Economic struggles to continue beyond Q3 July’s hard activity data out of South Africa suggest that the economy started the third quarter on a weak footing. With little momentum, GDP growth is likely to be subdued over the coming quarters. But that is …
14th September 2022
A weak start to Q3 July’s 2.3% monthly decline in euro-zone industrial production was largely due to a big fall in Ireland’s output. But even excluding Ireland, production decreased in July, with energy-intensive industries struggling. The surveys suggest …
Not peaked yet Despite CPI inflation easing from 10.1% in July to 9.9% in August, inflation has not peaked yet. We think CPI inflation will rise to 11.0% later this year and that the tight labour market will keep underlying inflationary pressures strong …
Arrears will rise as lenders adjust to higher rates The detailed mortgage lending data for Q2 show solid lending volumes, growing leniency on deposit sizes and income multiples, and arrears at a record low. But the ongoing adjustment to higher interest …
Further rise in core inflation increases chance of 75bp hike The continued increase in inflation in August, with the core rate hitting its highest level since December 1991, will keep the Riksbank in hawkish mode. We had expected the Bank to raise its …
Business investment to remain strong this quarter Although the surge in “core” machinery orders in July was driven by a handful of non-manufacturing sectors, the result still points to strong non-residential investment growth this quarter, chiming with …
Strength of core inflation confirms Fed will hike by 75bp The 0.6% m/m increase in core consumer prices in August, double the consensus expectation, confirms that the Fed will hike its policy rate by at least 75bp next week. Nevertheless, that outsized …
13th September 2022
More signs of recession in Germany The larger-than-expected fall in the German ZEW sentiment indicator in September adds to the evidence that the German economy is already contracting. Meanwhile, the final inflation figures for August, also published this …
Signs of softening emerging Turkey’s activity figures for July showed m/m declines in both industrial production and retail sales and suggest that the period of strong growth during the summer may be coming to an end. And with President Erdogan pressuring …
Large shortfall in labour supply keeps labour market exceptionally tight With further evidence that the weaker economy is leading to a cooling in labour demand, the renewed fall in the unemployment rate to a new 47-year low of 3.6% was driven by a …
Rise in headline CPI rate should ensure another 50bp rate hike this month The rise in Indian CPI inflation in August to further above the RBI’s 2-6% target range should ensure that the central bank delivers another 50bp hike to the repo rate (to 5.90%) in …
12th September 2022
Rapid growth in outstanding debt, but signs it should slow in September CRE lending saw an even stronger rise in August than in July, with multifamily and other commercial sectors both seeing a large increase in outstanding debt. But there are signs that …
The economy may already be in recession The disappointingly small rebound in real GDP in July suggests that the economy has little momentum and is probably already in recession. The government’s utility price freeze is unlikely to change that. The 0.2% …
Inflation showing no sign of turning a corner Inflation continued to fall sharply in Russia in August, to 14.3% y/y, and there’s little standing in the way of another interest rate cut by the central bank next week. We expect a 50bp reduction to 7.50%. …
9th September 2022
Fall in public sector labour demand pulling down employment The fall in employment in August was concentrated in the public sector and the jump in unemployment reflected an immigration-fuelled rise in the labour force, so they probably overstate the …
Inflation falls further, just one more hike likely Brazil’s headline inflation rate fell to a 14-month low of 8.7% y/y in August, but hawkish comments from the central bank this week support our view that there will be one final 25bp interest rate hike …
Industry supported by easing supply constraints Mexico’s industrial sector posted disappointing growth of 0.4% m/m in July as stronger automobile output was partially offset by weakness elsewhere. More timely indicators suggest that, the auto sector …
Credit growth depressed and likely to remain so There was a further deceleration in credit growth last month, with a new wave of lockdowns adding to the problems in the housing market that have been hitting credit demand. Credit growth will continue to …
High inflation to prompt another 50bp Norges Bank hike The continued increase in core inflation in August took it further above the Norges Bank’s target. With policymakers in hawkish mood, we expect another 50bp rate hike at the next meeting in two weeks. …
Inflation set to remain below government’s ceiling this year Consumer price inflation fell in August and remains below the PBOC’s preferred ceiling of 3%, leaving room for the Bank to ease policy further. Meanwhile, producer price inflation declined to …
Commercial stocks will remain low for some time US commercial crude oil stocks rose last week for the first time in four weeks, as imports increased while exports and refinery usage fell. But stocks will probably continue to remain at still-low levels for …
8th September 2022
Inflation rise shortens odds of 75bp hike, but we expect Banxico to opt for 50bp The further rise in Mexico’s headline inflation rate to 8.7% y/y in August will strengthen the case for Banxico to deliver a third consecutive 75bp increase to interest rates …
Weaker pound pushing up inflation; CBE waits in wings to hike rates Egypt’s headline inflation rate jumped to a near-four-year high of 14.6% y/y in August as the impact of the weaker pound continued to filtered through. Inflation is likely to rise a …
Economy to pick up as virus wave subsides The muted uptick in current readings in August’s Economy Watchers Survey indicates that the economy was still weighed down by the record Covid-19 wave last month, while buoyant outlook readings point to a quick …
Downturn becoming entrenched A further deterioration in demand in August has led surveyors to accept that a fall in prices is coming. The survey is already consistent with prices falling by 2% q/q in Q4 this year, and the headwinds to demand will only …
