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Canada has escaped much more lightly than we feared from President Trump’s big announcement, with the import-weighted US tariff likely to be 8% based on current plans and potentially below 5% in the near future. Nonetheless, the much larger tariff rate on …
3rd April 2025
Gold playing a key role in the slight narrowing of the trade deficit The narrowing of the trade deficit in February was driven by stronger exports, mainly of non-monetary gold, while imports remained at record levels, as businesses continued to rush …
Tariffs knock trade balance back into deficit The large fall in exports in February was to be expected given the (albeit temporary) imposition of tariffs on goods imports into the US that month. While Canada may have gotten off relatively lightly on …
We are significantly downgrading our end-2025 forecast for the S&P 500 for two key reasons. The first is yesterday’s announcement of greater tariffs on US imports than we had assumed . In such circumstances, we no longer think the economic backdrop will …
Asian economies will be hit harder than most by US reciprocal tariffs. We were already expecting more rate cuts than the consensus in most countries in the region, but there’s now a risk that central banks in Malaysia and Taiwan may have to start easing …
The easing in house price growth in both February and March suggests momentum in the housing market is waning. What’s more, as we now think the Bank of England will press pause on the interest rate cutting cycle later this year, mortgage rates may fall a …
2nd April 2025
Our scenarios of how different rates of US tariffs on UK exports could influence the UK are designed to provide clients with some real-time context when President Trump announces tariffs tonight. These are rough rules of thumb for blanket tariffs on all …
Volatility in the US stock market hasn’t picked up sharply since Donald Trump returned to the White House, despite a very high degree of uncertainty about his economic policies. That may remain the case even after “Liberation Day”, judging by the …
We expect the Reserve Bank of New Zealand to cut its Official Cash Rate by 25bp, to 3.5%, at its next meeting on 9 th April. Although activity is now on the mend, spare capacity will ease only gradually, consistent with a sustained decline in …
The latest PMIs suggest that global industry is heading into Q2 on a weaker footing. Meanwhile, price pressures accelerated sharply in the US but generally eased elsewhere. The output component of the global manufacturing PMI fell to 50.5 in March from …
1st April 2025
February’s JOLTS data show a labour market settling back into its pre-pandemic norms. With limited signs of DOGE’s trimming of the federal workforce in the survey, all eyes will now turn to March’s employment report, due on Friday. Job openings fell to …
Fall suggests manufacturing renaissance remains elusive The slight dip in the ISM manufacturing index in March suggests that, rather than triggering a reshoring factory renaissance, the uncertainty surrounding President Trump’s tariff threats are …
This page has been updated with additional analysis since first publication. House prices continue to lose momentum The stagnation in Nationwide house prices in March suggests any boost from buyers rushing to complete home purchases ahead of the rise in …
While the RBA is becoming increasingly confident that inflation will sustainably return to target, we still expect its easing cycle to be shallower than most anticipate. The RBA’s decision to leave its policy rate unchanged at 4.10% was correctly …
RBA’s easing cycle will be shallow While the RBA is becoming increasingly confident that inflation will sustainably return to target, we still expect its easing cycle to be shallow. The Bank’s decision to leave the cash rate unchanged at 4.10% was …
Australian house price growth remained soft in March, amid still-weak housing demand. Although the RBA’s easing cycle could help deliver a shift in momentum later this year, stretched affordability is likely to constrain the strength of the rebound. Much …
Consumer spending remains muted With consumers seemingly keeping spending on a tight leash, there is a risk that the RBA will loosen policy a bit more than we currently expect this cycle. The 0.2% m/m rise in retail sales values in February was a touch …
Tankan suggests economy is firing on all cylinders While business conditions were unchanged in the latest Tankan survey, the survey suggests that an increasingly overheating economy is creating strong price pressures. The Tankan’s headline measure of …
Overview – We’ve become more concerned about the outlook for the economy due to the drags from higher businesses taxes and the more uncertain global backdrop being bigger than we thought and the boost from government spending being smaller. Our forecasts …
31st March 2025
This page has been updated with additional analysis since first publication. Tentative signs households may be starting to spend a bit more freely February’s money and lending figures provide some green shoots of households starting to save less and spend …
Motor vehicle tariffs to boost inflation The Trump administration’s 25% tariffs on most motor vehicle and some parts imports is an upside risk to our inflation forecasts. As a reminder, our forecasts have long been based on the assumption that Trump would …
28th March 2025
Hopes of making it a week without any new tariff news were dashed on Wednesday when President Donald Trump announced a 25% tariff on motor vehicle and parts imports from April 3 rd . Despite accounting for 10% of Canada’s goods exports to the US, the hit …
Solid rise in GDP not a sign of things to come The stronger-than-expected 0.4% m/m rise in GDP in January, along with an upward revision to the December outturn, shows the economy still had solid momentum at the start of this year. The weak February …
Tariffs – UK still not very exposed The announcement of US reciprocal tariffs on 2 nd April will dominate next week. The UK has mostly flown under the radar of Trump’s tariffs and its economy is naturally less exposed than others – our Trade War Dashboard …
Inflation too hot and spending too cold The third consecutive above-target gain in core PCE prices in February, of 0.37% m/m, reinforces our view that the Fed is unlikely to cut interest rates this year. Admittedly, officials are likely to be concerned by …
