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RBA isn’t done tightening just yet The minutes of the RBA’s February meeting, where policymakers lifted the cash rate by 25bp to 3.35%, confirmed the Bank’s pivot to a slightly more hawkish stance. In contrast to its December meeting, the Bank didn't …
21st February 2023
Manufacturing downturn gathering speed According to today’s flash estimate, the manufacturing PMI fell deeper into contraction from 48.9 in January to 47.4 in February. The output sub-index fell to 44.9, the weakest reading since July 2020. Firms are …
The February composite PMI probably rose further above 50 in the euro-zone… (09.00 GMT) … and remained below 50 in the UK and the US We think CPI inflation was unchanged at 6.3% in Canada in January (13.30 GMT) Key Market Themes Those hoping for stellar …
20th February 2023
Being ranked by the Sunday Times as the top UK economic forecaster for 2022 is a great accolade and has generated a lot of interest in what we expect to happen next. Our forecasts for 2023 imply a tougher year than the consensus, with higher inflation …
This dashboard contains our forecasts for the US housing market and key macro indicators. If you have subscriber access to the data underlying this redesigned dashboard, you can download it via the menu options in the top right of each chart or table. If …
Yet another increase in core inflation The fall in the Riksbank’s target measure of inflation was largely due to a huge one-off drop in electricity prices but policymakers will focus more on the big increase in core inflation. This vindicates their recent …
While the recent economic data have surprised on the upside, property market indicators were broadly worse than expected in Q4. Occupier demand softened, particularly in the office and apartment sectors, as concerns about the outlook weighed on firms …
17th February 2023
Governor Tiff Macklem reiterated this week that the Bank of Canada wants time to assess the impact of high interest rates, suggesting it will not respond to the strength of employment by immediately resuming interest rate hikes. The weakness of home …
There are growing signs that stretched affordability is weighing on homeownership, particularly for the under 35s. We expect this to persist in the coming quarters. But there is a large pool of young adults waiting to purchase their first home once …
While more disinflation may yet benefit the US stock market by, for example, facilitating a renewed decline in TIPS yields and boosting profits from the rest of the world if accompanied by a weaker dollar, we don’t think it will prevent equities from …
In a previous edition of the UK Economics Weekly we said that the CPI core services inflation and private sector pay figures released this week would prove pivotal in determining whether the Bank of England raises interest rates further or calls time on …
Echoing the unexpectedly large increase in payroll employment last month, January’s retail sales and manufacturing output data were unquestionably strong too. Admittedly, retail sales appear to have been boosted by problems with the seasonal adjustment, …
The ECB’s doves have been pretty quiet for the past few months, but Fabio Panetta – who is probably the most influential one these days – gave a moderately dovish speech this week. Among other things, he suggested that inflation may already have peaked. …
This week’s data contained encouraging signs that inflationary pressures are fading, and the risks to our view that Bank Rate will rise to 4.5% this year now lie to the downside. The January MSCI data also included good news for investors, with …
Too soon to conclude that retail is coming out of its funk The rebound in retail sales in January was better than expected, had echoes of the leap in US retail sales and suggests that the festive/new year period wasn’t a complete write-off. But while …
2023 may be better than 2022 for retailers, but it will still be a struggle The 0.5% m/m rise in retail sales volumes in January was better than the consensus forecast of a 0.3% m/m decline (CE +0.5% m/m), echoes the leap in US retail sales earlier this …
The 11,500 drop in employment in January marked the second consecutive fall and we think it marks the beginning of a sustained period of labour market slackening. In annual terms, employment will still be up around 2.5% this quarter, but if our downbeat …
Export volumes fell again in January The 0.2% q/q rise in Q4 GDP was weaker than most had anticipated and is consistent with our view that the economy will do much worse this year than anyone expects. Indeed, the early indications are that economic …
UK retail sales volumes probably rose by 0.5% m/m in January (07.00 GMT) We think Russia’s GDP fell by 3.5% y/y in Q4 (16.00 GMT) Catch-up here on yesterday’s Drop-In on our UK economic outlook Key Market Themes The recent strength of the US dollar and …
16th February 2023
Starts fall back in January despite warm weather Single-family housing starts dropped back in January and the permits data add weight to our view that more weakness is to come. We think that starts will edge lower in the coming months, before an increase …
The Mexican peso’s outperformance since the start of 2022 has pushed up its valuation substantially, and we think that this leaves it vulnerable to sharp falls against the US dollar if, as we expect, the US economy falls into recession later this year. …
The UK avoided a recession last year partly because of more spending by households on restaurants and trains and partly because of more investment by businesses in aircraft, cars and cruise ships. This suggests the recovery from the pandemic cushioned …
We think French wage inflation will remain much stronger than in the pre-pandemic period this year. This is not least because of the automatic adjustments to inflation of the minimum wage and negotiated wages engrained in the French system. Charts 1 …
The survey data suggest that the modest decline in mortgage rates since October falls a long way short of what would be required for house prices to bottom out. The fall in market interest rates since the “mini” budget has allowed the average quoted …
