Wage growth & external demand holding up Data released this week showed that overall wage growth remained above 2% for the second consecutive month as a slowdown in regular earnings growth was offset by a strong contribution from bonus payments as firms …
11th August 2023
Households continue tightening their belts Earlier this week, we got further confirmation that household spending in Australia is now in freefall. The ABS’ monthly indicator showed that the slowdown in household spending deepened in June. As a …
Aramco’s profit slump ≠ austerity The slump in the profits of Saudi Arabia’s state oil company, Aramco, in Q2 has focussed attention on the deterioration in the Kingdom’s budget position. But the authorities appear to be taking as many steps as possible …
10th August 2023
More reasons for the Bank to remain on hold The further rise in the unemployment rate in July and signs that the housing market is cooling again are both reasons to doubt that the Bank of Canada will raise interest rates further. Employment weakened in …
4th August 2023
With the mini-meltdown in US bond markets taking centre stage over recent days, the dollar had been on the front foot for much of the week until the softish non-farm payrolls report earlier today prompted a rebound in bond markets and a drop back in the …
Brazil and Chile spring dovish surprise The decisions in the past week by central banks in both Chile and Brazil to cut interest rates confirm that Latin America remains at the front of the pack in this global monetary cycle. Having been among the first …
Inflationary pressure dissipating ULC growth slowdown adds to disinflation pressure The news that average hourly earnings growth increased by 0.4% m/m in July, and 4.4% over the past 12 months, might seem like a problem for the Fed. With productivity …
CEE easing cycles around the corner Expectations for the start of monetary easing cycles in Poland and Czechia were strengthened this week after the publication of weaker-than-expected Polish inflation figures for July and the shift in language at the …
Nigeria flirting again with unorthodox economics Comments from Nigeria’s president and potential cabinet members this week reinforced our fears that there has not been a clean break from Buharinomics. Justifying the removal of fuel subsidies, President …
Speeding up bond issuance is a start but not enough Following last week’s dovish Politburo meeting readout, regulators have reportedly told local officials that they have until the end of next month to fully utilize their annual issuance quotas for …
Peak does not mean pivot Whether you took this week’s 25 basis point (bps) rise in interest rates, from 5.00% to 5.25%, and the Bank of England’s accompanying communications as hawkish or dovish largely depends on your prior expectations. We thought it …
Our new GDP forecasts There was something for both the bulls and bears in the euro-zone’s Q2 GDP data. For the bulls, the data were better than expected and show that the economy continued to dodge a recession. For the bears, some one-off factors meant …
Core inflation remains a concern Figures from the Philippines published earlier today show that headline inflation fell to 4.7% y/y in July. This compares with 5.4% in June and a peak of 8.7% in January. Falling food and energy price inflation have been …
Government delivering on capex promise so far We noted at the time of the FY23/24 Union Budget announcement that the government appeared to be putting more emphasis on boosting longer-term prospects than had previously been the case. Capital expenditure …
On Tuesday, the Reserve Bank of Australia left its cash rate unchanged at 4.10%, upending the consensus forecast for a 25bp rate hike. The Bank’s detailed Monetary Policy Statement , published earlier today, showed that the Board did discuss the option of …
10-year yield continues to rise The Bank of Japan’s defence of Yield Curve Control (YCC) has devolved this week into a rearguard action. Since last Friday’s policy tweak to allow the 10-year Japanese government bond (JGB) yield to rise above 0.5%, the …
A surge in SAIBOR sets up SAMA to take stage The tightening of monetary conditions in Saudi Arabia since early 2022 has caused interest rates to rise rapidly. This week the Saudi Arabian Interbank Rate (SAIBOR) hit a record high. To prevent credit growth …
3rd August 2023
Central Bank of Nigeria’s reluctance to hike This week, the CBN’s policy rate hike of 25bp underwhelmed markets, presenting further evidence that Nigerian policymakers are trading off growth concerns with their inflation mandate. The MPC chose to hike …
28th July 2023
The Fed’s emphasis on data dependency amid even more evidence of resilience in the US economy pushed US Treasury yields up and the greenback higher against most major G10 currencies this week. Taken together with mixed activity data out of Europe and …
The Bank of Canada’s Summary of Deliberations highlighted the Bank’s concern that inflation could become stuck above the 2% target. Although headline inflation faces a bumpy downward path over the coming months, we think a faster easing in core inflation …
This week’s FOMC meeting brought hints that Fed officials are no longer wedded to previous plans for further policy tightening. Even if activity growth continues to hold up a bit better than expected, we think a run of weaker inflation readings will …
Erkan delivers, but lingering doubts remain All eyes were on Turkey’s central bank governor on Thursday and she delivered a convincing message during the Inflation Report briefing. The priority is clearly for a more rounded policy shift than one that …
Weaker labour market Singapore’s labour market remains very tight, but there are growing signs that it is starting to loosen. According to figures published on Thursday, employment growth eased from 1.0% q/q in Q1 to 0.7% in Q2, while the unemployment …
GDP data released this week suggest that the euro-zone economy held up better than we expected in Q2. Output rose in France and Spain and stagnated in Germany . Together, the national data point to euro-zone GDP rising by 0.4% in Q2 rather than falling …
China’s leadership promises more support The highlight of the week was Monday’s Politburo meeting. Although light on specifics, the readout was dovish in tone and made clear that more policy easing is on its way. While substantial direct support for …
