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Road to 2% inflation a bumpy one The hotter-than-expected October price data serve as a reminder that the Fed’s fight against inflation is not over. Based on the CPI, PPI and import price data, we estimate that the Fed’s preferred core PCE deflator price …
15th November 2024
The US election outcome means that Canada and the US will not be trading friendship bracelets anytime soon and leaves the risks to inflation more finely balanced, but we still think that growth concerns will prompt the Bank of C anada to cut the policy …
Today’s GDP release, which confirmed that the economy has barely grown at all since March, is clearly a blow for the government given its pledge to secure the “highest sustained growth in the G7”. This means that while the UK has now surpassed Japan and …
Temporary disruptions weigh on production again The fall in manufacturing output in October was driven mainly by temporary disruptions which should soon reverse. Excluding these disruptions, industrial production would have remained unchanged, suggesting …
Manufacturing sales weak, but tentative signs of a recovery Despite the 0.4% m/m decline in manufacturing sales volumes in September, the data still appear consistent with the flash estimate that GDP rose by 0.3% that month. Although manufacturing has …
This page has been updated with additional analysis since first publication. Q3 GDP growth muted, Q4 will be better The 0.1% m/m contraction in GDP in September meant that the economy still grew by 0.1% q/q in Q3 (consensus and CE forecasts 0.2% q/q), but …
Consumption continuing to surge For the first time since the market turmoil in August, the financial markets consider it more likely than not that the Bank of Japan will hike rates by another 25bp at its December meeting. One reason is that markets now …
RBA to stay vigilant for a bit longer At her post-meeting press conference last week, RBA Governor Bullock cited the tightness of the Australian labour market as a key reason why the Board remains reluctant to shift to an easing bias. Those remarks seem …
GDP growth set to remain sluggish The economy lost momentum in the third quarter and we think that GDP growth will remain around trend over the coming quarters. According to today’s preliminary estimate, GDP growth slowed from a downward-revised 0.5% q/q …
It is increasingly clear to us that pricing in all three regions we forecast has bottomed, even if appraisals are yet to reflect that in mainland Europe and the US. And although we expect recent events – the election of Donald Trump and the recent UK …
14th November 2024
PPI points to another above-target-consistent rise in core PCE The price data released this week suggest that inflationary pressures are proving stronger than the Fed anticipated. Based on the combined CPI and PPI data, we calculate that the Fed’s …
The UK is not as exposed to US import tariffs as many other economies and we suspect any resulting reduction in UK GDP would be very small. That said, the car and pharmaceutical sectors are the most vulnerable areas of the UK economy. And we don’t think …
While Trump has vowed to lower mortgage rates to 3%, we expect the net effect of his policies to have the opposite effect, keeping borrowing costs higher for longer. With that in mind, we are changing our home sales forecast to show a shallower and later …
Our forecast that Bank Rate will fall slower means that we now think mortgage rates will decline from 4.4% now to 3.9% by the end of 2026, rather than to 3.5%. But we still think that mortgage rates will fall by more than most expect and that house price …
Improvement in housing market sentiment may be overdone October’s RICS survey points to robust house price growth but the Budget means that mortgages rates will probably fall a bit slower than we previously thought, which will restrain house prices next …
This page has been updated with additional analysis since first publication. Resilient labour market heightens risk that policy easing will be delayed With the labour market still on sturdy ground, there is a growing risk to our forecast that the RBA will …
This dashboard shows our latest UK commercial property forecasts. If you have subscriber access to the data underlying this redesigned dashboard, you can download it via the menu options in the top right of each chart or table. If you would like …
Chief North America Economist Paul Ashworth discusses how Donald Trump’s return could influence the US economic outlook in this 22-minute video presentation. During this presentation, Paul addresses key issues around Trump's second term, including: The …
13th November 2024
CPI points to target-consistent gain in core PCE The third consecutive 0.3% m/m gain in the core CPI in October is somewhat concerning, with our preliminary calculations pointing to another above-target-consistent 0.22 m/m gain in core PCE prices, …
Our base case is that the LDP/Komeito coalition will be able to push through major pieces of legislation, including a supplementary budget by year-end, with only minor concessions to the Democratic Party for the People. If the DPP insists on its radical …
This page has been updated with additional analysis since first publication. Slowdown in wage growth has further to run Wage growth eased markedly in Q3, as workers in the awards system received much smaller pay hikes than last year. Although wage growth …
We doubt the S&P 500 will come a cropper in 2025 even though the index fell in 2018 when Donald Trump began to wage a less ambitious trade war than the one he is planning now. Although the S&P 500 was struggling today at the time of writing, it had been …
12th November 2024
Our Japan Chart Pack has been updated with the latest data and our analysis of recent developments. Wage growth is starting to outpace inflation and with real incomes rising, the rebound in consumer spending has further to run. With the Bank of Japan …
This page has been updated with additional analysis since first publication. BoE will look through rebound in pay growth Even though the rise in pay growth in September will probably be followed by a bigger gain in October, as the new 5-6% public sector …
