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Still no recession, but economic growth soggy The news that the economy contracted by 0.3% m/m in March and grew by just 0.1% q/q in Q1 as a whole (consensus +0.1% q/q, Bank of England 0.0% q/q, CE +0.1% q/q) suggests that low real income and high …
12th May 2023
We expect Peru’s central bank to leave its policy rate unchanged (00.00 BST) GDP data may show that UK economy grew slightly in Q1 (07.00 BST) University of Michigan consumer sentiment index probably edged lower in May (15.00 BST) Key Market Themes …
11th May 2023
Today’s 25 basis point (bps) rise in interest rates from 4.25% to 4.50% takes rates to our long-held forecast and may be the last hike, although one or two more hikes are possible. We suspect the subsequent holding phase will be fairly long, lasting until …
Rates may have peaked, but risks of one or two more hikes remain Today’s 25bps rise in interest rates from 4.25% to 4.50% takes rates to our long-held forecast and may be the last hike, although another hike or two is perfectly possible. We suspect the …
Governor Ueda presided over his first policy meeting late last month and opted to keep all monetary policy settings, including Yield Curve Control (YCC), completely unchanged. To be sure, Mr Ueda also announced that the Bank will conduct a thorough review …
Demand continues to slump In contrast to signs of a stabilisation in house prices and sales volumes in other indicators, the RICS survey remained downbeat in April. In particular, the renewed fall in the new buyer enquiries balance left it little higher …
Brighter outlook in Q2 The further rise in both the current and outlook readings point to continued upward momentum in services spending this quarter. Meanwhile, manufacturing conditions fell slightly but remained robust, boding well for industrial …
The US housing market has been largely unaffected by the banking sector turmoil. Indeed, buyer sentiment rose to an 11-month high in April and activity appears to have bottomed out. Tighter credit conditions could yet weigh on the market, but the latest …
10th May 2023
Core inflation refusing to budge The 0.4% m/m gains in headline and core consumer prices in April leaves core inflation at 5.5%, broadly unchanged from its level at the start of this year, further illustrating that the previous downward trend has …
Core inflation refusing to budge The 0.4% m/m gains in headline and core consumer prices in April leaves core inflation at 5.5%, broadly unchanged from its level at the start of this year, further illustrating that the previous downward trend has stalled. …
While the hiking cycles of all major central banks will soon be in the rear-view mirror, most of their impact on activity lies on the road ahead. Based on the latest national accounts data, we estimate that there is still plenty of scope for higher …
9th May 2023
We think migration patterns of footloose workers will continue to play the largest role in driving the rental outlook across metros. But rent as a share of income will also have a bearing, weighing on prospects in major markets such as NYC, LA and Boston, …
While world trade fell further in February, the available data point to a rise in March, especially due to a strong rebound in China. But that rebound looks to have already reversed in April. And with high interest rates set to weigh on demand for goods …
Prices slip in April, but remarkably resilient overall The small slip in the Halifax House Price index in April bought it a little more in line with the Nationwide figures. But prices remain remarkably resilient to the largest rise in mortgage rates since …
Gloomy wage growth outlook in H2 2023 Wage growth held steady in March from February, as a further slowdown in regular and overtime pay growth was offset by a decent increase in volatile payments. We still see further scope for wage growth to slow this …
More scope for wage growth to slow Labour cash earnings rose by 0.8% for the third consecutive month, broadly in line with our 0.7% forecast and far below the average 1.8% increase across 2022. As we had expected, regular earnings growth slowed from 0.8% …
The recent turmoil in the banking sector doesn’t appear to have triggered a severe further tightening in credit conditions, but since lending standards were already being tightened to a degree only previously seen during recessions, the lack of any …
8th May 2023
Fed’s Senior Loan Officer survey likely to show tightening in bank lending standards (Mon.) We expect the downward trend in US core inflation to have resumed in April (Wed.) The Bank of England looks likely to hike interest rates by another 25bp (Thu.) …
5th May 2023
Following the renewed concerns about regional US banks this week, markets are again pricing in interest rate cuts from the Bank of Canada later this year. From a domestic perspective, however, the strength of the local real estate board data in April and …
Our central scenario is that Italy’s public debt-to-GDP ratio will decline gradually in the long-run. However, the government will need to maintain sizeable primary budget surpluses to make that happen. The European Commission has recently made a series …
The April employment report showed that while jobs growth remains solid enough, it is still trending lower and the surveys suggest activity growth is slowing too. With ongoing concerns over regional banks looking more likely to result in a further …
April strength offset by downward revisions to earlier months The 253,000 gain in non-farm payrolls in April suggests that the labour market remains resilient despite the banking sector turmoil and broader signs of an economic slowdown. That said, the …
Pound standing to attention for King’s Coronation Note: We’ll be discussing the Bank of England’s May decision in an online briefing at 10:00 EDT/15:00 BST on Thursday, 11 th May . Register Now . The Coronation of King Charles III means the UK is on show …
