Inflation fall won’t stop Copom from hiking further The fall in Brazilian inflation to a four-month low of 10.1% y/y in December confirmed that the recent food and energy inflation spikes are starting to unwind. But with the headline rate still far above …
11th January 2022
Consumption to fully recover from lockdowns this quarter November’s data support our view that GDP will surpass its pre-delta level in Q4. But while the strength in retail sales is set to fade in the months ahead as Omicron weighs on consumption, the …
Labour force back to pre-pandemic size Unemployment in the euro-zone fell again in November, and timelier data suggest that there have been further improvements since then. While there has been less of a hit to the workforce in the euro-zone than in the …
10th January 2022
Inflation to drift higher, rate hikes coming on to the agenda Egypt’s headline inflation rate rose to 5.9% y/y in December and it is likely to increase further over the coming months, peaking around the mid-point of the central bank’s target range in Q2. …
More ammunition for Norges Bank to press on with rate hikes While Norwegian policymakers do not have as laser-like a focus on consumer price inflation as most, the increase in the core rate in Norway in December only lends support to our hawkish view that …
Full employment to drive sustained rapid wage growth While the 199,000 gain in non-farm payrolls once again disappointed the consensus, a much larger gain in the household measure of employment and a tepid rise in participation pushed the unemployment …
7th January 2022
Decent December to be followed by much weaker January The strength of employment in December is mainly because the LFS reference week preceded the onset of the Omicron wave. Nevertheless, the fall in hours worked is probably a taste of what is to come, as …
Strong inflation to prompt rate hikes in Mexico and Chile Inflation in Mexico stabilised at 7.4% y/y in December and, with price pressures likely to remain strong, we expect Banxico to deliver another 50bp rate hike, to 6.00%, at its meeting in February. …
Service sector becoming a drag on growth The EC Economic Sentiment Indicator decreased markedly in December, as the surge in Covid cases and tightening of restrictions took their toll on activity in the services sector. The survey also showed that …
Industrial sentiment stabilises but restrictions weigh on services sector The EC’s Economic Sentiment Indicators for December showed that the Eastern European economies rebounded last month as Delta virus waves abated, but Central Europe saw further …
PMI dips as Omicron and supply constraints take hold The construction PMI declined last month to end the year on a negative note, more than erasing the gain made in November. Despite tentative signs that they are starting to ease, we expect labour and …
Inflation unlikely to fall to 2% until end of 2022 After reaching 5.0% in December, headline euro-zone inflation should fall this year as the energy component plummets. But we think that core inflation will remain around 2%. The increase in headline …
2021 price rise strongest for at least 15 years Another substantial rise in the Halifax house price index in December ensured that the lender agreed with Nationwide that the rise in house prices over the 2021 calendar year was the strongest for at least …
Stalling manufacturing raises chance of recession The unexpected decline in German industrial production in November increases the chance that GDP fell in the last quarter of 2021. And with the Omicron variant likely to hit Germany hard in the coming …
Wage growth will rise to around 1% this year Wage growth fell to zero in November due a slump in bonus payments, but it should accelerate as the labour market tightens and the recent reopening feeds into a renewed recovery in overtime and bonus payments. …
Goods trade surplus at 13-year high The jump in the goods trade surplus to a 13-year high in November is another sign that the flooding in British Columbia had only a small impact on overall economic activity. It confirms that the economy headed into the …
6th January 2022
Net trade was a drag on fourth quarter GDP after all The sharp rebound in the trade deficit in November means that net trade is now on track to be a small drag on economic growth in the fourth quarter, rather than a small boost as we had previously …
Inflation will fall further in 2022 Germany’s HICP inflation rate fell to 5.7% in December and is now past its peak, but the national CPI measure, which is arguably a better indicator at the moment, rose slightly. Looking ahead, we expect Germany’s …
Industrial recession continued in Q4 The 0.2% m/m fall in Brazilian industrial production in November, taken together with the weak surveys for December, suggests that the sector probably knocked 0.1-0.2%-pts off q/q GDP growth in Q4. There’s a very real …
Omicron to weigh on demand for a few weeks yet Commercial crude oil stocks fell, but this reflected solid demand from refineries. Implied product demand – particularly for gasoline – slumped, suggesting that the public were cautious about travel in the …
5th January 2022
Mortgage rates resume their upward trend After a brief dip due to concerns over the Omicron variant, both the 10-year Treasury yield and 30-year mortgage rate have since resumed their upward trends, with the latter rising to a nine-month high by the end …
Weak growth and intense price pressures going into 2022 The final Composite PMIs for December confirm that the euro-zone economy ended 2021 on a weak note, consistent with our view that GDP rose by only about 0.2% q/q in Q4. They also suggest that price …
Recovery ongoing but surge in infections raises downside risks India’s PMIs remained buoyant in December, suggesting that activity continued picking up towards the end of 2021. We think the recovery will gain momentum this year but a recent sharp jump in …
Survey too early to capture Omicron disruption The ISM manufacturing index suggests that the pace of industrial activity growth remained reasonably solid at the end of last year, but the survey came too early to capture the potentially significant supply …
4th January 2022
Stabilisation in approvals consistent with robust demand Mortgage approvals stabilised in November, consistent with other evidence that demand remained robust after the stamp duty holiday ended. Even though approvals have softened to a similar level to …
