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Strong growth reduces urgency for interest rate cuts The broad-based strength of GDP growth in January and February means the economy almost certainly outperformed the Bank of Canada’s expectations in the first quarter and reduces the immediate risk of …
28th March 2024
This page has been updated with additional analysis since first publication. Mild recession confirmed, but recovery probably already underway The final Q4 2023 GDP release confirmed that the UK economy was in the mildest of mild technical recessions at …
Inflation risks linger on At first glance, it would appear that much of the data released this week went the way the RBA was hoping. First, we found out that CPI inflation is on track to undershoot the Bank’s expectations this quarter. Second, retail …
BoJ won’t provide much help in supporting yen With the yen hitting a 34-year low of just under 152 against the dollar on Wednesday, the Ministry of Finance’s Masato Kanda noted that the government will respond resolutely to “excessive” yen weakness and …
This page has been updated with additional analysis since first publication. Private consumption set to trudge along The modest uptick in retail sales in February was as we had anticipated. The data confirm our view that consumer spending is likely to …
This page has been updated with additional analysis since first publication. EC Survey points to stagnant economy and still-high price pressures The EC business and consumer survey for March reinforces the message that the economy is close to recession …
27th March 2024
Overview – Australia’s GDP growth will remain soft throughout the first half of the year so the recent stalling in inflation should be followed by a renewed moderation. However, as the labour market remains very tight, we’re pushing back our forecast for …
This page has been updated with additional analysis since first publication. Inflationary pressures are letting up, but risks linger Headline Inflation in February once again came in below the expectations of both the analyst consensus and the RBA. But …
Software increasingly driving productivity gains We still believe that the current productivity boom is mainly a cyclical phenomenon, as tight labour market conditions have forced firms to expand output by boosting the efficiency of their existing …
26th March 2024
Overview – We expect weak GDP growth of 0.8% this year, and a fall in inflation to less than 2% next year, to persuade the Bank of Canada to cut its policy rate back to 2.5% by mid-2025. A recovery in productivity and looser policy should drive a rebound …
A pause in the fall in mortgage rates and a rise in the number of homes coming onto the market mean house price growth will stall in the near term. But our forecast that Bank Rate will be cut further than expected suggests that further reductions in …
House price growth reaccelerates in January The fairly large gain in house prices in January points to a rebound in price growth driven by the fall in mortgage rates towards the end of last year. Although its early in the year, today’s data fit with our …
Earlier weakness in equipment investment fading The solid rebound in durable goods orders in February suggests that the recent decline in corporate borrowing costs is feeding through to a tentative recovery in business equipment investment. The 1.4% m/m …
While the Bank of Japan’s JGB holdings have started to shrink and will continue to do so now that Yield Curve Control is over, we think that the normalisation of the Bank’s balance sheet could take up to a decade. While shrinking central bank demand for …
The government’s plan to cut temporary resident numbers over 2025 to 2027 will result in the weakest three years for population growth in Canada’s 157-year history. While it might not be enough to persuade the Bank of Canada to start its loosening cycle …
25th March 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. As mortgage rates fall, we think the …
Faltering consumer spending reinforces our view that GDP growth will slow this year, although that slowdown is likely to be modest. After a disappointing couple of months for inflation, easing demand growth should help to drive a more marked decline later …
New home sales disappoint in February February’s tiny drop in new home sales cut short what appeared to be the beginning of a recovery in recent months. Even though the drop was extremely small, it still potentially casts some doubt over our upbeat new …
Overview – After having been too high for the past three years, inflation in the UK will be too low for the next three years, and much lower than in the US and the euro-zone. Not only do we think that CPI inflation will fall from 3.4% in February to below …
Germany's economy is in “troubled waters” and doing “dramatically badly” – and those are just the assessments of its economy minister. But are the recessionary conditions in the euro-zone’s biggest economy merely a cyclical blip or signs of deeper …
14th March 2024
Note: We will be discussing the outlook for residential markets across the US in a 20-minute online briefing on Tuesday April 16th. Find out more here . Overview – This year is being flagged by many as the year the recovery starts, but there is still a …
22nd March 2024
The Fed wasn’t as hawkish as we had expected this week and, assuming the recent upturn in core inflation proves temporary, there is still a good chance that interest rate cuts will begin in June. Fed content with more gradual inflation fall Despite recent …
The surprise fall in February leaves CPI inflation on track to average 2.8% this quarter, well below the Bank of Canada’s forecast of 3.2%. As the decline in inflation pressures was broad-based, there is a growing likelihood that the Bank of Canada will …
The Bank of England was never going to do anything except keep interest rates at 5.25% this week, but we and the financial markets were surprised that it took further steps in preparing the ground for the first interest rate cut. (See here .) As a result, …
