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New housing policies to provide only modest support The government’s policies to boost affordability for first-time buyers will have only a modest impact on demand, but they still add to our sense that house prices will rise in the coming years. While …
16th April 2024
The resilience of Swiss GDP over the past two years has been largely due to the merchanting sector, which buys and sells goods without them ever entering Switzerland. Excluding that sector, the economy was smaller at the end of 2023 than it was two years …
Our analysis shows that for CPI inflation to get stuck above 2.0% it would require oil prices and UK wholesale gas prices to rise to $110 per barrel and 150 pence per therm respectively. And for CPI inflation to return to 5.0%, it would require increases …
15th April 2024
Weak capital spending is a key reason for Australia’s poor productivity performance. While investment growth has been strong recently, we think it will take until the second half of this decade before the level of capital spending is high enough to return …
Ben Bernanke didn’t pull any punches in his review of the Bank of England’s forecasting/communications and recommended a full revamp of the Bank’s main forecasting model, using alternative scenarios to express uncertainties rather than fan charts and …
12th April 2024
We think ‘value’ stocks will generally underperform their ‘growth’ counterparts while a bubble in the US stock market continues to inflate, even if Treasury yields don’t drop back in the way that we expect. Depending on your perspective, value stocks – …
The Bank of England’s Q1 Credit Conditions Survey provides further evidence that the drag on activity from high interest rates is starting to fade. Looser credit conditions will soon aid the economic recovery. The fall in mortgage rates at the start of …
11th April 2024
Even if the US Federal Reserve leaves its policy rate unchanged for longer than we expect, our forecast that inflation in the UK will be lower than in the US suggests this won’t prevent the Bank of England from cutting rates from 5.25% to 5.00% in June …
Governor Tiff Macklem sounded relatively dovish in the Bank of Canada’s press conference today, leaving the door open to an interest rate cut at the next meeting in June. While the Bank left the policy rate at 5.0% today, the policy statement and …
10th April 2024
After a period of relative calm, Italy’s fragile public finances are likely to come under the spotlight again before long. Budget deficits will be much higher than the latest government projections imply and Italy will probably face official EU procedures …
The Reserve Bank of New Zealand didn’t drop any hints as to when it might pivot to looser policy at its meeting today. However, as inflation risks recede, we still expect the Bank to start cutting rates by August. The RBNZ’s decision to leave rates on …
The latest consensus figures have moved closer to our own total returns forecasts for the next three years. But they continue to expect a lower path for Treasury yields implying a smaller cap rate rise than us, which we think underpins the divergence …
9th April 2024
We think that reports of a wave of new resale supply coming onto the market are overblown. While the number of homes being listed for sale has increased compared to last year, it is still low by historical standards, as mortgage rate ‘lock-in’ continues …
After a historically weak 2023, there are early signs of a modest turnaround in world goods trade which we expect to endure. Meanwhile, global container shipping costs have halved – and those for commodity freight more than halved – from recent peaks, …
The slump in the yen has resulted in Germany overtaking Japan as the world’s 3 rd largest economy at market exchange rates. We expect Japan to overtake Germany yet again in the early 2030s as the yen strengthens and Japan benefits from higher productivity …
Falling full-time employment not a sign of weakness The rise in part-time employment is not a sign of economic weakness, but instead reflects the large inflow of prime-age women into the labour force, who have been the big beneficiaries of the …
8th April 2024
The Bernanke review of the Bank of England’s forecasting and communications will probably recommend the Bank illustrates the risks around its forecasts using alternative scenarios rather than fan charts and places greater emphasis on supply and monetary …
The continued surge in the stock market that we forecast is likely to drive household net wealth to a record high as a share of incomes and provide a tailwind to consumption growth. But that shouldn’t stop the Fed from gradually lowering interest rates if …
4th April 2024
ECB officials have stressed that evidence of easing wage growth will be key in determining the timing of the first rate cut. Accordingly, this Update assesses which of the euro-zone’s numerous wage measures investors should keep their eyes on. The main …
3rd April 2024
We expect the RBNZ to hold rates steady at its meeting next Wednesday. But with the economy in a deep slump and inflation clearly on the way down, the Committee is likely to tone down its tightening bias. As inflation risks continue to recede, we expect …
The February JOLTS data suggest that labour market conditions are now easing at a more gradual pace, but that isn’t a surprise when most indicators of slack have already returned to pre-pandemic norms. At 5.3% in February, the job openings rate has been …
2nd April 2024
March’s manufacturing PMIs provided further evidence that global industry is past the worst. And although higher industrial output has caused price pressures to increase in some advanced economies, it won’t prevent central banks from cutting interest …
Slowdown in house price growth has further to run Australian house prices continued to pare their gains last month. And a further loss of momentum appears likely in the near term, especially given that the RBA is unlikely to come to the housing market’s …
Once the Bank of Japan starts to reduce its huge holdings of Japanese Government Bonds (JGBs) in earnest, we think that commercial banks will once again become major holders of JGBs. Insurance firms may lift their holdings a touch further as well, but we …
The Bank of Canada’s quarterly business and consumer surveys remain consistent with weak GDP growth and generally show that inflation expectations are normalising, but the latter are still too high and raise the risk that the Bank will wait to see …
