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The renewed acceleration in the monthly changes in CPI-trim and CPI-median in April leaves us doubting our view that the Bank of Canada will be ready to cut interest rates as soon as October. While the rise in headline CPI inflation to 4.4%, from 4.3%, …
16th May 2023
Labour market defying economic weakness The labour market has been remarkably strong so far this year and we think it will continue to hold up much better than the GDP data might suggest in the coming quarters. The second estimate of Q1 GDP confirmed that …
Cooling labour market eases some pressure on BoE to raise rates further The labour market loosened by a bit more than the Bank of England expected in March. That may alleviate some pressure on the Bank to raise rates above 4.50% at the next policy meeting …
Lending against commercial turned increasingly negative in April Net commercial real estate (CRE) lending slowed sharply once again in April. Lending against all commercial sectors turned negative for the first time in nearly six years, and with little in …
15th May 2023
Still no recession, but economic growth soggy The news that the economy contracted by 0.3% m/m in March and grew by just 0.1% q/q in Q1 as a whole (consensus +0.1% q/q, Bank of England 0.0% q/q, CE +0.1% q/q) suggests that lower real household incomes …
12th May 2023
Demand continues to slump In contrast to signs of a stabilisation in house prices and sales volumes in other indicators, the RICS survey remained downbeat in April. In particular, the renewed fall in the new buyer enquiries balance left it little higher …
11th May 2023
Brighter outlook in Q2 The further rise in both the current and outlook readings point to continued upward momentum in services spending this quarter. Meanwhile, manufacturing conditions fell slightly but remained robust, boding well for industrial …
Core inflation refusing to budge The 0.4% m/m gains in headline and core consumer prices in April leaves core inflation at 5.5%, broadly unchanged from its level at the start of this year, further illustrating that the previous downward trend has …
10th May 2023
Prices slip in April, but remarkably resilient overall The small slip in the Halifax House Price index in April bought it a little more in line with the Nationwide figures. But prices remain remarkably resilient to the largest rise in mortgage rates since …
9th May 2023
Gloomy wage growth outlook in H2 2023 Wage growth held steady in March from February, as a further slowdown in regular and overtime pay growth was offset by a decent increase in volatile payments. We still see further scope for wage growth to slow this …
April strength offset by downward revisions to earlier months The 253,000 gain in non-farm payrolls in April suggests that the labour market remains resilient despite the banking sector turmoil and broader signs of an economic slowdown. That said, the …
5th May 2023
Labour market conditions easing despite unchanged unemployment rate The decline in full-time positions in April means that the large rise in total employment was weaker than it looks. Hours worked only crept up during the LFS reference week and, given the …
Strength of exports and unit labour cost growth unlikely to last A rebound in exports drove a sharp narrowing of the international trade deficit to a four-month low of $64.2bn in March, from $70.6bn in February, but the surveys continue to suggest that …
4th May 2023
Downside risks to first-quarter GDP growth despite export outperformance The small rise in export volumes and slump in imports in March confirms that net trade improved last quarter. However, the weakness of imports means there is a risk that the …
Decline in bank deposits doesn’t look like a bank run March’s money and credit data showed that the collapse of the US bank SVB and the takeover of Credit Suisse in early March triggered a small withdrawal of funds from the overall UK banking system. …
Net lending stable as investors wait for the bottom Even as commercial property investment has collapsed, net lending to property has been stable at close to zero since the start of the year. That suggests investors are building up war chests to snap up …
Recovery unlikely to continue The rise in mortgage approvals in March was stronger than consensus expectations, reflecting the reversal of the spike in mortgage rates since the autumn. However, we don’t think that mortgage rates can fall any further …
Net exports won’t have boosted GDP in Q1 The widening of the trade surplus in recent months belies the negligible contribution that net exports will have made to Q1 GDP. Indeed, we think the weakness in import values last quarter primary reflected …
Demand in line with post-GFC lows The slight rise in mortgage applications in April left them little changed from their recent lows, pointing to further near-term weakness in sales. While we expect affordability will gradually improve, growing economic …
3rd May 2023
Weakness in consumption growth While retail sales values rose at a decent pace in March, we estimate that sales volumes fell the most since 2021’s lockdowns last quarter and that weakness has further to run. That in turn should prevent the Reserve Bank of …
Labour market continues to run red hot New Zealand’s labour market remained extremely tight last quarter, presenting upside risks to our forecast for a 25bp rate hike later this month. The 0.8% q/q rise in employment was stronger than most had …
House price falls pause in April The pause in house price falls in April suggested that the reversal of the autumn spike in mortgage rates has allowed prices to stabilise. But with affordability still very stretched by historical standards and the economy …
2nd May 2023
House price rebound will prove fleeting The ongoing rebound in house prices is living on borrowed time. With affordability extremely stretched and the economy poised for a sharp downturn, we’re sticking to our forecast that house prices will fall another …
Manufacturing outlook weak, but hi-tech revival boosting construction The trivial rebound in the ISM manufacturing index to a still depressed 47.1 in April, from 46.3, contrasts with the more substantial recovery in the alternative S&P Global PMI but …
1st May 2023
Decent first quarter likely to be followed by contraction The small rise in GDP in February points to healthy first-quarter growth but, with the preliminary estimate pointing to a contraction in March and activity set to suffer in April due to the federal …
