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This page has been updated with additional analysis since first publication. Price pressures remain strong as economy is running hot The stronger-than-expected improvement in the latest Tankan survey suggests that the economy will continue to expand at …
2nd October 2023
Overview – We expect GDP growth to slow from 2.1% this year to only 0.8% in 2024, with the economy still likely to experience a near recession around the end of this year. Core inflation will continue to fall back to the 2% target by mid-2024, with much …
29th September 2023
The recent acceleration in immigration may not be enough to keep the economy afloat, with the latest data and surveys pointing to an increased chance that GDP will contract over the rest of the year. 40,097,761 and counting Stats Can confirmed this week …
GDP-GDI gap left largely unexplained In the end, the comprehensive revisions to the GDP data changed almost nothing of substance – the real economy was still 6.1% bigger in the second quarter of this year than it was pre-pandemic in the fourth quarter of …
Core PCE inflation slowing rapidly despite resilient consumption The August income & spending data confirm that real consumption growth strengthened in the third quarter, but also cast doubt on the market narrative that resilient growth will see interest …
This page has been updated with additional analysis since first publication. On the cusp of recession The economy failed to make much headway in July and August and the latest business surveys suggest that GDP probably contracted in September, which would …
After the huge upward revisions to the level of GDP in Q4 2021 announced at the start of September, which resulted in the UK leapfrogging Germany to sixth place in the league table of best performing G7 economies since the pandemic (see here ), Friday’s …
The Italian government’s decision to raise its deficit targets suggests it is trying to get away with as little fiscal tightening as possible. With EU fiscal rules set to come back into force next year, that raises the risk of tensions escalating between …
Approvals to remain weak for the next six months The further decline in mortgage approvals in August to their lowest level since the aftermath of last autumn's “mini” budget showed that high mortgage rates are keeping home purchase demand very weak. Our …
This page has been updated with additional analysis since first publication. Higher interest rates weighing more heavily on lending The drag from higher interest rates on bank lending grew further in August, particularly in the housing market. Although …
This page has been updated with additional analysis since first publication. GDP growth nudged up, but resilience won't last The final Q2 2023 GDP data release shows that the economy was a bit more resilient in the first half of this year than we …
Sustainable 2% inflation coming into sight The minutes of the Bank of Japan’s July meeting revealed that Board members had a lively debate on the outlook for inflation and monetary policy. One member noted that “close attention was warranted on the risk …
Economic data flash mixed signals The big news out of Australia this week was the strong rise in consumer prices in August. Moreover, with underlying price pressures showing few signs of relenting, we’ve revised up our forecast for the RBA’s terminal cash …
This page has been updated with additional analysis since first publication. Labour market set to tighten as GDP growth holding up While retail sales and industrial production were little changed in August, they point to another decent rise in GDP across …
This page has been updated with additional analysis since first publication. Inflation will only fall below 2% by end-2024 While the Tokyo CPI suggests that underlying inflation has now peaked it will take until late next year for inflation to fall below …
The US dollar’s record run of 10 consecutive weekly gains has brought it to its strongest level since last December (see Chart 1), and prompted renewed talk of FX intervention in Asia. We think that market participants have now gone too far in discounting …
28th September 2023
Global goods trade fell at its fastest pace since the pandemic in July and the timelier trade and survey data point to further declines in August and September. What’s more, given that we still expect several advanced economies to fall into mild …
We forecast a 170,000 increase in non-farm payrolls in September as employment growth continues to trend lower, but a government shutdown may disrupt the release of the data on Friday 6 th October. Recent downward revisions took three-month average …
We suspect the pound will fall from $1.22 now to $1.20 by the end of this year. That’s not due to lower interest rate expectations in the UK compared to the US or the euro-zone, as we think the UK will be the last to cut rates. Instead, it’s due to the …
The direct hit to the economy from even an extended government shutdown beginning next week would be modest. But it could also result in delays to key data releases, including the September employment and CPI reports due over the next couple of weeks. At …
GDP revisions change little; recent gap with GDI remains The comprehensive benchmark revisions to the GDP data changed almost nothing of substance – the real economy was still 6.1% bigger in the second quarter of this year than it was pre-pandemic in the …
As we anticipated , housing starts in England spiked to their highest level on record in Q2 as builders began work early to avoid having to conform with the Future Homes Standard. More timely monthly data show that starts slumped in July and August in …
