Inflation jumps, now a choice between 50bp and 75bp hike next month The rise in inflation in South Africa to an above-target 6.5% y/y in May is likely to shift the debate to a choice between a 50bp and a 75bp hike to interest rates at July’s MPC meeting. …
22nd June 2022
Probably not “persistent” enough to seal the deal on a 50bps rate hike The further rise in CPI inflation from 9.0% in April to a new 40-year high of 9.1% in May won’t prevent the Bank of England from raising interest rates further, but it may encourage it …
Existing home sales on a steady downward track as mortgage rates rise Surging mortgage rates led to another fall in existing home sales in May to their lowest level since the height of the COVID-19 lockdowns two years ago. And with mortgage rates set to …
21st June 2022
Strong April, but tougher times ahead The strong rise in retail sales volumes in April reinforces our view that overall consumption growth will accelerate sharply this quarter but, with consumer confidence plunging in June and the housing market rapidly …
Supply is picking up, just as prices fall Global aluminium production has increased steadily since the start of the year in large part owing to a rebound in China’s output. At the same time, demand is relatively subdued, which suggests that aluminium …
20th June 2022
Further evidence of growth slowdown The muted 0.2% m/m rise in industrial production in May adds to the evidence that the economy is slowing. But there is still little in activity data to suggest a recession is on the horizon, or to dissuade the Fed from …
17th June 2022
Underlying inflation to continue rising Final inflation data for May confirm that the headline and core rates both rose to record highs. The recent increases in gas and agricultural commodity prices will keep the headline rate higher than we had …
Housing starts falling rapidly as higher mortgage rates curb demand Housing starts in May recorded their largest month-on-month decline since the height of the COVID-19 pandemic. A fall in housing demand due to higher mortgage rates is occurring at the …
16th June 2022
Hourly wage growth finally picking up The acceleration in euro-zone wage growth at the start of the year is consistent with the timelier data already published and the message from pay negotiations. Against a backdrop of high inflation and a tight labour …
Exports to stay soft in near term Export volumes recovered a bit in May, but they are likely to stay weak in the near term until supply shortages dissipate and allow exporting automakers to ramp up production again. The 15.8% annual rise in exports in May …
Strong employment growth will keep RBA on track The strong rise in employment in May will keep pressure on the RBA to continue its aggressive hiking cycle in the months ahead. The 60,600 rise in employment was well above the Bloomberg analyst consensus of …
Activity to rebound in Q2 The fall in GDP at the start of the year was due to the disruption to activity from the Omicron outbreak. Growth will have rebounded strongly in the current quarter, but we suspect falling house prices and high interest rates …
High prices keeping a lid on demand Commercial crude stocks rose again this week, following another unusually large release from the strategic reserve. Meanwhile, implied product demand fell back as petroleum product prices remain very high. We’re …
15th June 2022
Surging prices starting to hit real consumption The 0.3% m/m fall in retail sales in May and downward revisions to previous months’ gains suggest that surging prices might finally be taking their toll on real consumption. But with the latter still on …
Weak recovery to follow hit to SA industry, jump in Nigerian inflation South Africa’s activity data for April showed that flooding in a key province and renewed power cuts dealt a big blow to industrial sectors, while retail sales held up well. GDP …
Outlook still bleak despite a rise in production The increase in industrial output in April only partially reversed the decline in March and shows that the economic fallout from the Ukraine war is still holding back production. With survey data pointing …
Inflation to drift higher but not for long Saudi inflation edged down to 2.2% y/y in May as food and transport inflation slowed last month, and, while we think that the headline rate will drift higher over the coming months, it is unlikely to reach the …
Industrial recovery well advanced, consumers still weak The May data suggest that a post-lockdown recovery got underway across most parts of the economy last month. It is likely to have progressed further in June. But the recent resurgence in infections …
Revisions leave manufacturing sector looking better than expected The 0.9% m/m rise in April, combined with a large upward revision to March, means that manufacturing sales volumes have finally risen above their pre-pandemic peak. While the recovery in …
14th June 2022
Mortgage rates to continue to rise as lenders rebuild margins The detailed quarterly mortgage lending data from the Bank of England confirmed that the squeeze on lenders margins intensified at the start of the year, suggesting that mortgage rates will …
Investor sentiment consistent with recession in Germany A second consecutive small monthly rise in the ZEW measure of German investor sentiment in June means it was still well below its level at the start of the year, and pointing to a recession. The …
WPI inflation suggests drop in CPI inflation will be short-lived Indian wholesale price inflation climbed to another historic high in May. The rise in food prices in particular suggests that some of the upside risks to the inflation picture we have been …
First signs of a less tight labour market The tentative evidence that the recent weakening in economic activity is filtering through into a slightly looser labour market may push the Bank of England a little closer to raising interest rates by 25bps …
50 basis point hike in June now looks nailed on The stronger-than-expected increase in Swedish inflation in May lends support to our forecast that the Riksbank will step up the pace of tightening. A 50bp hike in the policy rate now looks increasingly …
Lending growth maintains momentum in May Commercial real estate debt continued to grow at a decent pace in May, in line with the recent strength in investment activity. However, we expect a weaker economic backdrop to weigh on commercial property lending …
