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In the months ahead, there are five themes to watch for in the world of trade and shipping, the most immediate of which is the risk of strikes at US East and Gulf coast ports in October. The upshot is that, after a nascent recovery in the first half of …
19th September 2024
Sales slump, but signs of life emerging The slump in existing home sales in August shows that the sharp fall in mortgage rates since late-July is yet to stimulate the market, although the signs of life in last week’s purchase mortgage applications data …
We’ll be discussing the differences in the policy outlook for the Bank, the ECB and the Fed in a 20-minute online briefing at 3pm BST today. (Register here .) By leaving interest rates at 5.00% the Bank of England showed it is more like the ECB than the …
For our more detailed analysis of the Bank's September policy announcement, see here . BoE underlines that interest rates will be reduced gradually By leaving interest rates at 5.00% the Bank of England showed it is more like the ECB than the Fed and is …
Unemployment rate will approach 5% next year The labour market and population data released today are consistent with our view that the Reserve Bank of Australia will only lower interest rates in Q2 2025. For a start, the 47,500 rise in employment in …
This page has been updated with additional analysis since first publication. RBNZ still on course to loosen policy aggressively Economic activity in New Zealand last quarter wasn’t quite as weak as most had anticipated. However, we still think there’s a …
The Fed did cut its policy rate by a bigger 50bp today, to between 4.75% and 5.00%, but the vote was not unanimous and the new rate projections point to smaller 25bp cuts at the remaining two FOMC meetings this year. Accordingly, today’s announcement is …
18th September 2024
A hawkish 50 The Fed did cut its policy rate by a bigger 50bp, to between 4.75% and 5.00%, but the vote was not unanimous and the new rate projections only shows an additional 50bp of cuts between now and the end of this year. Accordingly, today’s …
Rebound in housing starts The large rise in housing starts in August was due to a rebound in starts in the south, confirming that the July slump was a temporary disruption caused by Hurricane Beryl. The increase in permits, particularly in the …
This page has been updated with additional analysis since first publication. Rise in services inflation makes September rate cut even less likely CPI inflation stayed at 2.2% in August (consensus & CE 2.2%, BoE 2.4%), but the rise in services inflation …
Even though state and federal budgets point to a sharp slowdown in public demand in 2024/25, our analysis suggests that the public sector will keep providing a sizeable boost to GDP growth. And if we’re right that private demand will pick up as real …
Drag from net trade will moderate Q3 GDP growth Even though the trade balance held up much better than most had anticipated in August, net trade will still provide a large drag on Q3 GDP growth. The 5.6% y/y rise in export values was much weaker than the …
We doubt the gap between expected interest rates in the US and its trading partners will keep shrinking, given what’s priced into the money markets. That could potentially buoy the dollar in time, assuming the Fed shies away from slashing its policy rate …
17th September 2024
Rent growth slowing rapidly Increased supply and weaker demand are pushing down rents in several cities. That raises the risk of another leg down for apartment prices, despite the recent drop in mortgage rates. The housing market is struggling for …
Despite the US being a net oil exporter, the recent plunge in the oil price will be a tailwind for the economy, as lower gasoline prices support consumer confidence and real consumption. The Fed will largely look through the impact on headline inflation, …
We doubt the small fall in Nationwide house prices in August was the start of a renewed downturn. Surveys suggest the recent declines in mortgage rates have led to an increase in housing demand, while a significant near-term pick-up in supply appears …
Manufacturing output rebounds, but challenges remain Manufacturing output rebounded strongly in August as the temporary disruptions to production from the previous month were reversed. Together with last month’s solid gain in control group retail sales, …
Consumers remain resilient The stronger-than-expected retail sales data for August suggest that, boosted by rapid wealth gains and falling energy prices, consumers continue to spend freely despite the labour market slowdown. With control group sales …
Mission almost accomplished The return of headline inflation to the 2.0% target in August was mainly due to favourable base effects and is likely to be short-lived, with inflation rebounding to as high as 2.5% by the turn of the year. Nonetheless, the …
Limited data flow since August meeting broadly in line with RBA’s expectations Bank will therefore reiterate pledge to keep rates unchanged this year First rate cut will happen in Q2 next year The Reserve Bank of Australia will probably stick to its …
A brief respite for the manufacturing sector The 0.9% m/m rise in manufacturing sales volumes in July implies there are upside risks to the flash estimate that total GDP was unchanged at the start of the third quarter, although the negative tone of the …
16th September 2024
