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Office-based jobs suffering in western tech-led markets Seasonally-adjusted total employment growth rose by 0.6% 3m/3m on average across the 30 metros we track for the third consecutive month. But there has been clear weakness in the information sector in …
2nd August 2023
Applications dipped back down toward 30-year lows June’s rebound in mortgage applications for home purchase was short-lived as total applications fell by 1.7% in July. This pushed applications back down toward 30-year lows and was probably prompted by …
One key lesson from the bouts of inflation in the 1970s and 1980s is that core inflation faded only once a loosening in the labour market drove down the job vacancy rate to more normal levels. We estimate that a fall in the job vacancy rate from 3.0% in …
Fitch downgrade to have little impact The news that Fitch Ratings is downgrading its US sovereign credit rating one notch from AAA to AA+ has predictably had little to no immediate impact on the Treasury market – yields are up on the day, but down since …
This page has been updated with additional analysis since first publication . Labour market will slacken in earnest before long Although New Zealand’s unemployment rate rose slightly last quarter, the labour market remains very tight by historical …
Falling vacancies in sectors where wage growth has been particularly strong will provide some comfort to the Fed, however the JOLTS survey showed that the broader labour market remained resilient in June. The job openings rate remained unchanged at in …
1st August 2023
The latest PMIs suggest that the decline in global manufacturing activity has further to run. At least weak activity is weighing on price pressures, which should lead to further falls in core goods inflation globally. The output component of the global …
Some measures of market risk premia have become quite low, suggesting to us that the bar for further big gains in risky assets has risen. If last week’s strong Q2 GDP print emphasised the surprising resilience of the US economy, the past couple of days …
This page has been updated with additional analysis since first publication. Subdued manufacturing activity keeping inflationary pressures muted The modest improvement in the ISM manufacturing index to 46.4 in July, from 46.0, suggests the manufacturing …
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3 rd August . (Register here .) Despite the easing in CPI inflation from 8.7% in …
The Reserve Bank of Australia left rates unchanged at 4.10% for the second consecutive month. And while the Board continued to strike some hawkish notes, there is a good chance that its tightening cycle is already over. The RBA’s decision flew in the face …
Mortgage rate surge starts to take its toll The slight fall in house prices in July is the first sign of the surge in mortgage rates since mid-May taking its toll. As we expect mortgage rates to remain around their current level for the next 12 months, we …
RBA stands pat The RBA’s decision to leave its cash rate unchanged at 4.10% means that its almost certain that our forecast for a terminal rate of 4.60% won’t come to fruition. Ahead of today’s meeting, 20 out of 36 analysts polled by Reuters, including …
Housing rebound continues unabated Australia’s house-price rebound went full steam ahead in July. At the margin, that should strengthen the case for the RBA to lift its cash rate by a further 25bp at its meeting later today. Nonetheless, with resurgent …
The Fed’s latest Senior Loan Officer Opinion Survey shows that, even though the banking crisis has faded, credit conditions remain unusually tight. Although the net percentage of banks tightening lending standards on commercial real estate loans fell back …
31st July 2023
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3 rd …
Climate change is expected to intensify the scale and frequency of flooding over the coming years. Housing markets in the US have yet to fully price in these risks, leaving many properties significantly overvalued. But as these risks begin to manifest, …
This article has been updated with additional charts and analysis since it was first published. Firms downbeat about output in Q3 June’s activity data were broadly positive for Q2, with both the industrial production and capital goods shipments data …
The Bank of Canada’s Summary of Deliberations highlighted the Bank’s concern that inflation could become stuck above the 2% target. Although headline inflation faces a bumpy downward path over the coming months, we think a faster easing in core inflation …
28th July 2023
This week’s FOMC meeting brought hints that Fed officials are no longer wedded to previous plans for further policy tightening. Even if activity growth continues to hold up a bit better than expected, we think a run of weaker inflation readings will …
This page has been updated with additional analysis since first publication. Sharp slowdown in second quarter growth Despite the rebound in GDP in May, growth in the second quarter looks set to be weaker than expected. With some of the factors supporting …
Slowdown in wage & price inflation despite resilience in activity The slowdown in both the employment cost index of wage growth and core PCE inflation to their lowest levels in nearly two years suggests that resilient activity growth won’t be enough to …
GDP data released this week suggest that the euro-zone economy held up better than we expected in Q2. Output rose in France and Spain and stagnated in Germany . Together, the national data point to euro-zone GDP rising by 0.4% in Q2 rather than falling …
One consequence of higher interest rates is an increase in the losses that the Bank of England will make via the bonds it bought during its quantitative easing (QE) programme. This week, the Bank published an estimate that it could make a huge £150bn …
Global goods trade rose slightly in May, but timelier data point to a renewed fall in June. And as spending patterns continue to normalise away from goods towards services at the same time as higher interest rates start to bite, it will probably be …
