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Third consecutive 0.4% m/m gain in core CPI kills June rate cut hopes Alongside the pick-up in monthly payroll employment gains, the third consecutive 0.4% m/m rise in core CPI in March pretty much kills off hopes of a June rate cut from the Fed. The …
10th April 2024
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 …
RBNZ remains on the sidelines The RBNZ didn’t drop any hints as to when it might pivot to looser policy at its meeting today, but we still think that it will start cutting rates by August. The RBNZ’s decision to leave rates on hold at 5.50% was correctly …
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
The bigger-than-expected fall in CPI inflation in February was the second in as many months, and together with the Bank of England’s clearer hints that it is getting close to cutting interest rates, it gives us a bit more confidence in our forecast that …
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
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. Our latest office metro forecasts highlight …
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 …
Some signs of life from German industry, but outlook still poor The second consecutive large monthly rise in German industrial production in February confirms the sector has started the year on a better note. But we still expect it to struggle over the …
This page has been updated with additional analysis since first publication. Virtuous cycle will continue to gain momentum in Q2 Regular wage growth spiked in February, which suggests that the virtuous cycle between prices and wages is in full swing. And …
The insolvency data released this week show the toll that high interest rates are putting on consumers and businesses. That is unlikely to be enough to persuade the Bank of Canada to cut interest rates next week but, with the cracks in the labour market …
5th April 2024
Supercore inflation fundamentals still improving Inflation fundamentals improving This week brought more good news on the outlook for so-called supercore inflation. Core services (ex-housing) prices, aka supercore, are the most labour-sensitive component …
Cracks growing in the labour market The jump in the unemployment rate in March, together with evidence of easing wage pressures, raises the chance of the Bank of Canada surprising markets with a rate cut next week, although our base case remains that the …
Blockbuster report another reason for the Fed to take its time The blockbuster 303,000 increase in non-farm payrolls in March supports the Fed’s position that the resilience of the economy means it can take its time with rate cuts, which might now not …
Whether you’re a monetarist or not, it’s hard to ignore the big rise in the annual growth rate of M4 money coming out of the pandemic being a harbinger of the surge in CPI inflation. Shortly before CPI inflation surged from 0.3% in November 2020 to a …
Rebound in mortgage rates causes prices to stall The first decline in the Halifax House price Index in six months confirmed that the slight rise in mortgage rates since the start of the year has caused house prices to stall. The 1.0% m/m fall in the …
No rush to cut rates The minutes of the RBA’s March meeting, published earlier this week, revealed that the Bank has now abandoned its tightening bias. Indeed, for the first time since May 2022, the Board didn’t discuss the option of raising rates higher. …
Tankan points to persistent strength in inflation Bank of Japan Governor Ueda today provided the strongest hint yet that the Bank is keen to hike interest rates further in the second half of the year. He noted that the probability of attaining a …
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 EDT/1600 BST . Register here for the 20-minute session. We expect a surge in completions and a …
4th April 2024
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 …
Exports and imports both surged A surge in gold exports and the end of earlier weather-related disruptions flattered the figures in February, but the trade data nonetheless point to a strengthening economy and suggest that net trade made a large …
Exports and imports surge in first quarter The strong gains in exports and imports in February imply that net trade will be a negative for first-quarter GDP growth, but that appears to mostly reflect the support to import demand from strong consumer …
We believe that the “narrow path” of returning inflation to target while keeping unemployment below pre-pandemic levels is wishful thinking. The Reserve Bank of Australia won’t bring domestic cost pressures under control unless the unemployment rate rises …
Clearer downward trend in underlying inflation But stronger GDP growth reduces the urgency to loosen policy New immigration policy could prompt big forecast changes While the recent inflation data have strengthened the case for interest rate cuts, we …
3rd 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 …
We think that it is now time for the curtains to close on the so-called ‘excess savings’ debate. While unusually high savings accumulated by households during the pandemic helped prevent recessions in advanced economies in 2023, they are likely to have …
Mortgage rates temporarily drop below 7%, helping demand recover Mortgage rates dipping back below 7% helped mortgage applications for home purchase edge slightly higher in March. But recent increases in the 10-year Treasury yield point to mortgage rates …
The recent easing in price pressures and the Bank of England's new-found dovish slant has convinced investors that interest rates will be cut a bit further over the next two years. But we still think investors are underestimating how far rates will fall. …
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 economy made a strong start to the year, but that was largely due to temporary factors that will soon fade. With spare capacity emerging, particularly in the labour market, downward progress on inflation is becoming clearer. Changes to immigration …
2nd April 2024
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 …
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 …
This page has been updated with additional analysis since first publication. Drag on activity from high interest rates continues to fade February’s money and credit figures show the dip in mortgage rates at the start of the year boosted mortgage approvals …
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 …
RBA abandons tightening bias but rate cuts still a long way off While the RBA no longer considered raising interest rates at its March meeting, we think it will take until November for the Bank to start easing monetary policy. The Bank noted that …
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
Above 50.0 for the first time since September 2022 The jump in the ISM manufacturing index in March, leaving it above the theoretical 50.0 no-change level for the first time since September 2022, suggests that the sector has finally turned a corner. While …
This page has been updated with additional analysis since first publication. Tankan points to sluggish recovery The slight fall in business conditions across all firm sizes in the latest Tankan suggests that a rapid recovery from the likely slump in Q1 …
Core prices moderate again, but real spending strong The slightly weaker than expected gain in core PCE prices in February will, at the margin, provide Fed officials with a little more confidence that the January surge was an anomaly. Nevertheless, the …
29th March 2024
Q1 GDP to drop sharply as industrial output slumps With industrial output falling yet again in February following the plunge in January, GDP will fall sharply in the first quarter. The 0.1% m/m decline in industrial production in February was weaker than …
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
The economy made a strong start to 2024, but that was partly due to the end of strike disruption and the record warm winter. We expect GDP growth to slow sharply next quarter, persuading the Bank of Canada to start its loosening cycle in June. GDP surges …
We expect non-farm payroll growth to ease to 180,000 in March. The jump in the unemployment rate in February is unlikely to be repeated, and is more likely to be partly reversed. We are sceptical that the recent reacceleration in non-farm payroll growth …
Everyone knows that one reason why the recession was so small and short is because higher interest rates had a smaller drag on the economy than in the past. But it’s less appreciated that future interest rate cuts may not boost the economy as much either. …
Before Neil Shearing gets on to discussing the key takeaways from our latest Global Economic Outlook, he talks to David Wilder about the inflationary risks stemming from the collapse of the Francis Scott Key Bridge at Baltimore’s port. The Capital …
Streets of Baltimore The collapse of the Francis Scott Key bridge, which was hit by an out-of-control container ship this week, could result in a lengthy disruption to the Baltimore port. Nevertheless, since that port is the 15 th largest in the country, …