Trade surplus has peaked The record fall in Australia’s trade balance partly reflects bad weather that held back coal exports, but the recent fall in the iron ore price hasn’t …
Higher property yields cut total return forecasts in 2022 and 2023 The latest IPF Consensus Survey showed a significant downgrade for total returns in 2022 and 2023, as higher yields hit capital value forecasts. But with those hikes in yields now …
7th September 2022
Deficit narrows as consumer goods imports cool off The trade deficit narrowed to a nine-month low of $70.7bn in July, from $80.9bn, driven by a sizeable drop back in consumer goods imports, although almost half that decline was due to lower imports of …
Stronger export volumes unlikely to prevent Q3 GDP slowdown Export volumes rose by more than we expected in July but, with the fall in import volumes painting a weak picture of domestic demand, it still looks like GDP growth will slow sharply this …
Renewed rise in mortgage rates points to further falls in demand Home purchase applications fell for a fifth consecutive month in August, leaving them down by 40% from their high in January. With mortgage rates once again rising and against a backdrop of …
More suggestions of PBOC intervention A sizeable fall in the value of China’s foreign exchange reserves in August may be further evidence of the PBOC pushing back against the slide in the renminbi. If the currency were to breach 7 to the dollar, this …
Recession looks inevitable The 0.8% q/q increase in euro-zone GDP in Q2 will be as good as it gets for a long time. A recession looks inevitable in the coming quarters and the subsequent recovery is likely to be sluggish. The upward revision to GDP growth …
House prices rise while outlook deteriorates The modest 0.4% rise recorded by Halifax in August confirms that house prices have continued to increase despite the sharp increases in mortgage rates we have seen so far and growing pressure on household …
No respite in sight for German industry German industrial output fell a bit less than anticipated in July but that was mainly due to a rebound in construction activity, while there were signs that manufacturing production is starting to be hit hard by the …
Exports weaker than expected China’s export volumes fell last month by the most since March. Partly, this was due to the backlog of orders that built up during Shanghai’s lockdown having been cleared and ports returning to normal operations. But there was …
GDP growth will slow over coming quarters The 0.9% q/q rise in Australia’s Q2 GDP was broadly in line with the RBA’s expectations and won’t move the needle in terms of the size of the next rate hike. That result was a touch below the analyst consensus of …
Fall in Q2 GDP pushes economy back below pre-pandemic level South Africa’s economy contracted by 0.7% q/q in Q2 and this is likely to be followed by only modest growth in the coming quarters. The outturn might raise second thoughts at the Reserve Bank …
6th September 2022
Rise masks deteriorating outlook The surprise increase in the construction PMI is little cause for optimism given it was driven by the reversal of an idiosyncratic fall in civil engineering activity a month earlier. Indeed, the commercial activity …
Consumers to fall back on pandemic savings as real wages fall Labour cash earnings growth weakened slightly in July as growth in bonuses slowed and further moderation is in store from August with the end of the summer bonus season. Overall earnings growth …
Small rise in retail sales, but worse to come The small rise in euro-zone retail sales volumes in July only partly reversed the previous month’s big fall, and with consumer confidence very weak and the final PMI surveys for August suggesting that price …
5th September 2022
Gulf economies continue to lead the way August’s batch of PMIs showed that activity in the Gulf economies pulled further ahead of their non-Gulf counterparts even as external demand has weakened on the back of softer global growth. Meanwhile, there were …
Inflation surpasses 80% milestone Inflation hit 80.2% y/y in Turkey in August, breaching 80% for the first time since 1998. Even so, the central bank is likely to remain beholden to President Erdogan’s wishes for looser policy and it seems that further …
Labour market conditions normalising The slower pace of payroll gains in August, together with the big rebound in the labour force, and the more modest increase in wages, would seem to favour a smaller 50bp rate hike from the Fed next month , rather than …
2nd September 2022
Industry starting Q3 on a better footing The 0.6% m/m rise in Brazilian industrial production in July suggests that, while headwinds facing the economy are growing, it started the third quarter in decent shape. Taken together with the robust Q2 GDP …
Rebound in new orders provides some reassurance The stabilisation in the ISM manufacturing index at 52.8 in August, unchanged from July, provides some further reassurance that the economy is not yet sliding into recession. While the details suggest …
1st September 2022
Strong H1 to be followed by weakness in H2 The stronger-than-expected 1.2% q/q rise in Brazilian GDP in Q2 has prompted us to revise up our 2022 GDP growth forecast to an above-consensus 2.5% (previously 2.0%). And the likelihood of a final 25bp rate …
Labour market recovery on borrowed time The fall in the euro-zone unemployment rate in July to a record low of 6.6% is likely to be as good as it gets. The region faces a difficult winter and recession looms. So the jobless rate is likely to rise from …
Manufacturing sector rebound unlikely to last The rise in South Africa’s manufacturing PMI in August essentially reversed the sharp decline in July on the back of weaker global demand as well as severe power cuts at home. We expect external conditions …
Mixed bag, but contractions in industry likely in Q3 Manufacturing PMIs for August were a mixed bag, with further signs that Russian industry is recovering while PMIs in Turkey, Poland and Czechia remained weak and are consistent with contractions in …
Regional manufacturing weakens again Manufacturing PMIs across Asia fell back again in August, with the readings for Taiwan and Korea especially weak. We are not expecting any improvement over the coming months, with weaker global demand, high commodity …
