Business equipment investment weak before the virus hit The rise in durable goods orders in February reflected a surge in transport orders, with underlying capital goods orders and shipments falling back. That suggests business equipment investment was on …
25th March 2020
Weaker inflation gives scope for more Copom easing The further fall in Brazilian inflation in the middle of March will allow the central bank to lower the Selic rate by a further 50bp in the near term. But the scope for aggressive easing is limited. The …
Services sector grinding to a halt The Ifo survey gives a similar message to the PMI: the German economy is collapsing, with services bearing the brunt. And the situation is likely to get worse in April. It’s no great surprise that March’s Ifo Business …
Inflation to drop to 1% in the third quarter The drop in CPI inflation from 1.8% in January to 1.7% in February is a small sign of things to come – we expect the effects of the coronavirus crisis to drag inflation below 1.0% in the months ahead. The …
New home sales face coronavirus shock from a strong position New home sales edged back from a 13-year high in February, but are now set for a sharp downturn as the coronavirus shuts down many parts of the home buying process. However, the high level of …
24th March 2020
Above-target inflation won’t prevent further Banxico cuts Despite Mexican inflation remaining above target in early March, we think that Banxico will follow up its emergency 50bp rate cut last week with around 200bp of further easing in the coming …
PMI already at record low before government restrictions bite The first conventional data for March confirmed that the coronavirus was having a massive negative impact on activity even before the Government stepped up the severity of its measures to slow …
The slump in output has only just begun March’s slump in the euro-zone Composite PMI is so sharp that at any other time it would look like a spreadsheet error. But now it is all too believable, and April’s data could be even worse. The decline in the …
Services sector hit hard by coronavirus outbreak While the manufacturing PMI didn’t fall as sharply as we had anticipated in March, the plunge in the services sector underlines that the coronavirus outbreak will result in a sharp slowdown in activity. The …
Sharp drop in confidence just the start of a long slump The plunge in the EC euro-zone consumer confidence index in March – its largest fall on record – leaves it consistent with household spending plummeting. Given the continued fast spread of the virus, …
23rd March 2020
2020 contraction still looks likely Global steel output was reasonably resilient in February. But that follows substantial downward revisions to the January figures. And while policy support – particularly in China – may boost steel production later this …
Trade resilience unlikely to last There are signs that trade has recovered somewhat from the shock of Chinese factory shutdowns, with both exports and imports bouncing back over the first 20 days of March. But with the world economy set to contract …
Existing home sales set for 35% drop Existing home sales saw a strong gain of 6.5% m/m in February, but with the whole of California being locked down the risks are building to our initial view that sales will see a 35% drop in the second quarter. …
20th March 2020
Sales set to plummet The 0.4% m/m increase in retail sales in January was entirely due to higher prices, with sales volumes falling. That will mark the start of a sustained period of weakness, with respondents to the retail survey saying that their sales …
Rising supply to exacerbate stocks glut Despite alarm bells ringing for global aluminium demand, output growth continued to gather pace in February. This will only have added to the piles of unwanted inventory and is another reason to expect that, once …
Deficit will soon explode After coming in at about 2% of GDP in 2019/20, the budget deficit will soon explode to close to the size seen in the great financial crisis. The government’s measures to combat the economic fallout of the coronavirus at the same …
First business survey for March points to very sharp declines in output March’s German Ifo survey was very downbeat, but it may even understate the decline in business sentiment. While the ECB’s expansion of QE is a positive step towards containing the …
19th March 2020
Unemployment rate will surge this year Today’s data show that the coronavirus did not have a significant impact on the Australian domestic economy in February. Even so, we think the draconian restrictions put in place will result in economic activity …
Inflation to turn negative this year Inflation fell in February, and we expect it to moderate sharply this year as capacity shortages evaporate and the coronavirus opens up slack in the economy. By far the deepest downturn since 2009 should cause core …
Growth was subdued even before the virus outbreak The decline in GDP growth in New Zealand in the fourth quarter shows that the economy was struggling even before the Covid-19 outbreak which will surely drag the New Zealand economy into recession in the …
18th March 2020
Crude stocks look set to rise further The latest US stocks data went largely unnoticed today as prices continued to plunge on concerns about the spread of coronavirus. But, for what it is worth, we expect stocks to climb in the coming months owing to a …
Inflation to drop below 1% in second quarter The slump in oil prices will cause headline inflation to plummet to below 1% in the second quarter, from 2.2% in February. While weaker activity will put downward pressure on core inflation in the second …
Rise in single-family housing starts pre-dates virus impact The rise in single-family housing starts in February pre-dates the outbreak of the coronavirus, and the outlook for starts has worsened considerably over the next few months. It will take time …
Resilience in exports won’t last Exports bounced back in February even as China’s economy came to a standstill. But with the coronavirus now disrupting economic activity across the globe, that resilience won’t last. The 1.0% annual decline in export …
Coronavirus outbreak will hit activity hard The February retail sales data provide further evidence that the economy was in reasonable shape before the coronavirus struck, but that won't prevent spending from falling sharply over the next few months. The …
17th March 2020