This page has been updated with additional analysis since first publication. RBA will hike despite slower retail sales growth Retail sales lost some momentum in August. However, with sales volumes still running above their pre-pandemic trend, that …
10Y Treasuries have underperformed 2Y Treasuries over recent months, bucking the usual pattern after the final Fed hike (if, as we think, the final hike was in July). But we think the stage is now set for 10Y Treasuries to outperform over the next year or …
27th September 2023
Strong immigration and the resilience of the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada keeping further rate hikes on the table, we still judge that GDP will contract later this year. Even if …
Equipment investment growth still set to slow The 0.2% m/m rise in durable goods orders in August was, at first glance, better than expected, but the outperformance was mainly due to a surge in defence aircraft orders. Admittedly, gains in core orders and …
New York and LA see a decline in office jobs Total employment growth slowed slightly in August to 0.4% 3m/3m across the 30 metros we cover, once seasonally-adjusted. But office jobs in western cities have continued to decline as layoffs in the technology …
Overview – We expect the euro-zone economy to struggle over the next 18 months, and a mild recession in the coming quarters looks more likely than not. Lower energy prices and improved global supply chain conditions should keep headline inflation on a …
Activity is holding up better than expected, while disinflation is stalling Another 25bp rate hike now seems more likely than not Policy easing pushed back to mid-2024 Stronger-than-expected GDP and inflation data should cement the case for the RBA to …
This page has been updated with additional analysis since first publication. Resurgent price pressures raise risk of tighter policy With Australia’s disinflationary process stalling, there’s a growing risk that the Reserve Bank of Australia will resume …
Softening demand proves a tipping point for new home sales The 8.7% m/m drop in New Home Sales in August was the largest monthly decline since September 2022 and suggests that the renewed rise in mortgage rates has caused home purchase demand to decline …
26th September 2023
Another dip in house prices this year unlikely after sixth consecutive rise The sixth consecutive rise in house prices in July showed that very tight supply is causing home prices to continue to rise despite sales volumes remaining weak, and suggests a …
Rising bankruptcy filings by large corporations are another reason to doubt that the economy will continue to grow at close to its potential rate, as the Federal Reserve now seems to believe. Admittedly, the bankruptcy data suggest that consumers and …
Overview – We expect another few quarters of near-zero GDP growth to lead to an annual gain of just 0.7% next year. Even with higher oil prices, the weakness of economic growth leaves scope for CPI inflation to fall back to the 2% target in 2024. That …
The sharp slowdown in broad money growth since late last year suggests that higher interest rates are working by reducing households’ and firms’ demand for borrowing, which should lead to softer activity and lower inflation. This supports our view that a …
RBNZ to reassert its tightening bias as activity surprises on the upside Given the noise in the recent data, we don’t expect further rate hikes However, policy will remain restrictive for longer, with rate cuts only in Q3 2024 Although economic activity …
Overview – With the economy showing signs of slowing and transaction volumes likely to stay low in H2 2023, a tough 6-12 months lies in store for commercial real estate. We still expect cap rates to rise on the back of higher Treasury yields, but the full …
25th September 2023
Given clearer signs of economic weakness in recent weeks, we think the surprise increase in underlying inflation pressures in August means the Bank of Canada is more likely to keep interest rates at their current level for longer than to raise rates …
Ifo points to renewed contraction in German GDP in Q3 The Ifo Business Climate Index (BCI) confirmed that the German economy remained in the doldrums in September. We continue to expect contractions in GDP in both Q3 and Q4 of this year. The small fall in …
The abandonment of Yield Curve Control would probably prompt the Bank of Japan to reduce its bloated holdings of government bonds, which could push up long-term bond yields. However, there are good reasons to think that the fiscal consequences wouldn’t be …
The September Flash PMIs add to evidence that economic activity in the US and Europe is weakening. This supports our view that the Fed, ECB, and Bank of England have finished hiking interest rates. Our estimate of the DM average composite PMI edged down …
22nd September 2023
Although the 10-year Treasury yield rose further to a post-Global-Financial-Crisis high of ~4.5% in the wake of this week’s FOMC meeting, we continue to forecast that it will drop back to 3.75% by the end of this year and to 3.25% by the end of next year. …
This week’s news that interest rates are probably at their peak (see here ) and the news that public borrowing in the current fiscal year is £11bn below the Office for Budget Responsibility’s forecast has raised the pressure on the Chancellor to deliver …
The new projections published by the Fed this week signalled that officials are fully onboard with the idea of interest rates staying ‘higher for longer’, but that is based on forecasts for real economic growth and inflation which we believe are …
Retail sales volumes weakening despite strong population growth Retail sales volumes edged down in July and the preliminary estimate implies they fell even more sharply in August. Given that population growth has accelerated in recent months, retail sales …