Low saving rate not a major concern The continued decline in the saving rate, which is now close to a 16-year low, is not a major concern given the recent surge in household net wealth. Furthermore, as the saving rate is calculated from two different …
As the much-anticipated start of Fed easing approaches, the debate has centred on whether Powell & Co. will opt for a 25 or a 50-basis point rate cut. On the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil …
14th September 2024
US households’ appetite for equities often depends on how confident they feel. Its strength in recent years is therefore rather surprising, given that their mood hasn’t been upbeat. Sentiment did perk up this month, judging by the University of Michigan’s …
13th September 2024
The Office for Budget Responsibility’s (OBR) “Fiscal risks and sustainability report”, published this week, showed that if left unchecked the public debt to GDP ratio would spiral from 98% now to 274% by the mid-2070s. Assuming a recession comes along …
25bp vs 50bp debate finely poised The 25bp vs 50bp debate seemed settled following Governor Christopher Waller’s speech shortly after the August Employment Report, in which he suggested that he was leaning toward the smaller move. The cautious tone of …
The sharp rebounds in both residential and non-residential building permit issuance in July eased concerns that the construction sector is about to take a turn for the worse. Risks remain, however, particularly for residential construction in Toronto. …
Consumer mood improves, but remains sour Despite the small rise in the University of Michigan consumer sentiment index in September, consumer confidence remains in a slump. At face value, weak sentiment points to softer consumer spending, but confidence …
We think the markets are wrong to expect two more interest rate cuts this year But we think rates will be cut more quickly next year and to 3.00% in early 2026 MPC may speed up QT by announcing a £110bn reduction in the balance sheet We agree with the …
The public sector isn’t the main game In a speech this week, RBA Assistant Governor Sarah Hunter reiterated the Bank’s view that conditions in the labour market are currently not conducive to “wages growing at a rate consistent with achieving the …
Stronger yen reducing upside risks to inflation Developments over the past week seem to support the consensus view that the Bank of Japan will wait at least until December before hiking interest rates again. After all, the yen reached a fresh high against …
Overview – There are tentative signs of improvement in the investment market, but we continue to think refinancing requirements will weigh on transactions. We still think appraisal-based valuations need to adjust further and that cap rates will increase …
12th September 2024
The structural deterioration in the fiscal situation suggests that a tight grip on the public finances in the Budget on 30 th October will be necessary. That’s why we think the government will maintain existing plans for fiscal policy to be tightened, but …
PPI also points to another muted gain in core PCE The August PPI data provide more encouragement for the Fed that inflation has been tamed. Together the CPI and PPI data point to a muted 0.14% m/m increase in the core PCE deflator last month, with the …
Global Economics Chart Pack (September 2024) …
Rising demand points to faster house price growth August’s RICS survey provided further evidence that housing demand is picking up in response to the recent falls in mortgage rates. What’s more, our view that Bank Rate will be lowered by more than …
Stronger yen has reduced upside risks to inflation, but labour shortages persist Recent data should have enhanced Bank’s confidence in its central scenario Bank will hike rates in October, but refrain from tightening any further in 2025 The Bank of …
There was little impact on GDP from the completion of the Trans Mountain pipeline expansion because the jump in exports was supported by a drawdown of inventories from elevated levels, rather than higher production. There is scope for production to rise …
11th September 2024
The adverse reaction in the stock market to today’s report on US consumer prices suggests inflation still matters to investors in equities, even if it has become a less important concern for them than economic growth over the past two months. Recall that …
Recent data favour a 25bp vs a 50bp interest rate cut in September New SEP to show more cuts this year We expect 200bp of cumulative rate cuts vs 250bp priced into markets With the labour market data more consistent with an economic slowdown rather than …
Inflation tamed rather than vanquished The 0.28% m/m increase in core CPI in August appears to be consistent with a slightly below-target 0.15% m/m increase in the Fed’s preferred core PCE deflator measure. But we doubt that modest undershoot would be …
This page has been updated with additional analysis since first publication. July’s stagnation unlikely to mark the start of a renewed downturn GDP stagnated in July (consensus and CE forecast 0.2%), but that doesn’t mean the UK is on the cusp of another …
The Reserve Bank of New Zealand has always ended up cutting interest rates by more than it anticipated at the start of previous easing cycles. We think this time won’t be any different and expect the Bank to cut rates to 2.25% at the end of its easing …
10th September 2024
Granular data showed that mortgage lending continued to recover in Q2, supported by a decline in the average mortgage rate on new lending. Our view that mortgage rates will fall further next year suggests demand will continue to pick up and housing …
