Huge boost from net trade won’t last The surge in the trade surplus in May suggests that net exports provided an even bigger boost to Q2 GDP growth than we had anticipated. But that boost should fade as the border reopening lifts outward tourism . The …
7th July 2022
Home purchase demand remains low as rates ease back Mortgage applications for home purchase saw a slight recovery over the course of June as mortgage interest rates eased back. But demand remains depressed compared to its pre-COVID-19 level and a further …
6th July 2022
Slowdown in construction activity intensifies in June The third consecutive monthly fall in the construction PMI suggests that that growth in development activity is slowing. The near-term outlook has also deteriorated, with growth in new orders easing …
Retail sales becoming a drag on growth The small increase in euro-zone retail sales in May, after a steep fall in April, suggests that high inflation remains a drag on consumption. Although re-opening effects may have boosted consumption in Q2, the …
Gulf non-hydrocarbon sectors on the up June’s PMIs were the proverbial mixed bag, but the bigger picture is that activity in the Gulf economies has remained robust and there are signs that firms are increasingly passing on higher costs to customers. In …
5th July 2022
Activity slowing, prices rising June’s final Composite PMIs confirmed the message from the flash release that activity is softening and that firms expect weaker conditions ahead. And price pressures remain intense throughout the euro-zone. The final …
Services sector booming India’s June PMIs show exceptionally strong activity in the services sector is offsetting slower growth in manufacturing. That may give the RBI some added confidence to continue frontloading policy tightening. India’s services PMI …
Wage growth to settle around 1% The slowdown in wage growth in May was entirely due to volatile bonus payments. Nonetheless, we don’t expect wages to grow fast enough for the Bank of Japan to start tightening policy anytime soon . The 1.0% y/y rise in the …
Rise in long-run inflation expectations bolsters case for larger 75 bp hike The increase in long-run inflation expectations in the Bank of Canada’s latest business and consumer surveys further raises the probability of the Bank enacting a larger 75 bp …
4th July 2022
No comfort for the SNB Although Swiss inflation remains enviably low compared to many advanced economies, the further increase in the core rate will only strengthen the SNB’s resolve to squeeze price rises out of the system. A return to positive nominal …
Further evidence of slowdown rather than collapse The fall in the ISM manufacturing index to a two-year low of 53.0 in June, from 56.1, will probably add to fears over the health of the economy. That said, for now it is still consistent on past form with …
1st July 2022
Inflation surprises on the upside yet again The further big increase in the euro-zone inflation rate came despite a substantial fall in Germany that was driven by regulatory changes, and shows that underlying price pressures remain exceptionally strong. …
Households exercising more caution The more muted rise in unsecured borrowing in May suggests the cost of living crisis and recent plunge in consumer confidence are prompting households to exercise a bit more caution. That adds to reasons to think …
Manufacturing sector rebound slowing The drop in South Africa’s manufacturing PMI in June signals that the rebound from the floods that hit activity in April lost steam at the end of Q2. The sector was probably a considerable drag on headline GDP growth …
Net lending cools in line with weaker investment activity Lending activity in the commercial property sector cooled in May, consistent with the weaker investment data seen in recent months. Looking ahead, we expect rising interest rates and high property …
Weak approvals point to subdued lending demand ahead Mortgage approvals remained relatively weak in May supporting our view that higher interest rates are now starting to curb activity. As mortgage rates are set to rise further over the next year, this …
Further signs of manufacturing weakness Manufacturing PMIs for June showed further weakness across the region with the exception of Russia, which seems to have benefitted from a shift from imports toward domestic production. There were some encouraging …
Manufacturing slowing and tentative signs of inflation easing India’s manufacturing PMI dropped back in June, adding to the evidence of a slowdown in the broader industrial sector. Meanwhile although there are tentative signs of price pressures in the …
Further signs of weakness Manufacturing PMIs for June fell back mainly due to the weakness of external demand. We think weaker global growth will remain a drag on exports over the coming months and that the region’s industrial sectors face a tough year …
Output jumps but demand growth still subdued The Caixin manufacturing PMI hit a 13-month high in June and points to a jump in output as virus restrictions were lifted and supply chain conditions improved. But it still points to subdued demand growth and …
Tankan signals soaring capital spending Today’s Tankan survey suggests that while the services sector is benefitting from the easing of virus restrictions, the outlook for the manufacturing sector is worsening. Meanwhile, the labour market didn’t tighten …
Housing downturn only warming up The monthly decline in house prices in June was the largest since 2019 but is unlikely to be the sharpest decline in the current downturn. We think house prices will eventually fall by 15% from their April peak, which will …
Shock contraction in GDP in May partly due to temporary factors The preliminary estimate suggests that the healthy 0.3% m/m rise in GDP in April was followed by a shock 0.2% contraction in May but, as this appears to have been partly due to temporary …
30th June 2022
Headline figures mask slowdown in output growth Base effects boosted y/y growth in India’s core infrastructure industries to a 13-month high in May. But stripping out base effects reveals that industry might be entering a softer patch after a strong few …
Another record low The fall in the euro-zone unemployment rate in May to a new record low reaffirms the strength of the region’s labour market despite the apparent softening of activity. That will underpin an acceleration in wage growth this year, adding …
