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Strong consumption momentum to carry over into Q2 Both the current and outlook readings in March hit their highest in more than a year, capping off a strong first quarter for the EWS. This is another sign that private consumption remained resilient in Q1 …
10th April 2023
Economy losing forward momentum Only two months later the economy’s apparent strong start to the year in January looks increasingly like it was a brief sugar high, in part due to the unseasonably mild winter and possibly the outsized cost-of-living …
7th April 2023
Employment and wage growth continue to trend lower The 236,000 gain in non-farm payrolls in March adds to the evidence that the economy’s strong start to the year was partly weather related, with momentum fading again. With the sharp fall in job openings …
Employment and wage growth continue to trend lower The 236,000 gain in non-farm payrolls in March adds to the evidence that the economy’s strong start to the year was partly a weather-related blip, with momentum now fading again. With the sharp fall in …
Overview – We have made substantial downgrades to our forecasts this quarter. Aside from their direct impact through tighter lending conditions, last month’s regional bank failures appear to be helping crystallise some of the risks to commercial real …
6th April 2023
The local real estate board data suggest that new listings fell again in March, defying expectations that high interest rates could lead to forced home sales. With supply falling by more than demand, the risks to our house price forecasts lie to the …
Current market pricing suggests that there is around a 60% chance that, at the next policy meeting in May, the Monetary Policy Committee (MPC) raises interest rates by 25bps, from 4.25% now to 4.50%. This isn’t surprising given the decision will probably …
Commercial real estate (CRE) has become an area of particular concern against a backdrop of higher interest rates and a pandemic-induced reduction in demand for office space. Sweden’s economy looks particularly vulnerable to a downturn in the sector for …
Expansion in Q1 likely… After stagnating in Q4, euro-zone GDP probably rose in the first quarter. The final Composite PMI , released this week, confirmed that economic conditions improved further in March (though a bit less than implied by the flash …
The Land Registry report that London house price growth slowed to 3.2% y/y in January and more timely data based on mortgage approvals show a 2.2% y/y fall in prices in Q1. The detail suggests that affordability is becoming the primary driver of pricing. …
The RBA’s decision to keep rates on hold at its April meeting has reignited debate over whether the Bank’s tightening cycle is at an end. Financial markets certainly seem to think this is the case. However, our view, and the analyst consensus, is that the …
We anticipate that the S&P 500 will fall back later in 2023, largely because analysts are far from pricing in a recession in the US that we think is even more likely after the recent banking turmoil. Our forecast is that the index will reach a trough of …
Construction activity holds up as housing enters the doldrums The March headline CIPS Construction PMI reversed some of its surprise jump in February, but it remained in expansionary territory. That was driven by the commercial sector, where strong …
House price indices diverge The third consecutive monthly increase in house prices recorded by Halifax suggests that pricing is proving remarkably resilient to higher mortgage rates. But it is at odds with the consistent fall in the Nationwide house …
Industrial resilience won’t prevent recession The second consecutive big increase in German industrial production in February all but confirms that GDP returned to growth in Q1. The industrial resilience may continue in the coming months but we still …
Falling international trade points to weaker growth The widening of the trade surplus in February largely reflects the fact that imports of goods and services fell at a much faster rate than exports. Therefore, even though net trade will make a positive …
Tankan paints gloomy picture This week’s Q1 Tankan headline indices supported our assessment that Japan’s economy will slip into a mild recession in the first half of this year. The Bank subsequently released the comprehensive data from the survey on …
Note: Office-based employment data for several metros were missing for February. February employment growth slowed after January’s high February saw a slowdown in jobs growth after a strong month prior, suggesting January’s jump in employment was an …
5th April 2023
Will underlying inflation prove to be stickier than we thought? Paul Ashworth and Andrew Hunter from our US Economics team held an online briefing shortly after the release of the March CPI report. During this 20-minute briefing, Paul and Andrew answered …
Models suggest recession coming soon Our composite models suggest the economy was on track to fall into recession soon even before the impact of the banking turmoil feeds through. There also appears to be a lower, but rising, chance that a recession has …
Underlying inflation pressures are still well above the 2% mid-point of the Bank of Canada’s target range, but there are several reasons to expect disinflationary forces to build. We forecast that CPI inflation excluding food and energy will fall to 2% at …
Recent data suggest the economy’s resilient end to 2022 was sustained at the start of this year. But while the worst of the falls in real household incomes are in the past, we still think around two-thirds of the drag on real activity from the rise in …
Strong start to the year already going into reverse The ISM services PMI fell to 51.2 in March, from 55.1, adding to the evidence that, following a weather-related sugar high to start the year, the economy and labour market are rapidly losing upward …
Mortgage applications boosted by banking turmoil A sharp decline in 10-year Treasury yields in the middle of March led to a drop in mortgage rates, restoking demand for mortgage applications as a result. We expect this will help offset a tightening in …