Heading for another decent quarter Despite only modest rises in retail sales volumes in January and February, the earlier strength in December means that growth should remain strong this quarter. The 0.3% m/m fall in retail sales was a little smaller than …
This page has been updated with additional analysis since first publication. Shoppers largely shrug off wet weather as retail rebound only paused Unchanged retail sales volumes in February (CE forecast 0.0% m/m, consensus -0.4% m/m), as shoppers largely …
Rate cut in August remains plausible At its meeting earlier this week, the RBA dialled down its hawkish bias, with Governor Bullock noting that “the risks to the outlook are finely balanced”. However, her statement may well have been a little premature. …
Run-off in bond holdings will accelerate The Bank of Japan didn’t disappoint at this week’s meeting as the Bank ended negative interest rates, Yield Curve Control and its ETF purchases. Even so, 10-year JGB yields declined and the yen weakened to as low …
Inflation will return to BoJ’s target by year-end The renewed jump in headline inflation in February leaves the door open for another rate hike by the Bank of Japan, but with underlying inflation moderating the case for tighter policy is weakening. The …
21st March 2024
The flash PMIs for March suggest that the euro-zone economy is still flatlining, while the UK and Japan seem to be pulling out of recession heading into Q2. The survey indicators of price pressures moved in different directions, but in general remain a …
Overview – Although we expect GDP growth to slow to a below-potential pace over the next few quarters, we then anticipate a pick-up late this year, as monetary policy flips from a headwind to a tailwind. Our forecasts are based on the assumption of no …
Existing home sales accelerate despite higher mortgage rates Existing home sales rose in February which we think largely reflects the sharp fall in mortgage rates at the end of last year. But borrowing costs have been rising so far in 2024, which in the …
With the Bank of England striking a slightly more dovish tone whilst keeping interest rates at 5.25% and inflation likely to fall further and faster than the Bank expects, we still think a rate cut in June is possible and that rates will fall to 3.00% in …
Slight dovish tilt, and fast fall in inflation will make BoE more dovish before too long The Bank of England sprung no surprises, leaving interest rates at 5.25% for the fifth time in a row and, despite no MPC members no longer voting to raise interest …
This page has been updated with additional analysis since first publication. Further signs of the UK economy having moved out of recession We’ll be discussing the outlook for Fed, ECB and Bank of England policy in a 20-minute online briefing at 3pm GMT …
This page has been updated with additional analysis since first publication. Stagnation continues, price pressures still high The flash PMIs for March suggest that the euro-zone economy is still flatlining, in line with our forecast. Meanwhile, the price …
This page has been updated with additional analysis since first publication. Disappointing borrowing figures won’t stop the Chancellor unveiling more tax cuts Note: We’ll be discussing the outlook for Fed, ECB and Bank of England policy in a 20-minute …
This page has been updated with additional analysis since first publication. Labour market still set to loosen in the coming months The sharp drop in unemployment in February was likely a blip, rather than a trend. With job vacancies continuing to fall …
Q1 GDP decline should be followed by vigorous recovery The rise in the composite PMI to a seven-month high suggests that any fall in Q1 GDP should be followed by a strong recovery. According to today’s flash estimate, the composite PMI jumped from 50.6 to …
We are resending this publication because the previous one didn't contain any text. Better news from net trade points to smaller fall in Q1 GDP The trade balance didn’t fall nearly as much as most had anticipated in February and net trade will only …
This page has been updated with additional analysis since first publication. Economic downturn will pave the way for aggressive rate cuts With the New Zealand economy in a double-dip recession, we’re sticking to our guns that the RBNZ will cut rates more …
20th March 2024
Despite upward revisions to the median projections for both GDP growth and core PCE inflation, the Fed’s median forecast for interest rates still shows a cumulative 75bp of policy loosening this year. In contrast, we continue to believe that …
Fed officials still see rate cuts, despite higher core inflation projections Despite upward revisions to the median projections for both GDP growth and core PCE inflation, the median forecast for interest rates – released at the end of the Fed’s two-day …
Our markets team recently held an online briefing all about how we expect global equities, bonds, and currencies to perform through the end of this year and into 2025. During this session, the economists answered questions from the audience following …
This page has been updated with additional analysis since first publication. UK inflation to fall below 2% in April and the rates in the US and euro-zone We’ll be discussing the outlook for Fed, ECB and Bank of England policy in a 20-minute online …
Credit spreads aren’t bound to fall further if a bubble continues to inflate in the stock market, judging by what happened in the US in the second half of the 1990s. Admittedly, the option-adjusted spreads (OAS) over underlying Treasuries of ICE BofA’s …
19th March 2024
Housing starts rebound in February The strong rebound in housing starts last month confirmed January’s slump was a weather-related blip. Although we expected starts to bounce back, February’s data were even stronger than we had anticipated. After falling …
Another good month, but more needed to convince Bank to cut rates The surprise fall in headline inflation to 2.8%, from 2.9%, is further reason to expect the Bank of Canada to cut interest rates soon, although we still think it will wait until June rather …
