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Given the revival in house prices and recent falls in mortgage rates, we are raising our Q4 2024 house price growth forecast from 1.0% y/y to 2.0%. We now think that the number of housing transactions per year will increase from 1.02m in 2023 to 1.07m in …
15th August 2024
Minimal movement in property yields and a slight edge up in the 10-year Treasury yield meant improvement in our property valuation scores stalled in the second quarter of the year. Despite the recent financial market turmoil, we still expect the 10-year …
Temporary disruptions hit IP The fall in manufacturing output in July was entirely driven by temporary disruptions which should reverse this month. Excluding those temporary factors, this is a strong report which, together with last month’s solid gain in …
Don’t bet against the American consumer There was almost nothing in the July retail sales report for the perma-bears to latch on to, with the rebound in retail sales led by a recovery in vehicle sales, but encouragingly broad-based with control group …
This page has been updated with additional analysis since first publication. Strength in Q2 won’t last While the economy flatlined in June, it still managed to grow by 0.6% q/q rise in GDP in Q2. That said, some of the rebound in activity in Q2 may have …
This page has been updated with additional analysis since first publication. Labour force continues to absorb surge in workers The slight uptick in the unemployment rate last month belies a renewed acceleration in employment growth. Accordingly, the data …
Strong rebound in consumption points to further monetary tightening The strong rebound in GDP last quarter was driven by the first rise in consumption in more than a year and should encourage the Bank of Japan to press ahead with another rate hike later …
While investment has tentatively turned a corner, subdued activity and further rises in cap rates mean 2024 will still be a tough year. All-property values are down by 18% from their mid-2022 peaks, but we expect the eventual peak-to-trough decline to …
14th August 2024
The renewed widening of global imbalances has become another faultline in the fracturing of the world economy, and will continue to provoke trade barriers in the coming decades. With overall imbalances most prominent in the US, further tariffs aimed at …
CPI consistent with a 25bp rate cut rather than 50bp The 0.15% m/m increase in all-items CPI and the 0.17% increase in core CPI in July suggest that, after the temporary relapse in the first quarter, the disinflationary trend has firmly reasserted …
Prime Minister Kishida’s resignation is hardly a surprise. At this stage, it’s very difficult to predict who will succeed him and the ruling LDP will probably remain in power for the foreseeable future. The upshot is that Kishida’s withdrawal doesn’t have …
This page has been updated with additional analysis since first publication. Soft surprise opens the door to more interest rate cuts later this year The smaller-than-expected rise in CPI inflation from 2.0% in June to 2.2% in July (consensus forecast …
The RBNZ began its easing cycle with a 25bp rate cut at its meeting today. Although the Bank appeared to strike a cautious tone about further policy easing, we think it will cut rates more aggressively than many are anticipating. We were among the 12 …
RBNZ will loosen policy aggressively The RBNZ began its easing cycle with a 25bp rate cut at its meeting today. Although the Bank seemed to strike a cautious tone about further policy easing, we think it will cut rates more aggressively than many are …
Muted PPI is more good data The muted 0.1% m/m increase in final demand PPI and unchanged core PPI for July is not quite as good as it looks, but it is nevertheless consistent with the Fed’s preferred core PCE prices measure increasing at a below-2% …
13th August 2024
This page has been updated with additional analysis since first publication. Easing in wage growth clears path for more rate cuts later this year The further easing in wage growth will be welcomed by the Bank of England as a sign that labour market …
This page has been updated with additional analysis since first publication. Wage growth will cool in earnest The RBA probably won’t read too much into the fact that annual wage growth stalled last quarter. A gradual loosening of the labour market should …
While a big reduction in speculative positioning against the Japanese currency may mean that future moves in global financial markets will be less extreme than recent ones, it doesn’t preclude more turbulence if, e.g., this week’s US data disappoint. Much …
12th August 2024
We are sceptical that the recent decline in mortgage rates will revive the housing market. Rates are still high compared to recent years, discouraging homeowners from moving, while most potential new buyers remain sidelined due to historically stretched …
Container shipping costs have fallen back slightly in the past few weeks. And while the potential for further shipping disruptions makes the outlook for shipping costs highly uncertain, as things stand the rise in shipping costs this year is unlikely to …
With the Summary of Deliberations this week confirming that the Bank of Canada is putting more weight on the downside risks, we feel confident that the Bank will continue to cut interest rates at each remaining meeting this year. Still, with wage growth …
9th August 2024
Economy still nowhere near recession In purely mechanical terms, the limited data released this week did trigger a downward revision to our third-quarter GDP growth forecast to 1.7%, from 2.0%. But only because the June trade data sets up for a slightly …
After stagnating in the first half of this year, the Halifax house price index jumped by 0.8% m/m in July in response to the fall in mortgage rates from 4.9% to 4.7% in July. (See here .) What’s more, July’s RICS survey suggests that increasing demand …
Not as bad as it looks The second consecutive small fall in employment might seem to suggest that the labour market has taken a further turn for the worse, but it mainly reflected soft part-time employment among younger and older people. The jump in …