Net lending reverses course as uncertainty grows Declines in lending for both standing property and new developments resulted in total net lending moving back into negative territory in November. The outlook is for credit conditions to remain tight in the …
November’s strength unlikely to have lasted The healthy rise in consumer credit in November adds to evidence that economic activity strengthened in the middle of Q4. But that feels like a distant memory now. Against a backdrop of surging COVID-19 cases, …
Economic headwinds continue into 2022 The latest surveys suggest that the pace of industrial growth picked up by more than expected last month. This was largely thanks to improving supply chain conditions and lower raw material prices. Meanwhile, services …
House prices to fall in 2023 The easing in house price growth in December will continue in 2022. And we expect further tightening in lending standards and rises in interest rates to cause house prices to fall in 2023. The 1.0% m/m rise in house prices …
Underlying inflation to get to around 1% Headline inflation picked up in November due to another acceleration in energy inflation and a further rise in fresh food inflation. Underlying inflation remained weak, and while it will accelerate over the coming …
24th December 2021
Soaring house prices mean cheaper new homes are no longer available The healthy rise in new home sales in November primarily reflected a downward revision to the previous month’s reading. Nevertheless, new sales activity is still elevated compared to its …
23rd December 2021
Falling real incomes & virus drag point to consumption slowdown The November durable goods and income & spending data are consistent with our estimate that fourth-quarter GDP growth was 6.5% annualised, but point to a slowdown in early 2022. Strong gains …
Fourth quarter GDP growth to be stronger than expected The strong rise in GDP in October and preliminary estimate of another solid gain in November imply that fourth quarter GDP growth will be stronger than the Bank of Canada anticipated, and means the …
High inflation will keep central banks in tightening mode The fall in Brazilian inflation, to 10.4% y/y, in mid-December is likely to be followed by further declines in the coming months. Inflation in Mexico edged up in the same period, to 7.45% y/y, but …
Demand tempered, but is likely to hold up well for now Commercial crude oil stocks fell sharply last week for the fourth week in a row. That was despite demand for oil products dropping back in line with the seasonal average. Early indicators suggest …
22nd December 2021
Sales resurgence pushes inventory to a record low Existing home sales continued to climb higher in November, leaving sales just short of their peak last year. But we expect a tight inventory and stretched affordability as mortgage rates rise to weigh on …
Weak steel demand will weigh on China’s steel output for some months yet Global steel production contracted in y/y terms in November, mainly owing to depressed output in China. Although China’s power rationing came to an end last month, there are no signs …
Less momentum going into Q4 Today’s release indicates the economy had a bit less momentum in Q3 than we had previously thought. And, with early signs the Omicron variant has hit activity, growth is sure to have slowed further in Q4. Upward revisions to …
Festive spirit in short supply December’s decline in consumer confidence adds to the list of deteriorating consumer indicators. We expect household spending to contribute to a marked slowdown in GDP growth in Q4 to just 0.2% q/q. Data released this …
21st December 2021
Strength in October and November unlikely to be repeated in December Retail sales rose strongly in October and the preliminary estimate points to another solid gain in November. That is likely to mark the peak for the next few months, however, as the …
Riksbank looking increasingly behind the curve The resilience of the ETI in December underlines that the Swedish economy is comparatively well-placed going into 2022. All told, the pressure on the Riksbank to soften its so-far dovish stance is building. …
Borrowing overshoot could continue in the coming months The rise in government borrowing in November suggests the public finances could be already starting to feel the strain from higher spending on NHS Test & Trace and booster vaccines. Now that tighter …
Output to bounce back in the months ahead, despite slipping in November Despite a y/y fall in global aluminium output in November, it is still up strongly year-to-date. And it is likely to rise again from here as power restrictions in China are lifted and …
20th December 2021
Inflation to stay above 2% until late 2022 November’s detailed inflation breakdown shows that the increase in price pressures is not just due to high energy costs and global demand-supply imbalances for durable goods. Services inflation has risen too. We …
17th December 2021
Another bleak midwinter The fall in the Ifo BCI for December underlines that German’s economy has been hit hard by the latest Covid wave even before the Omicron variant has taken hold. The only consolation is that manufacturers are holding up well. It now …
Black Friday boost, but Omicron threatens Christmas for retailers The strong growth in retail sales in November feels like a bit of a consolation prize for retailers who are now once again facing a difficult Christmas in light of the rapidly worsening …
Output rising as shortages ease The solid 0.7% increase in manufacturing output last month suggests that shortages are gradually easing. With demand still strong, the latest surveys are still consistent with manufacturing output expanding at a near-5% …
16th December 2021
Housing starts bounce back, but so do lumber prices Single-family housing starts rebounded in November, following a weak four months. While strong new home demand, limited inventory and surging house prices will incentivise builders to increase …
Rebound in wage growth won’t trouble the ECB The rebound in euro-zone hourly wage growth in Q3 is a sign of base effects fading and there is no evidence that this is the beginning of a wage-price spiral that would concern the ECB. Indeed, wage growth is …
Omicron already hitting services hard The fall in the composite PMI in December doesn’t come as much of a surprise given the surge in cases of the Omicron variant of COVID-19. But it was much bigger than expected, and shows that caution among businesses …