1st April 2024
Click below to visit our Shipping Disruption Dashboard, which we have updated and extended to include analysis of the Baltimore port closure. Explore the dashboard … Shipping Disruption Dashboard: New Charts on …
28th March 2024
Software increasingly driving productivity gains We still believe that the current productivity boom is mainly a cyclical phenomenon, as tight labour market conditions have forced firms to expand output by boosting the efficiency of their existing …
26th March 2024
The government’s plan to cut temporary resident numbers over 2025 to 2027 will result in the weakest three years for population growth in Canada’s 157-year history. While it might not be enough to persuade the Bank of Canada to start its loosening cycle …
25th March 2024
Note: We’ll be covering our views on residential market winners and losers in both the for-sale and rental markets in a Drop-In Tuesday 16th April 1100 EST/1600 BST . Register here for the 20-minute session. As mortgage rates fall, we think the …
The flash PMIs for March suggest that the euro-zone economy is still flatlining, while the UK and Japan seem to be pulling out of recession heading into Q2. The survey indicators of price pressures moved in different directions, but in general remain a …
21st March 2024
With the Bank of England striking a slightly more dovish tone whilst keeping interest rates at 5.25% and inflation likely to fall further and faster than the Bank expects, we still think a rate cut in June is possible and that rates will fall to 3.00% in …
Despite upward revisions to the median projections for both GDP growth and core PCE inflation, the Fed’s median forecast for interest rates still shows a cumulative 75bp of policy loosening this year. In contrast, we continue to believe that …
20th March 2024
Credit spreads aren’t bound to fall further if a bubble continues to inflate in the stock market, judging by what happened in the US in the second half of the 1990s. Admittedly, the option-adjusted spreads (OAS) over underlying Treasuries of ICE BofA’s …
19th March 2024
The Bank of Japan today called time on more than a decade of ultra-loose policy settings, but we don’t think it will lift its policy rate any further over the coming months. A Reuters survey conducted at the end of last week still showed that a majority …
The RBA sounded a touch less hawkish at today’s meeting and we think the Bank will start to lower interest rates by August. The Bank’s decision to keep the cash rate unchanged at 4.35% was correctly anticipated by all analysts polled by Reuters, ourselves …
Stretched affordability limits future price gains House prices stabilised in February and, despite emerging signs of financial stress among households, we believe that the risk of renewed price declines is limited. Nonetheless, with affordability so …
18th March 2024
The national average house price has risen by nearly 50% since the start of the pandemic, but that masks a lot of regional variation. The rise in house prices in southern metros has been even larger, whereas prices in most major and midwestern metros have …
Inflation in Norway has fallen more quickly than Norges Bank expected, so at next week’s meeting it is likely to signal that it will cut interest rates sooner than it previously expected, perhaps in Q3. And we think there’s a good chance that it will make …
14th March 2024
Our updated remote worker preference scores again highlight Nashville as the most attractive metro for remote workers, while San Jose is the least attractive. The winners continue to be predominantly in the South, reflecting relatively low living costs …
13th March 2024
The key risk for Canada’s economy from the US presidential election is that a Trump administration could pull out of the USMCA, leaving Canada subject to any US import tariffs. To avoid that, Canada may have to grant concessions such as increased market …
11th March 2024
We will be discussing whether the next government will move the dial on the economy in a 20-minute online briefing at 3pm GMT on Wednesday 13th March. (Register here .) We doubt the big rise in the minimum wage in April will prevent wage growth from …
The January JOLTS release showed no evidence of a resurgence in labour demand. With forward looking indicators still pointing to a sharp easing in wage growth, there is little to suggest that the labour market will drive renewed inflationary pressures. …
6th March 2024
The Bank of Canada gave little away about the potential timing of interest rate cuts today, although its communications suggest that it is gaining a bit more confidence that inflation is moving in the right direction. We continue to expect the first rate …
A fall in the participation rate has kept a lid on unemployment in recent months but, given rapid population growth, we continue to expect the unemployment rate to rise to 6.5% later this year. Despite the surge in the population, labour force growth has …
5th March 2024
Commercial real estate investment saw its worst year in over a decade last year. Most brokers seem to expect a recovery in investment activity this year as the Fed cuts interest rates and distressed assets come to market. However, we think the effect of …
Money growth remains weak but is rebounding steadily, with our broader M3 measure recovering to its strongest since mid-2022. But there is no reason to expect this to drive a rebound in inflation. Although M1 continues to decline, the pace of contraction …
4th March 2024
Our view that the Bank of England will become less concerned by the most persistent part of services CPI inflation suggests that it will cut interest rates in the summer, perhaps in June. But the risk is that non-energy intensive services inflation stays …
We have traced the government’s target of building 300,000 new homes a year in England back to the 2004 Barker Review. Rerunning the calculations two decades on suggests 385,000 new homes a year would now be necessary to achieve the same aims. In the 2017 …
The decline in listed firms’ profit margins over the last couple of years despite the tailwind from a weaker yen suggests that improved corporate governance isn’t changing corporate behaviour. While timely data point to a rebound in profitability, the …
February’s manufacturing PMIs suggest that global industrial activity improved at the start of this year, but that activity in emerging markets continued to outperform that in advanced economies. Meanwhile, Red Sea disruptions don’t seem to be having a …
1st March 2024
