Consumer price inflation hits a five-year high Headline inflation continued accelerating last month but core inflation held stable at a low level. With demand-side pressures on prices set to remain subdued in the coming months, we think that the People’s …
15th October 2019
Surge in headline inflation won’t worry the RBI yet The jump in headline consumer price inflation in September won’t prevent another policy rate cut from the Reserve Bank, particularly since it was largely due to damage to farmers’ harvests rather than …
14th October 2019
Increase in production not the start of a trend August’s small rise in euro-zone industrial production is nowhere near enough to offset the previous two months’ declines, and so output in Q3 as a whole is likely to have fallen sharply. This supports our …
Industrial weakness likely to be prove fleeting The larger-than-expected fall in Turkish industrial production in August is likely to prove a bump in the road, with more timely survey evidence pointing to a recovery over the coming months. That said, the …
Persistently weak WPI inflation raises likelihood of another rate cut The weakness in wholesale price inflation in September is likely to persist until the end of the year and, although not the preferred measure of inflation for India’s policymakers, …
Shipments weak ahead of trade deal The contraction in both exports and imports deepened last month. Import growth should start to recover soon. But with the mini US-China trade deal unlikely to alleviate the main headwinds facing exporters, it will take …
Labour market shrugs off global concerns The second month of strong employment gains in September suggests that the labour market is continuing to shrug off global growth concerns. But with the gains driven by public sector and self-employed workers, the …
11th October 2019
Slump in output should be temporary The contraction in India’s industrial production in August is alarming but it should prove temporary as the effect of recent policy easing kicks in. Data just released show that industrial production growth turned …
Manufacturing weakness is here to stay Mexican industrial production rose by a surprisingly brisk 0.8% m/m in August, but with the key manufacturing sector facing a slowdown, we expect that conditions for industry as a whole will remain weak later this …
No sign of tariff impact The muted gain in core consumer prices in September illustrates that, even after the introduction of additional tariffs on Chinese imports, inflationary pressures are still well contained. In that environment, a further slowdown …
10th October 2019
Recession fears banished, for the time being GDP fell on the month in August, but thanks to solid increases in May, June and July any remaining concerns that the economy fell into recession in Q3 have been well and truly banished. GDP fell by 0.1% m/m in …
Underlying inflation to stay subdued in Sweden The persistent weakness of underlying inflation in Sweden serves as further proof, if needed, that the Riksbank will have to shift to a more dovish stance over the next six months or so. As a result, the …
Inflation drops to seven-year low, more rate cuts on the way The further drop in Egyptian inflation in September to a seven-year low of just 4.8% y/y means that the central bank will press ahead with its easing cycle over the coming months. We now expect …
Housing market activity slumps in September According to the RICS survey, buyer and seller numbers fell sharply in September, as renewed uncertainty hit housing market confidence. But the big picture is that, even if Brexit uncertainty were to be resolved …
Business investment to slow next year The continued fall in machinery orders in August suggest that a last-minute investment rush ahead of October’s tax hike is looking increasingly unlikely. Either way, business investment will probably slow next year as …
Crude stocks are on a rising trend US crude stocks rose again last week and we suspect that they will increase further owing to ongoing refinery maintenance and the prospect of lower product demand as the US economy slows . The EIA’s weekly US Petroleum …
9th October 2019
Inflation surprise puts another 50bp cut on the table The fall in Brazilian inflation to a weaker-than-expected 2.9% y/y last month opens the door to another 50bp cut in the Selic rate when Copom meets at the end of this month. The outturn for September …
Weak inflation adds to case for November rate cut Mexican inflation eased to a three-year low of 3.0% y/y in September, which strengthens our view that policymakers will cut their key rate from 7.75% to 7.25% by the end of the year. Full-month figures …
Increase in August not a turning point The 0.3% increase in German industrial production comes as a relief, and a bit of a surprise, compared to the consensus forecast of 0.0% and our own expectation of a 1.0% fall, and given the poor factory orders data …
8th October 2019
Wage growth may pick up to 1% Growth in regular earnings has been broadly steady around 0.5% in recent months. And while we expect the unemployment rate to rise, wage growth may climb to 1.0% over the coming months. According to today’s preliminary …
Subdued house price growth here to stay September’s fall in the Halifax house price index chimes with the message from the alternative measures and suggests that house price inflation is subdued. Indeed, with house prices already high and interest rates …
7th October 2019
Outflow pressures remain muted China’s FX reserves declined unexpectedly last month but officials claim this was due to valuation effects and muted outflow pressures suggest that the PBOC will have felt little urgency to run down it reserves. The value of …
Easing cycle has further to run The fall in Russian inflation to the central bank’s target of 4.0% y/y in September is likely to be followed by a further decline in the headline rate over the coming months. We currently expect an additional 50bp of cuts …
4th October 2019
Net trade on track to subtract from third-quarter GDP growth The trade deficit unexpectedly narrowed in August thanks to a strong rise in export prices but, with export volumes falling and import volumes rising, it appears net trade was a drag on …
Employment growth easing rather than collapsing The 136,000 increase in non-farm payrolls in September illustrates that while growth in employment (and broader activity) has slowed, it is not collapsing. Otherwise, the employment report was something of a …