13th June 2022
Drop in inflation unlikely to last India’s consumer price inflation dropped back in May, but much of that was due to base effects. We expect inflation to resume rising from June, prompting the RBI to continue frontloading policy tightening. Headline CPI …
Economy’s robust performance continues Turkey’s activity figures for April suggest that the economy has held up well since last year’s currency crisis, but robust activity has added to inflation pressures and contributed to the widening of the current …
Bank may have to raise rates during a recession The 0.3% m/m fall in real GDP in April wasn’t as weak as it looks, but it nonetheless increases the chances that the economy is slipping into recession. While this is unlikely to prevent the Bank of England …
Rapidly accelerating wage growth makes 75bp hike more likely The 39,800 rise in employment in May drove down the unemployment rate to a multi-decade low and there are now clear signs of the tight labour market pushing up wages. That raises the chance of …
10th June 2022
Raging inflation could open door to a 75bp hike The surprise increase in headline inflation to a 40-year high of 8.6% in May, from 8.3%, together with another strong rise in core prices raises the odds that the Fed will need to extend its series of 50bp …
Credit growth stronger as government borrowing picks up Credit growth was stronger than expected last month. It is likely to accelerate following the clear signal in late May that policymakers want banks to step up lending. More policy easing is likely. …
Case for a step-up in the pace of rate hikes in June is now overwhelming The stronger-than-expected increase in Norway’s core inflation rate in May lends support to our forecast that the Norges Bank will step up the pace of tightening later this month. A …
No sign of upstream price pressures Consumer price inflation was unchanged last month and remains well below the government’s target of 3%, while producer price inflation dropped to its lowest in a year. As such, inflation is unlikely to be a constraint …
Inflation falling but Copom’s tightening cycle has further to run The fall in Brazilian inflation to 11.7% y/y in May suggests that Copom will continue to slow the pace of tightening with a 50bp Selic rate hike, to 13.25%, next week. But with inflation …
9th June 2022
Inflation stabilising points to another 50bp hike Mexico’s inflation rate stabilised at 7.7% y/y in May and we expect that it will trend lower in the coming months. This may temper some of the hawkish sentiment at Banxico. We think that it will stick to …
Inflation to rise further and more monetary tightening on the cards Egypt’s headline inflation rose to a three-year high of 13.5% y/y in May as the lagged effects from the devaluation of the pound in March continued to push up non-food inflation. …
Rebound in exports an exception rather than the rule Export and import y/y growth picked up last month. In volume terms, exports rebounded while imports were largely unchanged. We think outbound shipments will soften again before long amid growing …
Gathering evidence that the market is on the turn Softening demand in the RICS survey is a sure sign that rising mortgage rates are now putting prospective buyers off. Together with steady supply, that left the survey consistent with house prices …
Signs that inflation has already peaked The sharp fall in Russian inflation in May to 17.1% y/y suggests that inflation may have already peaked and price pressures are likely to ease further in the coming months. This will give the central bank room to …
8th June 2022
Demand holding up, for now Commercial crude oil stocks rose this week owing to an unusually large release from the strategic reserve and a slump in crude exports. Interestingly, implied product demand ticked up, after being relatively subdued for a few …
Construction sentiment worsens as economic headwinds mount The second consecutive fall in the construction PMI in May points to a sustained slowdown in development activity. And with the new orders balance easing and optimism of future demand declining, a …
Economy likely to undershoot expectations The upward revision to euro-zone GDP in Q1 was in large part down to the huge increase in Ireland, where the GDP data are notoriously unreliable. So the data aren’t as good as they look. And we still think that …
Momentum in house prices remains strong for now The slight easing in the Halifax measure of annual house price inflation reflects an outsize increase in prices a year earlier rather than any loss of momentum. But there are signs that rising mortgage rates …
German industry to contract in Q2 April’s increase in industrial output reversed only a fraction of the decline in March and shows that high energy prices, the Ukraine war and ongoing supply shortages are still having a major impact. We expect industrial …
Net trade a big boost to second quarter GDP The bigger than expected drop back in the trade deficit in April suggests that net trade will be a large boost to second-quarter GDP growth, with the risks to our forecast for growth of 4.8% annualised now …
7th June 2022
Goods trade surplus to widen before long Elevated commodity prices were still doing little to lift the goods trade surplus at the start of the second quarter, but we expect it to widen in the coming months as goods imports from Asia drop back and energy …
Strong Q1 to lift growth in 2022 South Africa posted stronger-than-expected GDP growth of 1.9% q/q in Q1 and, while the economy is unlikely to sustain such a robust performance over the coming quarters, we have revised up our GDP growth forecast for this …
Wage growth won’t reach the BoJ’s threshold anytime soon While regular wage growth is approaching its pre-pandemic peak, it won’t reach the 3% the Bank of Japan is aiming for anytime soon . More positively though, with overtime working hours reaching …
Payroll gains remain strong, as wage growth eases The better than anticipated 390,000 gain in non-farm payrolls adds to the signs that the economy is still strong while, amid a rebound in the labour force, wage growth is beginning to moderate. With wage …
3rd June 2022
Border reopening to boost services imports before long While the rise in export values in April was mostly due to rising commodity prices, the further fall in import values suggests that net trade will turn into a boost to GDP growth in Q2 after a huge …
2nd June 2022