Labour market conditions easing despite unchanged unemployment rate The decline in full-time positions in April means that the large rise in total employment was weaker than it looks. Hours worked only crept up during the LFS reference week and, given the …
Labour market resilient, but small cracks emerging The decline in full-time positions in April means that the large rise in total employment was weaker than it looks. Hours worked only crept up during the LFS reference week and, given the public sector …
April strength offset by downward revisions to earlier months The 253,000 gain in non-farm payrolls in April suggests that the labour market remains resilient despite the banking sector turmoil and broader signs of an economic slowdown. Nevertheless, that …
Hard data released this week paint a more downbeat picture of the euro-zone economy than the latest surveys. Three points are worth highlighting. First, the data confirm that the 0.1% q/q rise in euro-zone GDP in Q1 masks a greater weakness in domestic …
Wage pressures bubbling up Data released earlier in the week showed that pay increases under newly-inked enterprise bargaining agreements (EBAs) have started to surge in Australia. Employees covered by new EBAs received an annualised pay hike of 3.0% in …
Pay at small firms not keeping up with large firms While wage growth has been very strong by historical standards in recent months, wages have risen faster for employees of larger firms than at smaller firms. (See Chart 1.) Chart 1: Labour Cash Earnings …
Will 4.50% be the peak? Markets and economists have come round to our view that rates will rise to 4.50% 4.50% may well be the peak Risk is that resilient economy and sticky inflation prompt rise to 4.75% or 5.00% With the financial markets and other …
4th May 2023
Today’s 25bp decision was in line with market expectations and the views of most forecasters polled by Reuters – though we had been in the minority forecasting 50bp. The move marks a slowing in the pace of policy tightening and suggests at face value that …
While food CPI inflation remains very high in all major advanced economies – and especially so in Europe – we expect it to fall sharply in the coming year. Energy and labour costs have been key in keeping consumer food inflation so high, but these props …
We’ve been surprised that the rise in Bank Rate from 0.10% in November 2021 to 4.25% hasn’t triggered a contraction in GDP at the start of this year. Indeed, while higher interest rates were a further drag on net mortgage lending in March, the …
Strength of exports and unit labour cost growth unlikely to last A rebound in exports drove a sharp narrowing of the international trade deficit to a four-month low of $64.2bn in March, from $70.6bn in February, but the surveys continue to suggest that …
Downside risks to first-quarter GDP growth despite export outperformance The small rise in export volumes and slump in imports in March confirms that net trade improved last quarter. However, the weakness of imports means there is a risk that the …
Downside risks to Q1 GDP growth The small rise in export volumes and slump in import volumes in March confirms that net trade boosted GDP growth last quarter. However, as lower imports are likely to be reflected in slower inventory building – which the …
Strength of exports and unit labour cost growth unlikely to last The sharp fall in the international trade deficit to $64.2bn in March, from $70.6bn in February, was driven by a rebound in exports, but the surveys continue to suggest that renewed declines …
Decline in bank deposits doesn’t look like a bank run March’s money and credit data showed that the collapse of the US bank SVB and the takeover of Credit Suisse in early March triggered a small withdrawal of funds from the overall UK banking system. …
Net lending stable as investors wait for the bottom Even as commercial property investment has collapsed, net lending to property has been stable at close to zero since the start of the year. That suggests investors are building up war chests to snap up …
Recovery unlikely to continue The rise in mortgage approvals in March was stronger than consensus expectations, reflecting the reversal of the spike in mortgage rates since the autumn. However, we don’t think that mortgage rates can fall any further …
The market has finally come round to our long-standing view that Bank Rate will rise to 4.5%, with the Bank of England to likely to deliver another 25 basis point hike when it meets on 11 th May. But what will follow? Resilient activity data and …
The slowdown in regular earnings at the start of the year largely reflects sampling changes, with an unchanged sample of firms reporting continued strong wage growth. However, with inflation set to come off the boil before long and the labour market …
Net exports won’t have boosted GDP in Q1 The widening of the trade surplus in recent months belies the negligible contribution that net exports will have made to Q1 GDP. Indeed, we think the weakness in import values last quarter primary reflected …
Net exports won’t have boosted GDP in Q1 The wide trade surplus belies the negligible contribution made by net exports to Q1 GDP. The widening of the trade surplus to $15.3bn in March, from an upwards-revised $14.2bn in February, was in contrast to what …
The Fed’s new policy statement provides the clearest hint yet that the 25bp rate hike today is likely to be the last. We expect economic weakness and a sharper-than-expected drop back in core inflation to convince officials to start cutting rates again …
3rd May 2023
Fed’s focus will turn to policy loosening before long The Fed’s new policy statement provides the clearest hint yet that the 25bp rate hike today is likely to be the last. We expect economic weakness and a sharper-than-expected drop back in core inflation …
We expect a final 25bp rate hike from the Fed today, to 5.00-5.25%... (19.00 BST) ...and a 50bp hike from the ECB tomorrow, to 3.50% (13.15 BST) The US trade deficit probably narrowed sharply in March (13.30 BST) Key Market Themes The FOMC looks set to …