The Bank of Japan announced today that it will allow 10-year yields to rise above the 0.5% ceiling – which it says it is retaining – to a new “just-in-case” cap of 1.0%. With signs mounting of a virtuous cycle between inflation and wages, the chances of …
Real household incomes falling at rapid pace Data released last week underline that Japanese households are struggling to cope with rising living costs. While labour income rose at a robust pace, a slump in government transfer payments resulted in a 1.6% …
The Bank of Japan announced today that it will allow 10-year yields to rise to 1.0% instead of the current ceiling of 0.5%. We still think that a slowdown in inflation will convince the Bank to keep its short-term policy rate unchanged over the coming …
The big news out of Australia this week was that both headline and trimmed-mean inflation in Q2 were lower than most had anticipated. However, we still think it’s too soon for the RBA to declare victory in the war on inflation. After all, services …
This page has been updated with additional analysis since first publication. Retail sales soften anew The sharp decline in retail sales in June suggests that sales volumes fell for a third consecutive quarter in Q2. With the RBA sounding increasingly …
This article has been updated with additional charts and analysis since it was first published. Upside risks to our services inflation forecasts Headline inflation was unchanged in Tokyo this month, but a jump in services inflation helped power a renewed …
The latest RICS survey signalled a slight improvement in occupier and investment sentiment in Q2, but confidence remained low by historic standards. Tight credit conditions and a poor economic backdrop in the second half of this year suggest sentiment …
27th July 2023
We expect the July employment report to show a continued gradual slowdown in employment growth and a decline in wage growth to a two-year low. That should give Fed officials a little more confidence that the moderation in core inflation will continue. The …
Economy shrugs off impact of higher rates The 2.4% annualised gain in second-quarter real GDP growth, which means the economy expanded at close to its potential pace over the first half of the year, suggests that higher interest rates are having …
25bps hike and peak in sight Reverting to a 25bps hike rather than 50bps Rate hikes may come to a halt a bit sooner than most analysts and investors expect After a lengthy pause, rates to fall further than investors expect in late 2024 and in 2025 We’ll …
As everyone expected, the Fed increased its policy rate by an additional 25bp today, taking the fed funds target range to between 5.25% and 5.50% but, while officials are possibly still eyeing one final hike later this year, futures markets are mostly …
26th July 2023
Policy rate now at peak, as disinflation will persuade Fed to stand pat in September As everyone expected, the Fed increased its policy rate by an additional 25bp today, taking the fed funds target range to between 5.25% and 5.50% but, while officials are …
The sky-high valuations of some touted winners from AI have given rise to claims that their share prices have risen to unsustainably high levels. Is there anything we can learn from the dot com era? The best-performing stock in the S&P 500 in the …
The continued rise in the valuations of “risky” assets relative to “safe” ones mostly seems to reflect growing confidence in the economic outlook. We think that optimism will be disappointed and that risk premia may rise again – and valuations may fall – …
Total returns were negative again in Q2 at -2.0% q/q. This was dragged down by the office sector, where values fell by 7% and quarterly returns were -5.8%, with all other sectors outperforming the all-property number. Nevertheless, we still think office …
Comparing the proper inflation gauges reveals that core inflation in Japan remains far lower than elsewhere. And with most of the recent pick-up in core inflation reflecting soaring imports costs, the Bank of Japan’s assessment that above-target inflation …
Economic activity slowing and inflation weakening faster than anticipated However, labour market still very tight and services inflation still accelerating Bank to hike to 4.35% next week, but September rate hike is a close call With inflation …
This page has been updated with additional analysis since first publication. RBA will deliver at least one more rate hike The faster-than-expected slowdown in inflation in Q2 may convince the RBA that it has done enough to rein in price pressures. …
Our forecast that in late 2024 and 2025 the Bank of England will cut interest rates further than investors expect suggests that UK gilt yields will fall and close the current gap with US yields. Admittedly, there’s still a risk that inflation in the UK …
25th July 2023
The sharp rise in the share of the population with a disability may reflect the legacy of the pandemic. But with the rise in disability rates doing little to keep people out of work, it isn’t necessarily a problem for the economy. According to the …
Overview – Global inflation has almost halved since September last year and this trend has further to run. Admittedly, the fall in headline inflation so far mainly reflects the drag from lower energy price inflation, which has almost run its course. But …
House prices rose again in May House prices rose for the fourth consecutive month in May according to Case-Shiller. The resurgence in prices has coincided with an uptick in home sales from February to May, in turn driven by a moderation in mortgage rates. …
Analysts are split on whether the BoE will repeat June’s 50bps rate hike at the August meeting or revert to the 25bps hikes now favoured by the Fed and the ECB. And the release of the BoE’s new Monetary Policy Report will provide some clues to just how …
July’s flash PMIs suggest that activity slowed further at the start of Q3. Industry remains the weak spot, but the outlook for the services sector has also deteriorated noticeably. And while this seems to be weighing somewhat on employment growth and …
24th July 2023
Strong immigration and the turnaround in the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada back in hiking mode, we still judge that GDP will contract later this year. Even if recession is avoided, a …