The sharp decline in the 10-year Treasury yield in Q3 meant marked improvement in our property valuation scores. That left all-property looking “fairly valued” for the first time since the end of 2021. But the expected economic impact of a second Trump …
11th November 2024
Clearer window into policymakers’ minds While the Summary of Deliberations from the Bank of Canada’s October meeting didn’t give much away about the size and pace of further interest rate cuts, we did learn more about policymakers’ aims. The Bank has …
8th November 2024
The market reaction to Donald Trump’s election victory suggests that, with the Republicans closing in on a clean sweep of Congress too, his return to the White House will be a net positive for the economy. We remain highly sceptical that the Republicans …
Confidence buoyed by lower inflation expectations The rise in the University of Michigan consumer sentiment index, despite uncertainty ahead of the US election, shows that economic developments remain the key driver of confidence in the aggregate. While …
After a big couple of weeks for the UK, the US, the world and global financial markets, we have revised some of our economics forecasts. Due to the policies in the UK Budget (bigger and sooner rises in government spending than taxes, see here ), we now …
Muted job gain even worse that it seems The muted rise in employment in October was even weaker than it seems, as, like in September, it was propped up by strong gains in youth employment. While the unchanged unemployment rate will reassure the Bank that …
Tariffs won’t be a big drag We’re now assuming that Donald Trump will impose a 60% tariff on US imports from China and a 10% tariff on imports from all other countries next year. The US is Japan’s largest export destination, with shipments equivalent to a …
RBA need not fret geopolitical risks The RBA’s meeting this week came and went without much ado, with the Bank leaving rates on hold yet again and providing little in terms of new forward guidance. In fact, the RBA’s meeting was quickly overshadowed by …
As expected, after a run of stronger activity and inflation data since it started its rate cutting cycle with a 50bp reduction in mid-September, the Fed opted for a more modest 25bp cut at the conclusion of its two-day FOMC meeting, taking the fed funds …
7th November 2024
Fed slows pace of rate cuts As expected, after a run of stronger activity and inflation data since it started its rate cutting cycle with a 50bp reduction in mid-September, the Fed opted for a more modest 25bp cut at the conclusion of its two-day FOMC …
We have revised some of our key market forecasts in response to Donald Trump’s victory and the news that the Republicans are on course to regain full control of Congress. These include higher projections for the 10-year Treasury yield and the greenback. …
Surge in ULC illustrates upside risks to services inflation The BLS finally incorporated the upward revisions to its labour compensation estimates into the productivity and unit labour costs data, and the results are likely to trigger some inflation …
Watch a recording of our post-MPC online briefing here . While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only gradually. We agree and due to the Budget (and not the US …
Watch a recording of our post-MPC online briefing here . Budget means Bank may not cut rates as fast and far While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only …
This page has been updated with additional analysis since first publication. Retail sales strong in September but unlikely to keep rising rapidly Euro-zone retail sales rose in September rounding off a good quarter for retailers. We suspect that sales …
This page has been updated with additional analysis since first publication. House prices rise to record high and will accelerate next year October’s 0.2% m/m rise in Halifax house prices suggests that the recent momentum in house prices has a bit further …
The recent weakness in productivity growth is only partly due to a cyclical hangover from the pandemic as it also reflects the structural weakness in investment. With investment growth set to remain mediocre, productivity growth will remain lacklustre …
Regular wage growth may already have peaked The strong pay hikes in this year’s spring wage negotiations now seem to be fully reflected in labour cash earnings and we expect wage growth to slow again next year. According to today’s preliminary estimate, …
Rebound in mortgage activity short-lived Rising borrowing costs snuffed out the nascent recovery in mortgage activity in October, with home purchase and refinancing applications both slumping after a promising end to September. This puts to bed any hope …
6th November 2024
This early edition of the Capital Daily provides our first thoughts on the market reaction to the likelihood of a second Trump term. The US election has seen a stark shift to the Republican Party, with Trump claiming victory in the Presidential race and …
Trump appears to be edging ahead The presidential election remains too close to call, but Donald Trump does appear to be edging ahead in some of the key swing states. At close to 11.30pm ET, the NYT gives Trump a 91% chance of victory, expecting him to …
This page has been updated with additional analysis since first publication. Rise in joblessness has further to run The modest rise in the unemployment rate last quarter belies the precarity of the jobs market. We still believe the unemployment rate will …
5th November 2024
Earlier interest rate cuts are yet to have much effect on the Canadian economy, which remains trapped in a period of below-potential growth. Making matters worse, any boost to the economy from lower borrowing costs next year will be countered by a decline …
The net fiscal loosening of £36bn (1.1% of GDP) in 2029/30 relative to previous plans unveiled by the Chancellor in the Budget means we now expect GDP growth of 1.8% and 1.7% in 2025 and 2026 respectively, compared to 1.5% in both years previously. But …
Goods trade balance improves, but for the wrong reasons The improvement in the goods trade position in September was for all the wrong reasons, with a fall in imports outpacing a decline in exports. While this suggests that net trade provided a small …
