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The “America First Trade Policy” White House memorandum makes it clear that tariffs are coming, although we still have little clarity on the timing. There are some signs that a universal tariff could come later than in the second quarter as we have …
21st January 2025
The economy continues to do well with GDP growing strongly, employment growth solid and core inflation pressures easing again. We are concerned, however, that the Trump administration’s policies will weigh on GDP growth over the course of this year. …
The precarious nature of the outlook for the Federal budget deficit is well appreciated at this stage, but arguably the bigger long-term risk is the mounting current account deficit . With the primary income balance no longer in surplus and the dollar …
Concerning signs despite GST-related fall in headline inflation The small fall in headline inflation to 1.8% in December is not as encouraging as it looks, with the details suggesting that a higher proportion of the GST holiday was captured by the price …
This page has been updated with additional analysis since first publication. UK wage growth rebounds further, but there are signs of cooling further ahead While the further rise in regular private sector pay growth in November will cause the Bank of …
We aren’t overly worried about the impact of higher bond yields on Japan’s public finances because rising interest rates are a direct consequence of higher inflation. With the effective interest rate on public debt set to rise only slowly, the net impact …
President Donald Trump returned to the White House today with pen already in hand to sign what is expected to be close to 100 executive orders. That flurry of executive action will set the tone on what we can expect from his administration in a wide range …
20th January 2025
The Bank of Canada’s latest business and consumer surveys support our view that GDP growth will pick-up this quarter and suggest there are some upside risks to our forecast for another 75bp of interest rate cuts this year. That said, given the threat of …
We know that the economy flatlined or suffered a small contraction in Q4. But that would have been much worse if not for what appears to be a rise in government spending, which will play an important role in driving GDP growth throughout 2025 too. With …
The federal government is planning to fight US tariffs with tariffs, but reports this week suggest that those would cover a far smaller value of goods than the US is likely to hit. The government has also failed to muster enough support from the …
17th January 2025
Real economy still firing on all cylinders The strong December employment figures were followed by news this week of solid gains in control group retail sales, industrial production and housing starts. As a result, we now estimate that fourth-quarter GDP …
The Chancellor was able to breathe a sigh of relief this week after favourable CPI inflation prints for December in both the UK (see here ) and the US (see here ) led to a reversal in last week’s leap in gilt yields. In fact, the 28 basis points (bps) …
Manufacturing output rebounds The strong rise in industrial production in December is consistent with the recent improvement in the survey evidence. However, we do not think this marks the beginning of a sustained recovery in the manufacturing sector. The …
Jump in starts consistent with growing optimism among builders The large rebound in housing starts and continued resilience of building permits in December provides some support to our forecast that starts will remain solid in the first half of the year. …
The latest data suggest that resilient consumer spending supported GDP growth in the US towards the end of last year, while activity in other advanced economies remained weak. Industry continues to struggle in DMs, while in China it is benefiting from …
This page has been updated with additional analysis since first publication. Disappointing Q4 not a sign of things to come December’s 0.3% m/m fall in retail sales volumes was worse than expected (consensus forecast +0.4% m/m, CE 0.0% m/m) and rounded off …
Bank wary of triggering another market rout A flurry of communication by the Bank of Japan has resulted in the financial markets pricing in an 80% chance of a rate hike at next week’s meeting. We and two-thirds of economists polled by Reuters agree that a …
Upcoming inflation data will be pivotal Data released this week broadly support our view that the Reserve Bank of Australia won’t be in a rush to start cutting rates. Indeed, yesterday’s blockbuster jobs report only adds to the evidence that the …
Higher bond yields a risk to fragile recovery The rise in house prices in December builds on November’s gain, providing some support to our view that house prices will rise by a healthy 4% this year. That said, with the sales-to-new listing ratio dropping …
16th January 2025
Strong control group bodes well for Q4 GDP The 0.4% m/m increase in retail sales in December was a little weaker than expected, with the consensus forecast as high as 0.6%, but this was actually a strong report that boosts our fourth-quarter GDP growth …
Higher mortgage rates appear to be weighing on housing demand December’s RICS survey suggests that the relief rally after the Budget may have started to fade at the end of last year and the recent rise in mortgage rates have finally began to weigh on …
Our ANZ Chart Pack has been updated with the latest data and our analysis of recent developments. The Antipodean central banks will tread different paths on policy over the forecast horizon. With the New Zealand economy in dire straits and with inflation …
The Bank of Japan has signalled that it will raise rates at its January meeting. And with inflation set to remain above the Bank’s 2% target for a while yet, we’re sticking to our forecast that the policy rate will reach an above-consensus 1.25% by the …
This page has been updated with additional analysis since first publication. Tight labour market bolsters case for RBA to stay put Although we expect the labour market to cool in earnest over the course of this year, risks to our forecast that the …