Exports downturn well under way The trade deficit was virtually unchanged in January, as volumes and prices of exports and imports fell across the board. With the global downturn weighing on external demand, further export volume contractions are in …
Labour market will continue to slacken The weakness in January’s labour market data shows that rapid rate hikes are starting to cool activity, but with inflation still far too high that won’t prevent the RBA from tightening policy for a while yet. The …
Labour market will continue to loosen The weakness in January’s labour market data underlines that aggressive monetary tightening is starting to cool activity, but with inflation still far too high, that won’t prevent the RBA from hiking interest rates …
Exports and machinery orders to trend down in H1 The trade deficit was virtually unchanged in January, as volumes and prices of exports and imports fell across the board. Export volumes likely fell for the second consecutive month and with the global …
Commercial crude oil stocks looking healthy Commercial crude stocks rose to their highest since June 2021 last week due to lower refinery activity. With crude demand likely to remain sluggish over the coming months, and the US government set to sell …
15th February 2023
Unseasonably warm weather provides little support The unseasonably warm start to 2023 provided little support to the housing market or construction, with sales and prices falling further in January while housing starts slumped to a 28-month low. As prices …
We expect the central bank in the Philippines to raise rates by 50bps to 6%... (07.00 GMT) … and Bank Indonesia to keep rates unchanged at 5.75% (07.20 GMT) US January housing starts may temper economic optimism a bit (13.30 GMT) Key Market Themes This …
Further evidence of rebound The 1.0% m/m rebound in manufacturing output in January provides further evidence that the economy began the year on a strong footing. That said, while the survey evidence also appears to be turning a corner, for now it is …
Surge in sales erases Q1 recession fears The massive 3.0% m/m surge in retail sales in January may have been partly related to the unseasonably mild winter in the Northeast but, alongside the unexpected strength of payroll employment, it nevertheless …
Further evidence of January rebound The solid 1.0% m/m rebound in manufacturing output in January provides further evidence that the economy began the year on a strong footing. That said, while the survey evidence also appears to be turning a corner, for …
Sales volumes fall again despite resurgent motor vehicle sector Another rise in motor vehicle manufacturing sales failed to offset weakness elsewhere in December, with overall sales volumes edging down. The rebound in the S&P Manufacturing PMI and …
Moderating services inflation makes Bank of England’s life easier The fall in CPI inflation from 10.5% in December to 10.1% in January (consensus and CE forecast: 10.2%, BoE forecast: 10.1%), the drop in the core rate from 6.3% to 5.8% and the easing in …
Moderating services inflation makes Bank of England’s life easier The sharp fall in CPI inflation from 10.5% in December to 10.1% in January (consensus and CE forecast: 10.2%) was the most eye-catching part of today’s CPI release. But it is the easing in …
The government formally nominated Kazuo Ueda as the next Bank of Japan Governor at yesterday’s Diet session. Since the initial announcement of his candidature last Friday , analysts and investors have been looking for clarity on Mr Ueda’s views. So far …
Data a touch softer than expected, but not soft enough for RBNZ to back away We still expect rates to peak at 5.5% by the middle of this year Looming recession will prompt looser policy by year-end The incoming data have been a touch softer than the RBNZ …
A further decline in US inflation seems largely priced in to financial markets. But we still think investors are too optimistic about how quickly the economy will grow, and as such are sticking with our view that equities will come under renewed pressure, …
14th February 2023
The surge in employment in January highlights that some sectors are still recovering strongly and raises the prospect that the economy could avoid recession, although we still judge that a modest one is more likely than not. As the employment gains have …
We think the PBOC will cut the interest rate on its Medium-Term Lending Facility UK CPI inflation probably fell further in January (07.00 GMT) We expect US activity data to show some recovery, due partly to easing supply shortages Key Market Themes …
Pace of disinflation slowing The 0.5% m/m increase in consumer prices in January suggests that the downward trend in inflation is slowing. But we still expect the disinflationary process to re-accelerate soon, as easing shortages push core goods prices …
Core inflation eases only gradually The 0.5% m/m increase in consumer prices in January illustrates that inflation is still declining only gradually, but we still expect that downward trend to accelerate soon, as easing goods shortages feed through and …
Recession looming Confirmation that euro-zone GDP growth slowed to a crawl in Q4 does not alter our view that the region is now falling into recession. That said, we think the labour market will continue to hold up well. The second estimate of Q4 GDP …
Wage growth continues to accelerate despite cooling labour demand December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continued to support strong wage growth. The Bank of …
Wage growth continues to accelerate despite cooling labour demand December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continues to support strong wage growth. The Bank of …
Still on track for a recession in the first half Japan’s economy returned to growth in Q4, avoiding a technical recession after the contraction in Q3. With business investment slowing even quicker than we anticipated and a lower savings rate leaving less …