One consequence of higher interest rates is an increase in the losses that the Bank of England will make via the bonds it bought during its quantitative easing (QE) programme. This week, the Bank published an estimate that it could make a huge £150bn …
Reforms to take a back seat for now In an otherwise quiet week, the big news from the past few days is that India’s parliament has approved a no-confidence vote lodged by opposition parties against Prime Minister Modi’s BJP-led government. The motion has …
Real household incomes falling at rapid pace Data released last week underline that Japanese households are struggling to cope with rising living costs. While labour income rose at a robust pace, a slump in government transfer payments resulted in a 1.6% …
The big news out of Australia this week was that both headline and trimmed-mean inflation in Q2 were lower than most had anticipated. However, we still think it’s too soon for the RBA to declare victory in the war on inflation. After all, services …
Mbappé or not, Saudi gov’t focussed on sports The Saudi Pro League went from the back pages to the front pages this week as Al-Hilal (a football club recently acquired by the Kingdom’s sovereign wealth fund) made a world record $335mn bid for PSG’s Kylian …
27th July 2023
“The Boy” is back Much ink has been spilled – not least by ourselves – on the potential impacts of the return of El Niño conditions on commodities and economies. It’s fair to say that some of the analysis we have stumbled across has been towards the …
Food supply concerns mount The near-term outlook for global food security and prices has continued to worsen. Following the recent news that we are entering El Niño, this week saw the collapse of the Black Sea Grain Deal as well as India ban the export of …
21st July 2023
The US dollar has rebounded over the past two days and looks set to unwind much of last week’s fall. (See Chart 1.) With US data somewhat mixed, much of this rebound in the greenback seems to have been driven by a reassessment of the outlook for other …
Headline inflation fell to 2.8% in June and, excluding mortgage interest costs, was in line with the 2.0% target. While the Bank’s preferred core measures are still higher, the weakness of retail sales in May and June suggests demand is easing and is …
The Fed is almost certain to hike its policy rate by 25bp to between 5.25% and 5.50% at next week’s FOMC meeting, but we increasingly believe that will prove to be the peak. Despite the ‘higher for longer’ rhetoric from officials, a more marked decline …
Despite the fall in CPI inflation from 8.7% in May to 7.9% in June (see here ), the UK is still lumbered with an inflation rate that is 1.4 percentage points (ppts) higher than in the euro-zone. And at 4.8ppt, the gap between UK and US CPI inflation …
Russian FinMin throwing in the towel? A raft of comments from senior policymakers at the Russian Ministry of Finance this week highlight the pressures that the public finances are under and how policymakers are likely to tighten fiscal policy in response …
Argentina continues to dodge exchange rate issue An Argentine delegation travelled to Washington this week in a bid to close negotiations with the IMF on the fifth review of the country’s $44bn Extended Fund Facility (and, according to local media, to …
In a relatively quiet week for euro-zone economists, the most important release was the final inflation data for June. Unusually, these were revised slightly from the flash release as core HICP inflation is now estimated to have edged up to 5.5% rather …
Limited impact from ban on trade and inflation We warned last week of a potential ban on rice exports in response to rising prices in some parts of the country and as a pre-emptive measure ahead of a potentially severe El Niño weather event. This week, …
Regulatory environment is only part of the problem After making life more difficult for many private firms in recent years, officials are shifting course. On Wednesday, a document aimed at promoting the development of the private sector was jointly issued …
Below trend growth in Q2 A few places have already published second quarter GDP figures, and the rest of the region will follow over the coming weeks. Although the data are likely to show GDP growth picked up in around half of the region (see Chart 1), …
New Zealand inflation looks sticky CPI data published on Wednesday revealed that New Zealand’s consumer prices rose by 1.1% q/q in Q2, only slightly below the 1.2% quarterly rise in Q1. Nonetheless, favourable base effects meant that annual inflation fell …
Note: Join our Asia Drop-In on whether China is in a balance sheet recession, the July BOJ meeting and more at 09:00 BST/16:00 SGT on Thursday, 27 th July . Register here . Tax revenue disappoints According to the Bank of Japan’s flow of funds accounts, …
Saudi-UAE tensions pose a threat to OPEC+ A Wall Street Journal report this week highlighted the tensions between Saudi Arabia and the UAE, which have been simmering for some time. If these persist, one risk is that the UAE will seek to leave OPEC+. The …
20th July 2023
In the wake of last week’s solid US payrolls report and this week’s below-expectation CPI data, which have strengthened hopes of a “soft-landing” in the US economy, short-term momentum has swung heavily against the dollar. Although it has rebounded a bit …
14th July 2023
The news that core CPI increased by a muted 0.16% m/m in June, which is less than 2% in annualised terms, has raised hopes that the Fed’s planned rate hike this month will be the last in this cycle, with the policy rate peaking at 5.25% to 5.50%. …
The Bank of Canada struck a hawkish tone at its meeting this week, emphasising persistent excess demand and sticky price inflation. Nonetheless, with the upgrades to the Bank’s GDP and inflation forecasts putting them above our own, we think the hike this …
Colombia’s fiscal watchdog sounds the alarm bell Concerns about Colombia’s public finances have re-emerged this week after the country’s Autonomous Fiscal Rule Committee (CARF) warned that the government is unlikely to comply with the fiscal rule in the …
Stage 6 loadshedding returns with a vengeance Cold weather in South Africa prompted officials to return to Stage 6 loadshedding this week, threatening a fresh hit to the economy. We doubt that concerns about the inflationary impact of power cuts will …