The ceasefire reportedly agreed between Israel and Hamas is likely to have significant consequences for some countries in the region, notably Israel itself as well as Jordan and Egypt. But the possible disinflationary impact for the rest of the world via …
15th January 2025
If sustained, rising bond yields add to downside risks to economic growth. The potential direct effects on real activity are greatest in the US. But higher yields in other DMs could limit how far borrowing costs in the private sector fall and force the …
Core CPI consistent with soft gain in core PCE The 0.23% m/m increase in core CPI in December appears consistent with a below-target 0.14% m/m increase in the Fed’s preferred core PCE deflator measure. Although that would leave core PCE inflation …
Manufacturing recovery stalls The rise in manufacturing sales in November was entirely due to higher prices, with sales volumes unchanged. While the recovery in activity took a breather, the 1.8% m/m rise in new orders and increase in the S&P Global …
Slowing economic growth and rising availability will hold back French industrial rental growth this year, with affordability concerns likely to be an additional drag in Paris. This will leave the region underperforming other euro-zone markets, with …
This page has been updated with additional analysis since first publication. Soft surprise boosts February rate cut odds While a lot of the surprisingly large fall in services inflation from 5.0% in November to 4.4% in December (CE forecast 4.8%, BoE …
It’s possible that prolonged weakness in economic activity and a jump in unemployment force the RBA to cut rates more aggressively than we’re anticipating. However, a more likely scenario resulting in below-neutral rates is that a sharper-than-expected …
It’s easy to forget the importance of earnings in influencing the S&P 500 when its performance is driven instead, as has been the case recently, by gyrations in the Treasury market. Earnings will be front of mind again tomorrow, though, when reporting …
14th January 2025
Our base case is that a stabilisation and eventual fall back in gilt yields will allow the government to muddle through and wait until the next fiscal event on 26 th March before making any decisions on taxes and spending. However, a significant worsening …
Jump in airfare prices bad news for core PCE On the surface, the weaker than expected 0.2% m/m increase in final demand PPI and unchanged level of core final demand PPI in December seems encouraging, but they mask some price jumps in a few of the key …
UK commercial property finally turned a corner in 2024 after a few painful years. But 2025 has started with a bruising sell-off in gilt markets that has seen yields surging to multi-year highs. Will this imperil the market’s recovery? Where will the …
13th January 2025
While commercial real estate insurance premiums remain elevated, their growth dropped back substantially last year. But as the West and Gulf coasts still face the greatest threat from climate risks, we expect continued rapid premium growth in those …
Raising the federal debt ceiling this year will likely come as part of a budget reconciliation package alongside concessionary spending cuts given the razor-thin Republican majority in the House. As ever, a deal likely won’t be reached until the eleventh …
This new interactive dashboard combines the key takeaways and most insightful charts from our extensive research into demographic trends and their economic and fiscal consequences. The central theme is that ageing populations are an acute challenge for …
While the economy lost all momentum at the end of last year, we still expect GDP growth to accelerate from 0.8% in 2024 to an above-consensus 1.3% in 2025. Admittedly, activity could be restrained if the increase in the government’s borrowing costs due to …
After the market bottomed last year, where will the opportunities and risks lie in US commercial real estate in 2025? What influence will the US macro (and political) backdrop have on returns? Will distress remain a market theme? Our US real estate and …
The power vacuum created by Prime Minister Justin Trudeau’s resignation comes at a bad time, with President-elect Donald Trump ratcheting up his threats against Canada, raising the risk that the next government will be parachuted onto the front lines of a …
10th January 2025
Still waiting for clarity on the Trump agenda More than two months after Donald Trump and the Republicans completed a narrow clean sweep in last November’s election, and with only 10 days until the inauguration, there is still massive uncertainty about …
This week’s leap in gilt yields creates more problems for the Chancellor and is an extra headwind for the economy. But it is not a crisis. Admittedly, it is always worrying when UK bond yields rise by more than yields elsewhere and the pound weakens. …
Even Republicans growing concerned about Trump’s policy plans The drop in the expectations index of the University of Michigan Consumer Sentiment Survey in January and the accompanying jump in inflation expectations suggest that consumers are becoming …
Strong across the board The larger-than-expected 256,000 gain in non-farm payrolls in December and drop back in the unemployment rate to 4.1% supports the Fed’s decision to slow the pace of rate cuts and has heightened speculation that the loosening cycle …
This page has been updated with additional analysis since first publication. Jump in employment raises chance of Bank pause The huge gain in employment in December supports our view that labour market conditions are strengthening, despite the recent …
Tight labour market muddies the waters Financial markets are becoming increasingly optimistic that the RBA’s next easing cycle is right around the corner. They are now pricing in a 70% chance that the Bank will hand down a 25bp cut at its meeting in …
Bank will probably wait until March While the Bank of Japan refrained from hiking interest rates at its December meeting, the case for further policy tightening remains intact. For a start, the “Summary of Opinions” of that meeting showed that at least …
