Trade hit by domestic and external weakness The sharp narrowing of the trade deficit to $61.5bn in November, from $77.8bn, came as a big fall in exports was offset by an even sharper drop in imports. Net trade still looks to have been a small drag on …
5th January 2023
Fed doubling down on hawkish views The minutes of the Fed’s December policy meeting reveal officials in hawkish mood, with participants arguing that “a restrictive policy stance would need to be maintained until the incoming data provided confidence that …
4th January 2023
Weaker ISM shows activity stalling, but labour market conditions remain tight The decline in the ISM manufacturing index to a two-and-a-half year low of 48.4, from 49.0, is another sign that the economy was losing momentum at the tail-end of last year. …
Rates on hold, but cuts still some way off Poland’s central bank (NBP) left interest rates unchanged at 6.75% again today. We expect the next move by the NBP will be an interest rate cut , although that is only likely to arrive towards the end of 2023. …
Higher interest rates continue to weigh on the economy November’s money and credit figures showed further signs that higher interest rates are dampening activity, particularly in the housing market. And this will be a constant theme throughout the year …
Drop in inflation in December likely to reverse in January The sharp falls in CPI inflation in several major German states in December suggest that inflation figures for Germany as a whole and for the euro-zone (due later today and on Friday, …
3rd January 2023
Headwinds from reopening continue into 2023 The latest manufacturing surveys suggest that the hit to factory activity intensified further in December following the surge in infections. A combination of recurrent virus waves, a deepening global downturn …
The economy is likely to teeter on the brink of recession in 2023 Economic growth slowed sharply during the first two months of the fourth quarter and we think a further slowdown is likely over the coming quarters. The flash estimate for Q4 GDP, largely …
Economy beginning to lose momentum The modest gain in GDP in October and upward revision to activity in September suggest the economy was coping well with higher interest rates at the start of the fourth quarter, but the preliminary estimate that GDP was …
23rd December 2022
Q4 growth looking ok, but economy losing momentum Real consumption is on course for solid growth of around 3.5% annualised in the fourth quarter, but the income and spending data show that it stalled in November. The sharp fall in durable goods orders …
We are resending this publication due to an error in the previous version. Inflation will fall below 2% by mid-2023 Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of …
22nd December 2022
CBE acts aggressively to counter inflation surge and weaker pound The 300bp interest rate hike by the Egyptian Central Bank (CBE), which took the overnight deposit rate to 16.25%, suggests that policymakers are even more concerned about rising inflation …
CBRT on hold … for now Turkey’s central bank (CBRT) stuck to its previous guidance today and left its policy rate on hold, at 9.00%, but there is clearly a risk that President Erdogan forces the CBRT to restart its easing cycle, particularly with the 2023 …
Bank Indonesia slows pace of tightening, but further hikes are likely Bank Indonesia (BI) today raised interest rates for a fifth consecutive meeting but slowed the pace of tightening by raising interest rates by just 25bps (to 5.50%) from 50bp at its …
Jump in rents drives upside surprise in inflation Overall inflation pressures were stronger than anticipated in November and support our view that the Bank of Canada will err on the side of hawkish caution with a final interest rate hike in the new year. …
21st December 2022
Rate cuts to arrive in mid-2023 The Czech National Bank (CNB) left its policy rate on hold, at 7.00%, as expected again today and, with inflation set to drop sharply from Q1, we think the CNB will be one of the first EM central banks to cut rates next …
Fiscal stimulus and high inflation pushes borrowing to a record November high November’s public finances figures showed that government borrowing is rising fast. And the trio of the government’s energy price support, cost of living payments and pressures …
MNB staying the course as inflation pressures persist Hungary’s central bank (MNB) left its base rate on hold again at 13.00% and is likely to use its communications later today to reaffirm its commitment to its market stabilisation tools to defend the …
20th December 2022
Bank won’t follow band widening with rate hikes The Bank of Japan today widened the tolerance band around its yield target but we don’t expect it to hike its short-term policy rate anytime soon. The Bank’s decision to keep its short-term policy rate at …
End of RBA’s tightening cycle is nearing The fact that the RBA discussed keeping the cash rate unchanged for the first time since the start of the current tightening cycle at its December meeting suggests that it won’t hike rates much further, though we …
Sentiment recovers further, but recession still coming The renewed increase in the Ifo Business Climate Index in December and the general improvement in the surveys over the past two months suggests the outlook for the German economy has improved. But we …
19th December 2022
CBR now set for extended pause Russia’s central bank kept its main policy rate unchanged at 7.50% today as it emphasised that inflation risks have become slightly more skewed to the upside. This reinforces our view that the easing cycle is unlikely to …
16th December 2022
PMIs suggest we’re in recession, but inflationary pressures continue to ease The flash PMIs for December are consistent with our view that the UK economy is probably in a recession, although a relatively shallow one at the moment. While the price indices …
Improvement, but surveys still point to recession The flash PMIs for December provide more evidence that businesses in some parts of the euro-zone have become a bit less gloomy about their current situation – but they still point to a combination of …
No early Christmas cheer for retailers The 0.4% m/m fall (consensus +0.3%) in retail sales volumes in November resumes the downward trend seen across most of the year. Sales volumes in November were 4.5% lower than at the start of the year. And despite …
