Business investment to slump after tax hike The surge in machinery orders in June supports our view that investment spending will continue to expand at a rapid pace in the third quarter. However, we expect a renewed drop after October’s sales tax hike. …
14th August 2019
Rebounding core inflation unlikely to prevent further rate cuts The stronger than expected 0.3% m/m rise in core consumer prices in July, which followed a similar-sized gain in June, suggests that underlying inflationary pressures may not be as subdued as …
13th August 2019
More rate cuts on the way despite rise in core inflation Headline inflation held steady in July and remains comfortably below the central bank’s (RBI) 4.0% target, laying the foundations for at least one more interest rate cut later this year. But with …
Labour market shrugs off economic contraction The labour market has shrugged off the 0.2% q/q fall in GDP in Q2, providing support to our view that the economy will recover in Q3. Indeed, employment rose by 115,000 on the quarter (consensus +60,000), the …
Early signs of a recovery The slightly better-than-expected 0.9% y/y rise in Russian GDP in Q2, up from 0.5% y/y in Q1, is likely to be followed by a further improvement in the second half of the year. But growth is still likely to be weaker than most …
12th August 2019
Credit growth sputters The latest slowdown in lending highlights the need for further monetary easing if policymakers are to succeed in putting a floor beneath growth. Chinese banks extended RMB1,060bn in net new local currency loans in July, down from …
Wage growth surges as employment falls The second consecutive monthly drop in employment will raise a few eyebrows among policymakers, but it’s the surge in hourly wage growth to 4.5% that will capture the most attention. Stronger wage growth is a risk to …
9th August 2019
A better Q2 than Q1 Indian industrial production growth slowed in June, but the sector performed much better across Q2 compared to Q1. Looking ahead, recent policy moves should help to support local industry over the next couple of quarters. Data just …
Production rebound to provide strong carryover for Q3 The stronger-than-expected increase in Mexican industrial production in June, of 1.1% m/m, should provide a strong carryover for Q3. But with the economy still very weak, we remain comfortable with our …
Contraction in Q2, but recession unlikely The small contraction in GDP in Q2 throws up the spectre of a recession even before Brexit. However, almost all the weakness was because the original Brexit deadline meant that activity that would have happened in …
Above-target core inflation to keep Norges Bank in tightening mode, for now The fact that core inflation in Norway remained above target for the ninth month in a row in July will keep the Norges Bank in tightening mode for now. But with prices pressures …
Factory-gate deflation returns Weakening demand dragged producer price inflation into negative territory last month even as surging pork prices continued to push up consumer price inflation. Both have downbeat implications for the health of China’s …
Growth set to slow after tax hike GDP rose more quickly than most had anticipated in the second quarter and the details were unequivocally strong. And while the economy will lose momentum after October’s sales tax hike, our view remains that the Bank of …
Falling inflation opens door to further rate cuts The decline in inflation in Brazil and Chile in July points to further monetary easing, and we currently expect a 25bp interest rate cut in both countries next month. In Brazil, with pension reform passing …
8th August 2019
Further fall in inflation keeps August rate cut in play The further fall in Mexican inflation in July, to 3.8% y/y, keeps an interest rate cut at next week’s policy meeting on the table. It will be a close call, but on balance we think the central bank …
Drop in inflation bolsters case for rate cuts The drop in Egyptian inflation to a four year low of 8.7% y/y in July reinforces our view that the central bank will resume its easing cycle at its next meeting with a 100bp cut in the overnight deposit rate, …
Market struggles to gather momentum The latest RICS survey showed a housing market struggling to gather any upward momentum. With Brexit uncertainty poised to intensify in the coming months, we expect house prices and transactions to see little or no …
Trade picks up but headwinds remain Shipments in and out of China held up better than expected last month, but a sustained turnaround still looks unlikely in the near-term. Export growth picked up from -1.3% y/y in June to 3.3% last month in US dollar …
Weak growth to prompt more aggressive policy easing The continued weakness of growth means that the central bank will likely opt for a more aggressive 50bp policy rate cut this afternoon. And while growth should recover from here, don’t expect a strong …
The turning point looms for US crude stocks While much of last week’s decline in commercial crude stocks is down to the EIA’s opaque adjustment factor, the latest stocks report nonetheless paints a fairly weak picture of US demand. Given our view that the …
7th August 2019
Lower rates fail to attract more buyers to the market Despite a steady decline in mortgage interest rates, mortgage applications for home purchase had dropped to a five-month low by the end of July. The recent drop in the 10-year Treasury yield means …
The calm before the storm The latest FX reserves figures are consistent with the People’s Bank (PBOC) having remained on the side-lines of the FX market last month. But the relative calm of July will give way to a more eventful August . The value of the …
Another unusually strong result from the Halifax House price growth on the Halifax index once again outpaced the other main indices. But we wouldn’t put too much weight on that result. With house prices very high relative to incomes and the likelihood of …
Fall in output kills off hopes of Q3 recovery The 1.5% fall in German industrial production in June kills off any hopes that the strong orders data published yesterday marked the beginning of a recovery. On the contrary, with business surveys all pointing …
Easing inflation strengthens the case for further rate cuts The decline in Russian inflation to 4.6% y/y last month – coming alongside the stability of the ruble this week – adds weight to our view that the central bank will cut its policy rate by a …