This page has been updated with additional analysis since first publication. Bumper rise in retail sales suggests households may be spending more freely Today’s deluge of data confirmed that the economy was weak even before the full effects of higher …
RBA will cut two more times this year Australian Prime Minister Anthony Albanese confirmed today that the next general election will be held on 3 rd May. The announcement comes closely on the heels of the government’s 2025/26 Budget , which includes an …
Time to act decisively has come The US this week announced a 25% tariff on auto imports and Japan will be among those economies most affected. (See here .) While PM Ishiba has said that “all options are on the table” when it comes to Japan’s response, our …
While US tariffs are a headwind, the continued acceleration in consumer prices will only heighten concerns among Bank of Japan’s Board members about inflation overshooting its 2% target. As the Bank should have a rough sense of the severity of US trade …
Overview – We have raised our assumption for the average US tariff rate that Canadian exporters will face, to a level that will likely push the economy into recession. The downturn should be only moderate if, as we expect, the government steps in with …
27th March 2025
DOGE-led layoffs of approximately 25,000 junior federal employees will be a modest drag on March payrolls, but they should be offset a rebound in weather-sensitive sectors. We forecast a smaller yet still healthy 140,000 employment gain and the …
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
Trump imposes 25% tariff on auto imports Following media reports at the start of this week that product-specific tariffs would be deferred, President Donald Trump has changed tack once again and announced that all finished motor vehicle imports will be …
26th March 2025
Despite saying the “world is changing”, the Chancellor, Rachel Reeves, today just tinkered with fiscal policy. This left the impression that bigger changes lie ahead. Indeed, the pressure to raise both defence and other public spending is only likely to …
For updated and more detailed analysis see here . Markets may be concerned about unfinished fiscal business Despite saying the “world is changing”, the Chancellor, Rachel Reeves, today just tinkered with fiscal policy. This left the impression that bigger …
Tariff effects help lift core orders Stronger orders for primary metals and fabricated metal products in February suggest that tariff effects helped to drive up core durable goods orders last month, while transportation orders also did better than we …
This page has been updated with additional analysis since first publication. Temporary dip in inflation may not help the BoE or Chancellor much The dip in CPI inflation from 3.0% in January to 2.8% in February (CE & consensus 2.9%, BoE 2.8%) is a bit of a …
The Reserve Bank of Australia will leave policy settings unchanged at its upcoming meeting that ends on 1 st April and will probably still sound hawkish. However, with inflation set to soften a touch faster than the Bank had anticipated, we still expect …
Weakness in Australia’s underlying inflation points to May rate cut The weakness in underlying inflation means that the RBA will probably cut rates again 25bp in May and creates some downside risks to our forecast that the Bank will only cut rates to …
We think markets are too optimistic about Fed rate cuts this year, meaning the recent dip in mortgage rates is just a temporary respite. We expect rates to rebound to 7% and hover around that level throughout the rest of the year. There is still room for …
25th March 2025
Environmental, Social and Governance, or ESG, investing has come under renewed pressure due to pushback from the new US president. Despite that, we think that demand for ESG investments is here to stay and that their performance won’t buckle much in the …
Small rebound in sales shows new home market still in good health After a large partly weather-driven fall in January, last month’s small rebound in new home sales was a little underwhelming but still illustrates that the market for new homes is in decent …
House price inflation rises to five-month high The solid 0.5% m/m rise in house prices in January and accompanying pick-up in house price inflation to 4.7%, from 4.6%, confirms that the market has stopped cooling for now. While we still expect house price …
As expected, Australian Treasurer Jim Chalmers unveiled a slew of new spending measures in today’s pre-election Budget. However, we don’t believe the scope of fiscal expansion is large enough to keep the RBA from cutting rates a bit further this year. In …
Because the concept of ‘reciprocal tariffs’ is merely a cover for the White House to impose whatever tariffs it likes, they pose a potentially considerable threat to world trade. This Update provides answers to ten questions regarding what we know, as …
Overview – Both Antipodean economies seem to have turned a corner at the end of last year, and we expect the recoveries to gather momentum in the coming quarters. Given the tight labour market and elevated public demand, we believe the RBA will only …
Over the past month or so, economic data have generally surprised to the downside in the US, whereas they have done the opposite in the euro-zone. This may be one reason for the intervening shift in the performance of their stock markets. Admittedly, much …
24th March 2025
The latest flash PMIs suggest that while economic activity may have picked up a bit in advanced economies towards the end of Q1, the outlook remains fairly bleak. And while inflation seems to finally be receding in the euro-zone, price pressures remain …
This page has been updated with additional analysis since first publication. Stubbornly high UK price pressures will add to BoE’s worries With the downside risks on activity shrinking and high price pressures being sustained, the Bank of England is …
The prospect of looser fiscal policy in Germany isn’t the only significant reason MSCI’s Europe Index has outperformed its USA Index since Donald Trump returned to the White House. The ‘big-tech’ sectors’ fall from grace in the US has also been very …
21st March 2025
