent improvements in manufacturing prospects in Europe and China, …
Weak ADP suggests malaise spreading to labour market The muted 106,000 increase in the ADP measure of private payroll employment will add to fears that the malaise in activity has spread to the labour market. Nevertheless, while this supports our estimate …
Headline inflation to fall sharply, but core rate will be sticky January’s bigger-than-expected decline in headline euro-zone inflation should be taken with a big pinch of salt because a “data processing problem” at Germany’s statistics office meant that …
Return of tourists will help drive the city’s recovery Hong Kong’s GDP was unchanged in q/q terms last quarter. This was largely due to a further decline in exports but the worst may be over on that front given that global growth is probably close to a …
Industrial activity steady as services rebound The Caixin manufacturing PMI published today edged up slightly in January as disruption from the reopening wave eased but it remained at a subdued level. Taken together with the official survey published …
Monthly data point to healthy fourth-quarter GDP growth The monthly data suggest that GDP expanded by 1.6% annualised in the fourth quarter. That would mark a sharp slowdown from the gain of 2.9% in the third quarter, but would still be much better than …
31st January 2023
Easing labour market conditions pushing wage growth lower The 1.0% rise in private wages and salaries in the fourth quarter, down from a 1.2% gain in the third quarter, adds to the evidence that wage growth is slowing gradually. The Fed is still likely to …
Recession likely in first half of this year The small increase in euro-zone GDP in Q4 was better than we feared a few months ago but the economy excluding Ireland still flat-lined. As the data deteriorated towards the end of the quarter and tighter …
Drag from higher interest rates intensified in December December’s money and credit figures revealed that higher interest rates further dampened economic activity at the end of last year. Moreover, the drag on activity will continue to intensify this year …
This page has been updated with table and charts of key figures. Growth slow to round off a bumper 2022 The flash estimate for Saudi Arabia’s economy showed GDP expanded by a solid 1.5% q/q in Q4, but year-on-year growth continued to soften and we expect …
Economy likely to contract in first half of 2023 The small increase in France’s GDP in Q4 last year was worse than it first appears as household consumption fell sharply and investment growth slowed. It looks as if a (mild) recession in the first half of …
Reopening kick starts a rapid recovery The official PMIs add to evidence of a rapid rebound in economic activity this month as disruption from the reopening wave faded. More shoppers returned to the street boosting services activity while easing labour …
Weakening industrial production outlook heralds recession Retail sales rebounded in December and industrial production was mostly flat in December. However, firms’ forecasts are consistent with sharp contractions in industrial output over the coming …
Unemployment rate to rise before long The unemployment rate stayed unchanged in December, but labour market conditions are beginning to betray signs of loosening. We are expecting unemployment to rise to 2.8% by mid-year due to a recession. The labour …
30th January 2023
Recession not off the table yet The fall in German GDP in Q4 suggests that the energy crisis started to dent activity at the end of last year. This pours cold water on the recent optimism about the prospects for the euro-zone and suggests that a technical …