6th August 2019
Net trade will continue to be the main driver of Australian growth We estimate that net trade boosted GDP growth in Q2, providing a glimmer of hope amidst the bleak domestic outlook. The trade balance surged from an upwardly revised surplus of $6173mn in …
Wage growth should settle around 0.5% Wage growth accelerated in June as regular earnings stopped falling and summer bonuses rose. However, wages increased even faster once we allow for sampling changes that will probably only disappear from the beginning …
Strength in the labour market won’t last long The sharp fall in the unemployment rate is unlikely to prevent the RBNZ from cutting rates tomorrow given that labour market data are volatile and often prone to revision. What’s more, we expect the …
Pick-up in the Gulf’s non-oil sectors appears to have run its course The drop in PMIs across the Gulf in July suggests that the pick-up in growth in non-oil sectors in the first half of 2019 has started to go into reverse. If oil prices stay low and …
5th August 2019
Services sector proves resilient The low level of the PMI surveys, particularly for construction and manufacturing, is consistent with the economy struggling in the aftermath of the original Brexit date. But there was some encouraging signs of …
Germany and Italy remain the euro-zone’s weak spots July’s final euro-zone PMI is consistent with continued weak GDP growth at the start of Q3. And the PMI surveys also confirmed that Italy and Germany remain the currency union’s weak spots. While Italy’s …
Rise in inflation to be temporary, further large rate cuts still on the cards The rise in Turkish inflation in July is likely to be temporary and followed by chunky falls in the coming months. Accordingly, so long as the lira remains stable, the central …
Growth to remain weaker than the official figures show GDP growth in Indonesia has been suspiciously stable at around 5% over the past five years, and it was no surprise that it recorded another quarter of growth at close to this rate in the second …
Jobs growth trending lower The 164,000 gain in non-farm payrolls in July confirms that employment growth is trending lower, but it also suggests that the economy is still coping reasonably well amidst concerns over weaker global growth and trade policy …
2nd August 2019
Escalation of US-China trade war another downside risk for exports June’s trade data suggest that net exports made a strong contribution to the likely 3.0% annualised increase in GDP in the second quarter. But signs of weaker growth elsewhere, combined …
Retail sales growth likely to slow further The jump in retail sales in June follows a fairly sharp contraction in May and feeble growth in April, and means that retail sales growth slowed in Q2 overall. With the boost from falling inflation now behind us …
Fall in Swiss inflation adds to pressure on the SNB The unexpected fall in Swiss inflation in July, and signs of a deepening downturn in the industrial sector, will only strengthen the resolve of the SNB to resist the rising franc. There is a growing …
Consumption growth remained weak second quarter The weakness in real retail sales in Q2 suggests consumption growth remained sluggish in the second quarter. That’s one reason why we expect GDP growth to slow from 2.8% in 2018 to just 1.5% this year. …
Fed right to be concerned by weak global demand The further decline in the ISM manufacturing index to a three-year low of 51.2 in July, from 51.7, confirms that the downturn in the factory sector continued into the third quarter, and suggests that Fed …
1st August 2019
Slipping into recession The 0.6% m/m fall in Brazilian industrial production in June adds to the evidence that GDP contracted again in the second quarter. We expect a recovery in the second half of the year, but it will be slow going. June’s outturn was …
Signs of stabilisation, but no rebound in the works The manufacturing PMI remained at 48.0 in July, which was slightly stronger than expected (consensus 47.7), but it still indicates that manufacturing output fell at the start of Q3. However, the ongoing …
Bouncing back, but economy still pretty weak South Africa’s PMI rebounded to 52.1 in July, adding to signs that the economy gained pace in the middle of the year. Even so, headline growth over 2019 as a whole will be tepid, and we still expect that …
Losing pace into Q3 The sharp fall in Norway’s manufacturing PMI in July adds to signs that the economy is losing momentum and lends support to our view that the Norges Bank will hike rates by less than investors expect this year. Meanwhile, the weak PMI …
PMIs weaken further, hard data to follow suit soon July’s batch of manufacturing PMIs point to a sharp slowdown in industrial output across Central Europe at the start of Q3 . While the hard activity data have so far defied the weak messages painted by …
Two-year manufacturing expansion won’t stop a rate cut India’s manufacturing PMI reading for July is consistent with decent output in the sector at the start of Q3. But this won’t be a barrier to further monetary easing, and we’ve pencilled in another …
July PMIs give slightly better news, but still point to weakness PMI readings for Emerging Asia were slightly more positive at the start of Q3, but the big picture is that they remain low by past standards and there are few signs of a meaningful …
Unofficial survey rises but headwinds remain The latest Caixin survey suggests that factory activity remained weak last month but that downward pressure eased somewhat, painting a similar picture to the official manufacturing PMI released yesterday. The …
Housing downturn may be bottoming out House prices appear to be bottoming with an average increase in prices across the eight capital cities in July. We expect prices will remain around this level for the rest of 2019 before rising by 3% in 2020 and 5% in …
No sign of a turnaround Korea’s trade data suggest that a meaningful recovery in the external environment remained elusive at the start to the second half of the year, with weakness in the technology sector and slowing demand from China continuing to …
Despite the large draw, US oil demand is looking soft Another hefty drawdown in US commercial crude stocks last week might be taken as a bullish sign by oil markets. However, taking a closer look at the latest week’s figures, the picture painted of demand …
31st July 2019