More evidence of easing house price growth Monthly house price inflation slowed in June to its lowest since last September according to the Nationwide, while the annual rate continued to edge lower. That is consistent with our view of steady deceleration …
Households have a slightly smaller savings buffer The final Q1 GDP data leave households looking a bit more vulnerable to the big fall in real incomes that’s going to hit in Q2 and Q3. Although GDP and consumer spending won’t fall as far as real incomes, …
Robust services rebound amid easing restrictions The official PMIs point to a surprisingly rapid recovery in services activity this month after virus restrictions were mostly lifted. But this likely reflects a one-off boost from reopening and we doubt …
Recovery disappointing yet again The plunge in industrial output in May suggests that Japan’s recovery is disappointing yet again. The upshot is that it will take until the second half of the year for GDP to surpass its pre-virus level . The 7.2% m/m …
Clearer signs that the economy has stabilised The latest Russian data for May suggest that activity, having declined sharply after Western sanctions were imposed in March, has started to stabilise. Some sectors of manufacturing have benefited from a shift …
29th June 2022
Recoveries slowing but Dallas still powering on Employment growth slowed last month, but remained above its historic averages. The big gainer in May was Dallas, which recorded the strongest 3m/3m growth in both total and office-based employment, closing …
Refinery constraints to put a floor under commercial crude oil stocks Commercial crude stocks fell last week as refineries raised production of petroleum products. However, refineries will probably struggle to raise output much further, with many of them …
Price pressures still not easing The fall in inflation in Germany and the increase in Spain in June largely reflect temporary factors and will not alter the consensus view at the ECB that interest rates need to be increased quite rapidly. The decline in …
Sharp fall in sentiment as recovery starts to slow The EC’s Economic Sentiment Indicators for Central and Eastern Europe showed broad-based declines in sentiment across the region and across sectors in June to levels not seen in a year. Economic activity …
Activity holding up better than expected The decline in EC Economic Sentiment Indicator in June was not as bad as we had feared and paints a more upbeat picture than the PMIs published last week. Nevertheless, the survey also pointed to inflationary …
Consumption growth will remain strong this year The strong rise in retail sales in May highlights the strength in the Australian economy and is consistent with our view that the RBA will continue to hike rates aggressively in the months ahead. The 0.9% …
Consumer spending will disappoint yet again The disappointing rise in retail sales in May poses downside risks to our upbeat forecasts for consumption growth in Q2 . The 0.6% m/m rise in retail sales values in May marked the third consecutive rise but …
House price growth starts to slow, and will eventually turn negative House price growth is finally showing signs of slowing, in line with measures of housing market activity which peaked at the start of the year. Soaring mortgage rates are shutting some …
28th June 2022
Business equipment investment growth slowing, not collapsing The surprisingly robust 0.7% rise in durable goods orders last month was much better than some of the downbeat survey evidence had suggested and is consistent with business equipment investment …
27th June 2022
New home sales show a surprise increase New home sales rose in May, bucking widespread signs of a housing market slowdown. But given the volatility in the data we wouldn’t put too much weight on one month’s reading. After all, new home sales are not …
24th June 2022
Ending Q2 on a weak note The renewed decline in the German Ifo Business Climate Index (BCI) for June provides further evidence that weaker demand is starting to affect manufacturing output. With inflation set to remain high and the country’s gas supply …
Cost of living crisis bites harder The fall in retail sales in May suggests that the decline in households’ real incomes from surging inflation is starting to hit consumer spending a bit harder. Even so, consumer spending appears to be softening rather …
Inflation to remain above BoJ target until early-2023 While inflation didn’t rise any further in May, it will remain above the BoJ’s 2% target until early-2023, while underlying inflation will approach 2%. However, the Bank won’t respond with tighter …
Inflation surprise seals the deal on a 75bp hike The stronger-than-expected rise in inflation to 7.9% in the first two weeks of June adds to the pressure on Banxico to fight stubbornly strong price pressures. We think Banxico will step up the pace of …
23rd June 2022
Activity holding up better than expected The fact that the composite PMI didn’t fall in June means the economy could be holding up a little better than we and the Bank of England had feared. Beneath the headline numbers, the survey also suggests strong …
Stagflation begins June’s euro-zone PMI surveys showed a further slowdown in the services sector, while activity in the manufacturing sector now seems to be falling outright. With the price indices remaining extremely strong, the euro-zone appears to have …
Weaker economy will limit the Chancellor’s ability to help households The larger-than-expected rise in public borrowing in May is an early blow for the government on a day when it is expected to lose two by-elections. What’s more, the combination of a …
Supply shortages still biting but consumption bouncing back The PMIs suggest that supply shortages are still holding back manufacturing output and adding to price pressures. On a more upbeat note, the surveys also point to a strong pick-up in consumption …
Peak in inflation yet to come The jump in CPI inflation to 7.7% in May all but guarantees that the Bank of Canada will raise interest rates by a larger 75 bp next month, particularly with inflation on track to accelerate to over 8% in June. The rise in …
22nd June 2022
Steel production to remain lacklustre in 2022 Global steel production continued to pick up in May, led by higher output in India and China, which more than offset the ongoing decline in Europe’s production. The rise in input costs, efforts to curb carbon …