28th April 2023
Economy may not have shrunk in Q1 The end-month data rush only adds to the dilemma the Bank of Japan is facing. While labour market conditions are now easing in earnest, underlying inflation is set to surpass 4% at the national level. On balance though, …
Economy starts the year on a weaker footing The disappointing 1.1% annualised rise in first-quarter GDP indicates that the economy had less forward momentum at the start of this year than previously thought. We continue to expect the drag from higher …
27th April 2023
Sentiment fell further in Q1 The RICS Q1 survey indicated confidence fell further in the opening months of the year but remains substantially above the lows seen during the height of the pandemic. However, we expect sentiment to drop further in the coming …
Occupier demand ticks up, but further falls in rents and capital values likely After a weak end to 2022, surveyors reported that occupier demand was essentially flat in Q1. All sectors saw an improvement and that suggests take-up will pick-up in Q2. That …
Product demand proving solid, for now Commercial stocks fell last week as production and net imports declined. Meanwhile, product demand remains resilient, but we doubt oil demand can weather the mounting economic headwinds much longer. The EIA’s latest …
26th April 2023
Details consistent with declining equipment investment The 3.2% m/m jump in durable goods orders in March mainly reflects a stronger-than-expected gain in the more volatile commercial aircraft component, with the details suggesting that first-quarter …
Markdowns smaller in Q1, but this feels like the eye of the storm Total returns of -1.8% q/q in Q1 reflected a much smaller markdown in values than in Q4. But, looking ahead, we remain convinced that the strains being felt by many investors will drive …
RBA will deliver a final 25bp rate hike next week While inflation is moderating slightly faster than the RBA had anticipated, price gains remain far too strong to be consistent with the Bank’s 2-3% inflation target and we’re sticking to our forecast of a …
House price growth turns positive New home sales jumped in March and house prices increased 0.2% m/m in February. The continued resilience of the housing market means the risk to our forecast of an 8% drop in house prices are now to the upside. But …
25th April 2023
A note of caution from the Ifo The Ifo Business Climate Index rose again in April but remained in contractionary territory. This is contrast to the PMIs which point to much stronger economic performance at the start of Q2. The small rise in the Ifo …
24th April 2023
Momentum fading After a strong start to the year, retail sales volumes dropped back in February and the preliminary estimate implies they fell again in March. While consumption probably still rose at a healthy pace in the first quarter, that weakness is a …
21st April 2023
Resilience in economic activity continues into Q2 April’s flash PMIs suggest the economy is still proving resilient to the dual drags of high inflation and high interest rates going into Q2. That, alongside evidence suggesting that domestic inflationary …
Despite soggy sales, outlook for retailers a bit sunnier than it was Underlying retail sales volumes aren’t as soggy as the 0.9% m/m drop in March suggests as some of that fall was due to the unusually wet weather. The further rebound in consumer …
Exports downturn could prove short-lived April’s flash PMIs point to further upside risks to our GDP forecasts, indicating a broad improvement in both domestic and external demand. That suggests the exports downturn may be short-lived. Meanwhile, services …
Stronger yen, falling commodity prices to cool decades-high inflation Underlying inflation saw a sizeable increase in March, while headline inflation inched down thanks to falling energy prices. A stronger yen and falling import price inflation should …
Sales continue weak start to the year Existing home sales edged lower in March rounding off the weakest start to the year in over a decade. While the lending data point to further declines in April, we expect mortgage rates will fall back to 5.75% …
20th April 2023
The trade deficit narrowed in March as import values fell faster than export values. Data for Q1 so far are still consistent with a negative contribution from net trade to GDP. Export values surprised analysts to the upside, rising by 4.3% y/y in March …
Inflation is coming off the boil Although inflation in Q1 was below what the RBNZ had expected, we don’t expect the Bank to take its foot off the brakes just yet. Indeed, with non-tradables prices continuing to rise at a rapid clip, the RBNZ is likely to …
Fight against inflation is lasting longer than expected Plunging energy price inflation will soon drag down CPI inflation more significantly, but the stubbornness of core inflation suggests that the fight against inflation is lasting longer than the Bank …
19th April 2023
Base effects helped to pull headline inflation lower in March, but there were also encouraging signs in core inflation, as the average three-month annualised gain in CPI-trim and CPI-median fell to a 16-month low. We continue to expect headline and core …
18th April 2023
Wage growth eases further, but slowly The labour market became a bit less tight in February and wage growth continued to ease, albeit slowly. That leaves the Bank of England with a tough call on whether to raise interest rates further. Tomorrow’s release …
Further evidence of fading economic momentum The 0.5% m/m fall in manufacturing output in March provides more evidence of a loss of economic momentum going into the second quarter. While the return of temperatures to seasonal norms last month appears to …
14th April 2023
Sales saved by online strength Retail sales fell by 1.0% m/m in March, adding to the evidence that the strong start to the year was partly due to the unseasonably mild winter weather. With control group sales only falling by 0.3% m/m last month, …
Mortgage demand still the limiting factor The headline mortgage availability balance of the credit conditions survey turned positive for the first time in over a year in Q1. The collapse of SVB while the survey was in the field probably helps explain why …
13th April 2023
Bank of England may yet need to generate a recession The stagnation in real GDP in February means the economy probably avoided recession in Q1. But it also increases the chances that the Bank of England will need to raise interest rates further to …