Recent safe haven flows into the franc may have prompted limited FX interventions by the SNB. But we think that the policy rate will remain its main policy tool, even for dampening the franc’s strength. Indeed, we now expect the SNB to cut its policy rate …
8th August 2024
After an already-tough H1 for information sector jobs, we expect the second half of the year to see further cuts, which will be bad news for tech-heavy metros in the West. But a more diverse occupier base and much more pronounced return to the office in …
No rush to loosen policy Although the Reserve Bank of Australia left rates on hold at its meeting this Tuesday, its messaging was unequivocally hawkish. In her post-meeting press conference Governor Michele Bullock stated that the Board had seriously …
Financial stress should be short-lived The Topix and the yen have reversed some of the large moves seen earlier this week, but BoJ Deputy Governor Uchida still signalled that those developments have reduced the chances of further policy tightening in a …
Increasing demand points to stronger price growth Tentative signs from July’s RICS survey add to the growing evidence that demand and prices are starting to pick up. And as lenders start to cut mortgage rates, further cuts in Bank Rate than financial …
At its last policy meeting, the Bank of England still sounded a long way from being assured that inflation and wage growth will continue to ease. As a result, we doubt the recent moves in global financial markets will be enough to persuade the Bank to cut …
7th August 2024
With the economy now in a position of excess supply, we expect core inflation to continue to fall back to 2% by the middle of next year. With the Bank of Canada putting more emphasis on the downside risks to the economy, we expect the Bank to cut interest …
The news that the economy may now be 2.6% bigger than its Q4 2019 pre-pandemic size, rather than 1.8%, suggests it is in better shape than we previously thought. But with the UK still suffering from balefully low productivity and labour force growth, …
Sharp fall in mortgages rates should soon support activity July was a disappointing month for mortgage activity overall, with earlier high borrowing costs causing home purchase applications to slide by 5.4% m/m. All the attention, however, will be on the …
Market turmoil has not yet led to a tightening of financial conditions in the US and most other advanced economies. That’s because borrowing costs have fallen sharply as investors have grown to expect more rate cuts from the Fed. To recap, our financial …
Even though it’s difficult to identify what could have broken as a result of the recent rapid market moves, a stronger yen is a bigger threat to the health of Japan’s financial institutions than falling stock prices. The Topix has reversed half of the …
This page has been updated with additional analysis since first publication. Falling mortgage rates boost house prices After three months of stagnation, the bigger-than-expected rise in the Halifax house price index in July provides further evidence that …
We are in the minority of forecasters who expect the Reserve Bank of New Zealand to hand down a 25bp rate cut at its meeting next week. Moreover, with excess capacity in the economy rising rapidly, we think the Bank will embark on a more aggressive easing …
This page has been updated with additional analysis since first publication. RBNZ will welcome continued loosening of the labour market Although employment growth in Q2 was stronger than most had anticipated, it didn’t keep the unemployment rate from …
Although the UK has clearly been caught up in the recent turmoil in global financial markets, we do not think a double-dip recession is on the cards. Nonetheless, the disorderly market reaction, if sustained, raises the downside risks to our GDP forecast …
6th August 2024
A pullback in buyer demand paired with rising supply has cooled the market, causing house price inflation to ease. However, the recent sharp decline in mortgage rates will offset some of that softness, by lifting demand from its current slump – providing …
While the UK led the recovery in investment activity in Q4 last year, the latest data suggest the US and euro-zone are now also turning a corner. But given concerns over economic growth in all three markets alongside structurally higher long-term rates, …
Domestic demand remains intact There was little sign of weakening domestic demand in the international trade data for June, with imports rising. Exports rose even more sharply, causing the trade deficit to narrow, although the forward-looking indicators …
Jump in exports an upside risk to GDP growth The strength of oil exports in June suggests that GDP in the second quarter will come in stronger than the 2.1% annualised gain that the flash estimate implied. Coupled with stronger consumer goods imports, …
Although the RBA left rates on hold today, it poured cold water on market expectations that it will loosen policy later this year. With the economy still running above its speed limit, we continue to believe that rate cuts won’t be on the agenda until Q2 …
With RBA retaining its tightening bias, rate cuts will have to wait Although the RBA continued to strike a cautious tone when it left rates on hold today, we still believe that the Bank’s next move will be down. That said, contrary to market pricing, we …
Japan’s government has intervened in the FX markets to weaken the yen far more often than to strengthen it. But FX interventions have become very rare over the past two decades and our sense is that the government is welcoming a stronger exchange rate in …
Despite the weakness of the latest labour market data, we judge that a soft landing is still the most likely outcome for the economy. Nonetheless, the risk of a hard landing has increased, while the disorderly market reaction – if sustained – could prompt …
5th August 2024
Rise in ISM services index should soothe recession fears The rebound in the ISM services index to 51.4 isn’t much to get excited about given it remains weak, but the corresponding increase in the employment index should soothe concerns that the labour …
Fears about US recession are fuelling volatility in financial markets, sending stock prices and bond yields sharply lower. But how justified are these fears? And do moves in asset prices point to a fundamental shift or a temporary blip in the market …