Divergence between manufacturing and services to continue According to today’s flash estimate, the manufacturing PMI fell slightly deeper into contraction from 49.0 in November to 48.8 in December. The output sub-index rose to 46.4 but is still the second …
Banxico delivers smaller 50bp dose of tightening, end of cycle close Mexico’s central bank slowed down the pace of tightening with a 50bp interest rate hike, to 10.50%, today and the accompanying statement made clear that the tightening cycle will soon …
15th December 2022
Further signs that economy is losing momentum The 0.6% drop in manufacturing output last month matches the already-reported decline in retail sales and provides further evidence that the economy has lost some serious momentum. With weak global growth and …
Consumer resilience starting to fade The 0.6% m/m fall in retail sales in November suggests that the resilience of consumers to much higher interest rates is starting to crumble. Solid gains in previous months mean real consumption growth should still be …
More ECB rate hikes to come Today’s 50bp rate hike came alongside hawkish comments which are consistent with our view that the deposit rate will peak at 3%, significantly higher than the consensus forecast and a touch above what was priced into the …
Easing off the brakes, but hikes may not halt until rates hit 4.50% The Bank of England followed the Fed by slowing the pace of interest rate hikes from 75bps in November to a 50bps hike today as widely expected, which took rates from 3.00% to 3.50%. But …
This report has been updated with additional analysis, table and chart of key figures. Inflation on the way down Saudi inflation ticked down to 2.9% y/y in November on the back of a drop in food inflation. We think the headline rate will continue to fall …
SNB hikes by 50bp, hints at more to come The SNB’s 50bp rate hike, to 1.00%, was in line with expectations but, more importantly, the Bank also raised its medium-term inflation forecast slightly, hinting that policymakers believe future hikes may be …
Norges Bank tightening nearly over, but pivot a long way off Today’s 25bp rate increase by the Norges Bank, to 2.75%, takes it very close to the end of its tightening cycle. But we think the Bank is a long way from pivoting to loosening policy. The …
End of the tightening cycle Taiwan’s central bank (CBC) today raised its main policy rate by 12.5bps (to 1.75%) but with inflation easing and growth set to struggle we expect this hike to have marked an end to the tightening cycle. Today’s decision was in …
Tightening cycle nearing an end The central bank in the Philippines (BSP) today raised its main policy rate by a further 50bps (to 5.50%), but with Governor Felipe Medalla sounding more dovish than expected on inflation, we think the tightening cycle will …
The downturn has deepened and reopening won’t reverse it overnight The disruption from virus outbreaks intensified in November, with retail sales, investment spending and industrial output all contracting by the most month-on-month since the Shanghai …
Labour market strength won’t last much longer The continued strength in Australia’s labour market is consistent with our view that the RBA will hike rates more sharply than most anticipate over the coming months. The 64,000 rise in employment in November …
Exports downturn has begun The trade deficit narrowed substantially in November and has further scope to do so again in December. But with the global downturn weighing on external demand next year, further progress towards a more balanced goods trade …
Economy will fall into recession in 2023 The huge jump in Q3 GDP will prompt the Reserve Bank of New Zealand to press ahead with another 75bp hike in February, adding to our conviction that a sharp downturn lies ahead. The 2.0% q/q in production GDP was …
14th December 2022
The Fed strikes back Despite the increasingly compelling evidence that core inflation will fall sharply next year, the Fed simply doubled down on its recent hawkishness. As expected, the Fed issued an identical statement and raised interest rates by a …
Inflation passed its peak, slower rate hikes more likely The fall in CPI inflation, from 11.1% in October to 10.7% in November (consensus 10.9%, BoE 10.9%, CE 11.1%,), means that inflation has peaked and the fall in core inflation from 6.5% to 6.3% will …
Services race ahead while manufacturing struggle Today’s Tankan survey suggests that while the services sector is going from strength to strength, the outlook for the manufacturing sector continues to worsen. The Tankan’s headline index for large …
Stick a fork in it, inflation is done The Fed will still hike its policy rate by 50bp tomorrow and the new projections could show the peak above 5%, but the 0.2% m/m increase in core consumer prices in November provides strong support to our long-held …
13th December 2022
Still a long road ahead to restoring debt sustainability The news that Ghana has secured a $3bn staff-level agreement with the IMF will go some way to easing the country’s economic crisis, but the government still needs to clear a number of hurdles to put …
Little appetite for borrowing Credit growth has now reversed all of its modest acceleration over the past year, a clear sign that monetary easing has failed to gain traction due to virus disruption and waning confidence among households and firms. …
12th December 2022
Rebound in October likely to be a blip The larger-than-expected 0.5% m/m rise in GDP in October was mostly due to the rebound after September’s extra bank holiday. But it could tilt the Bank of England towards delivering another bumper 75bps interest rate …
Sentiment remains at recessionary levels The small rebound in the University of Michigan index to 59.1 in December, from 56.8, indicates that the slump in gasoline prices and recovery in the stock market is supporting consumer sentiment. But the index …
9th December 2022
Inflation likely to remain subdued even amid reopening Consumer price inflation dropped to its lowest in eight months in November and producer price inflation stayed at a 23-month low. The shift away from zero-COVID could put some upward pressure on …