Manufacturing sector weak even before virus outbreak Manufacturing sales fell for the fifth consecutive month in January and, given the disruption caused by February’s rail blockades and the coronavirus outbreak, are likely to fall much further. The 0.2% …
Investor sentiment points to big falls in GDP The sharp drops in the ZEW measures of German and euro-zone investor sentiment in March came as no surprise, and point to sharp falls in GDP. Things are likely to get much worse in Q2, when we expect euro-zone …
The last hurrah for the labour market The strong rate of employment growth at the start of the year is a rare bit of good news for the economy at the minute. But this growth will give way to a plunge in employment in the coming months. Employment rose by …
Drop in WPI inflation increases rate cut chances amid virus threat The drop in wholesale price inflation in February is an added source of comfort for the RBI following the fall in CPI inflation last month. We think it will follow its global peers by …
16th March 2020
Weakest-on-record data point to a sharp contraction in Q1 The latest activity and spending data were much weaker than expected and point to a far deeper downturn than during the Global Financial Crisis. While domestic conditions should improve slowly in …
Business investment set to fall sharply this year The slight rise in machinery orders in January suggests that business investment was recovering – albeit slowly – before the coronavirus began to dent economic activity from all angles. We think a sharp …
Solid bank lending likely to unwind in the coming months The sum of outstanding commercial bank lending secured against real estate climbed to a new high in February. But with demand for new loans set to soften over the coming months as transactions …
13th March 2020
Drop in headline inflation sets scene for renewed policy rate cuts February’s drop in consumer price inflation leaves the headline rate still well above target. But inflation is likely to fall further. In any case, with coronavirus risks mounting, the …
12th March 2020
Encouraging results expected to be a false dawn UK housing market activity rose again in February according to the RICS. But as the survey was conducted before the escalation of the coronavirus crisis and related financial market turmoil, we expect any …
Headline inflation will fall toward 1% The drop back in CPI inflation to 2.3% in February, from 2.5%, is a sign of things to come, with the plunge in crude oil prices likely to drag headline CPI inflation below 1.0% soon. With underlying price pressures …
11th March 2020
Inflation edges down, rate cut likely The modest decline in Brazilian inflation, to 4.0% y/y, probably gives Copom leeway to lower the Selic rate by 25bp when it meets next week, despite the fall in the real. The outturn was down from 4.2% y/y in January, …
Economy struggling even before the coronavirus The stagnation in GDP in January shows that the economy was weak even before people started worrying about the coronavirus. And our more timely measures of activity, such as weekly cinema sales, suggest that …
Policy support keeps the credit taps on Credit growth was stable last month despite the slump in economic activity. In most countries, credit growth would slow sharply in response to a shock such as the coronavirus, as households defer large purchase and …
Some signs that China disruption is easing Korean trade data for the first 10 days of March suggest that the disruption from factory closures in China to regional industry eased recently, although both imports and exports remain depressed. The timely …
High LTV lending eases at the end of 2019 The latest mortgage statistics show an easing in the share of higher LTV loans at the end of 2019, though there was evidence that high LTI loans have risen slightly. Overall, our view remains that high house …
10th March 2020
Coronavirus fears and inflation fall bring rate cut back onto the table The sharp fall in Egyptian inflation in February to 5.3% y/y puts it well below the lower bound of the central bank’s target range. Coupled with mounting fears over the coronavirus …
A disinflationary shock The coronavirus outbreak is putting downward pressure on inflation. While supply chain disruptions have kept food prices high, weaker demand has weighed on the price of other goods and services. Consumer price inflation fell from …
Inflation jumps, but policymakers will be watching peso Given rising inflation and the sharp fall in the peso, we no longer think that the Bank of Mexico will cut its key rate this month in line with the Fed. Policymakers will probably leave rates on …
9th March 2020
Output set to slump again The rise in German industrial production in January provides no relief for policymakers, who should now be braced for a new slump as Covid-19 spreads throughout Europe. Industrial output is likely to fall more steeply in Q1 and …
Spread of coronavirus will deal severe blow to economy The plunge in the Economy Watcher’s Survey (EWS) in February to its lowest level since the 2011 tsunami suggests that the intensified spread of the coronavirus will cause consumer spending to fall …
Imports yet to reflect the slump in demand Exports dropped the most since 2008 at the start of this year. Imports held up better but at the expense of a jump in inventories. Inbound shipments will soon play catch-up with the slump in domestic demand. …
Economy is probably in recession A disastrous Q4 following the sales tax hike was shown to have been even worse in the second estimate of GDP. That supports our bearish view that output will fall by 1% this year. It also further raises the chances of …
Labour market continues to recover The 30,000 rise in employment in February is encouraging, but the real test will come in the next few months as the effects of the coronavirus outbreak are felt. Despite the strong labour market, the slump in exports in …
6th March 2020
Economy in robust health ahead of coronavirus impact The 273,000 gain in non-farm payrolls in February confirms that the US economy was in very good shape before the coronavirus hit. Nevertheless, with the 10-year Treasury yield slumping to a new record …
Falling inflation will prompt another rate cut The further fall in Russian inflation to 2.3% y/y in February leaves the door open for the central bank to continue its easing cycle this month. Although market expectations for easing have been pared back …