Falling trade volumes add to signs of economic slowdown The sharp declines in both exports and imports in February add to the signs that economic growth is faltering. Although strong gains in January mean that both are still likely to have risen over the …
Falling trade volumes adds to signs of economic slowdown The sharp declines in both exports and imports in February add to the signs that economic growth is faltering. Although strong gains in January mean that both are still likely to have risen over the …
London office capital values fell by a relatively modest amount in the second half of last year and monthly data show values stabilised in the first two months of 2023. But that has left London office spreads very narrow at a time when the recent banking …
Surveys point to expansion in Q1 March’s PMIs suggest that the economy expanded in Q1. They also point to further gains in employment and strong price pressures. With the turmoil in the banking sector having stabilised, this makes us more confident in our …
The decision by the Reserve Bank of New Zealand to lift its official cash rate by 50bp, to 5.25%, came as an upside surprise, but we still think the end of the hiking cycle is approaching. In any case, the Bank’s aggressive tightening confirms our view …
Hawkish RBNZ will push New Zealand into recession The RBNZ’s decision to lift its official cash rate by 50bp, to 5.25%, came as an upside surprise to all. 22 out of 24 analysts polled by Reuters, including ourselves, had predicted a 25bp rate hike. The …
We expect the RBNZ to slow the pace of tightening and hike by 25bp (02.00 BST) The ISM Services Index is likely to show further signs of slower growth (15.00 BST) We think policymakers in Chile and Poland will keep interest rates on hold Key Market …
4th April 2023
The sharp fall in job openings in February shows that labour demand was cooling even before the recent banking turmoil and provides another reason to think that the Fed’s tightening cycle is nearly over. The fall in vacancies and downward revision to …
While we expect a more-than 20% peak-to-trough price correction for US commercial real estate, offices face a much tougher outlook, with large falls in net operating incomes compounding the broader re-pricing facing the sector and driving a …
Narrow money growth has turned negative as savers have shifted out of bank deposits and into money market funds and bonds, which now offer significantly higher returns. (See Chart 1.) Bank loan growth remains robust but, with the tightening in credit …
The Reserve Bank of Australia kept open the possibility of further tightening when it decided to leave its cash rate unchanged at 3.60% today. As such, we do still expect the RBA to deliver one final 25bp rate hike in May before bringing its tightening …
RBA will deliver one final rate hike in May The RBA’s decision to keep rates on hold does not signal an end to its tightening cycle. The RBA’s decision to pause was correctly predicted by 21 out of 37 analysts polled by Reuters, including ourselves. The …
Domestic weakness offsetting China reopening boost The slump in the ISM manufacturing index to a new cyclical low of 46.3 in March, from 47.7, indicates that the post zero-Covid recovery in manufacturing activity in China has not benefited US producers …
3rd April 2023
March’s sharp fall in headline inflation in Switzerland will provide some relief for the SNB as the decrease was spread across a wide range of goods. However, underlying price pressures remain strong by Swiss standards and we expect the SNB to hike …
Housing downturn has further to run With housing affordability the most stretched it’s been since the global financial crisis, we don’t think the uptick in house prices in March will be sustained. We’re sticking to our forecast that house prices will fall …
Faltering business conditions, investment intentions point to recession Today’s Tankan survey suggests that while the services sector remains resilient, the outlook for the manufacturing sector has worsened materially. The Tankan’s headline index for …
Tankan points to sharp investment slowdown The Tankan’s headline index for large manufacturers fell for the fifth consecutive quarter from +7 to +1, broadly consistent with decline indicated by the monthly Reuters Tankan (Bloomberg consensus: +3, CE …
Strong start to the year begins to flag After an unexpectedly strong start to the year in January, which was mostly maintained in February, the March data will tell us whether that early strength was a temporary weather-related spike or a genuine pick-up …
31st March 2023
While there are downside risks from hidden exposures or a sudden loss of confidence and deposits, our sense is that the banking issues won’t escalate significantly further, or spread to UK banks. (See here .) The broad message from this week’s …
Real spending drops back; core inflation still elevated Although real consumption declined by 0.1% m/m in February, that reversed only a small fraction of the upwardly revised 1.5% surge in January (previously estimated to be 1.1%). Even allowing for …
Less than two weeks have passed since the demise of Credit Suisse so it is too early to draw many lessons about the implications (if any) for the global banking sector. But the speed of the collapse of a bank which had passed the key financial health …
Recession still to come this year as resilience recedes The final Q4 2022 GDP data suggested the economy was even more resilient in 2022 than we previously thought, as the government absorbed some of the hit to households from high inflation. But we …
Wage-price spiral still looking unlikely Ahead of today’s deadline for initial submissions to the 2022-23 Annual Wage Review, stakeholders have been haggling over increases to the minimum wage this year. The Australian Council of Trade Unions has backed a …
Adjustment to higher mortgage rates continues House prices fell for a seventh consecutive month in February, taking the total fall from their peak in August to 4.6%. With house prices still significantly overvalued in today’s higher mortgage rate …