Tax cuts not having much of an effect so more stimulus is needed Retail sales growth remained subdued in August despite the government’s tax cuts which suggests that economic activity did not recover strongly in the second half of 2019. The 0.4% m/m rise …
Housing starts fall again Housing starts fell for a third consecutive quarter in Q2, pushing the pace of construction down to its lowest level in three years. Looking ahead, with Help-to-Buy set to be pared back and wider housing market activity set to …
3rd October 2019
Germany behind euro-zone Q3 slowdown The downward revision to September’s euro-zone PMI leaves it consistent with zero growth at the end of Q3, as the contraction in Germany’s economy appears to have accelerated and spread to the services sector. …
Losing momentum The drop in the IHS/Markit services PMI to a six-month low of 49.5 in September means that all three sector PMIs are now below the 50-mark which theoretically separates expansion from contraction, reigniting concerns that the economy is in …
Saudi non-oil sector holding up well, but UAE’s slump continues September’s batch of whole economy PMIs provided further evidence of a divergence between non-oil sectors in Saudi Arabia and the UAE. But we don’t think this will continue for much longer as …
Inflation returns to single digits, more rate cuts lie in store Last month’s steep fall in Turkish inflation, taking it back into single digits, was flattered by base effects and the headline rate will rise again later this year. Even so, these figures …
Trade will only provide a modest boost to growth in Q3 The narrowing in the trade surplus in August was mostly driven by a decline in export prices so we doubt that net trade will be a drag on GDP growth in Q3. Even so, we estimate that the contribution …
Crude stocks to continue rising as the US economy slows US crude stocks increased last week as inputs to refineries fell. We expect crude stocks to continue to rise in the coming months as a weaker US economy leads to softer growth in gasoline demand . …
2nd October 2019
Rise in mortgage rates dampens refinancing demand The first rise in mortgage rates since November last year dampened refinancing demand in September, but applications for home purchase saw a small gain. However that rise merely took home purchase demand …
Construction output set to drop in Q3 The fall in the headline construction PMI in September suggests that construction output contracted in Q3. For the commercial property sector, the softer supply pipeline may limit rental values falls. Meanwhile, we …
Another step towards deflation The further decline in Swiss inflation, to just 0.1% in September, will stoke deflationary fears at the SNB and will only strengthen its resolve to resist upward pressure on the franc. The headline Swiss inflation rate fell …
The perfect storm of global weakness, trade war and GM strike The slump in the ISM manufacturing index to a decade low of 47.8 in September, from 49.1, will reignite fears that the US economy is headed for a recession. Our guess is that this deterioration …
1st October 2019
Growth set to slow to 1.5% in the third quarter The economy’s stagnation in July was partly due to temporary disruptions in the volatile oil and gas sector, which should be reversed in August. Nevertheless, we think that third-quarter growth slowed …
Further signs of recovery The better-than-expected 0.8% m/m rise in Brazilian industrial production was driven by rapid growth in the mining sector, which won’t be sustained. Even so, the figures add to the evidence that the economic recovery gathered …
From bad to worse The release of a grim set of manufacturing PMIs for September this morning lends further support to our views that policymakers in Sweden and Switzerland will end up cutting interest rates deeper into negative territory, and that the …
Manufacturing PMI still pointing to drop in output Despite the rise in the manufacturing PMI in September, it remains at a low level and suggests the industrial sector contracted again in Q3. However, we still doubt that manufacturing will pull the …
More evidence of weakness in Q3 South Africa’s PMI slumped to a decade low of 41.6 in September, adding to the evidence that – despite the rebound in Q2 – the underlying pace of economic growth remains very weak. Figures released earlier today showed that …
Turkish recovery gathers momentum, CEE remains weak Turkey’s PMI for September provides further evidence that the economy recovered strongly in the third quarter and with policy set to be loosened further, the recovery has some legs. Meanwhile, our …
House price growth subdued The subdued picture for house price growth is unlikely to improve anytime soon. Even if a no deal Brexit disruption is avoided, we think high house prices, mortgage regulation and rising interest rates will keep house price …
PMI reading hasn’t yet reflected corporate tax cut boost The manufacturing PMI reading held steady in September, but this barely captured the impact of the recent large-scale corporate tax cut. Looser fiscal policy and the likelihood of further monetary …
A weak quarter, but some signs of improvement more recently Downbeat trade data for Korea and weak regional manufacturing PMIs suggest that GDP data for last quarter are likely to be subdued again in most places, but there were some signs of improvement …
House prices recovery to continue The 10% annualised rise in house prices in September is unsustainable in light of sluggish income growth. We expect prices to rise by a slower 5% in 2020 and 2021. The 1.1% m/m rise in house prices in the eight capital …
Price pressures to remain weak, but deflation will be temporary Despite headline inflation in Korea dropping further into negative territory in September, we don’t think there is much risk of a damaging period of prolonged deflation. Figures released …
Conditions holding up better than expected The latest Tankan survey shows that business conditions are holding up better than expected while the labour market remains very tight. And even though firms are turning more cautious about the outlook for …
Business conditions prove resilient According to today’s Tankan survey, business conditions held up better last quarter than most had anticipated but the further deterioration in firms’ capital spending plans will cause some concern at the Bank of Japan. …
