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Weak investment momentum makes recession even likelier Japan’s economy returned to growth in Q4, avoiding a technical recession after the contraction in Q3. However, the rebound was subdued, let down mostly by contractions in business investment and …
14th February 2023
Slowdown in lending activity beginning to show in January The expected slowdown in net lending to real estate began to show in January. This was seen across all sectors and the latest Senior Loan Officer (SLO) survey suggested this will continue, as banks …
13th February 2023
Central banks need wage growth to slow significantly before they can judge that inflation is firmly under control. The least painful way for this to happen is for the recent rise in “mismatch” between workers and vacancies to reverse. However, we think …
The surge in employment and rise in hours worked in January suggest that economic activity continued to expand at the start of 2023 and present clear upside risks to our forecasts for GDP growth. Nevertheless, we disagree with the market-implied view …
10th February 2023
The US dollar is set to end the week a touch stronger against most currencies, adding to its gains last week. But, aside from the Japanese yen round-tripping on news over the next BoJ governor, it’s been a relatively quiet week for the greenback – not …
It was a fairly quiet week in commodities markets, although oil prices rose on concerns about earthquake-related disruption to exports from the Turkish port of Ceyhan and Russia’s announcement of a 0.5m bpd cut to production in March. By contrast, the …
Given that US economic outperformance has tended to coincide with a stronger dollar, we suspect a “soft landing” in the US economy would provide a favourable backdrop for the greenback, if it also meant that growth in the US remained more resilient than …
Markets have continued to swing round to the Fed’s view that rate cuts are unlikely this year. We still believe that those cuts are coming, however, as economic growth disappoints and core inflation falls more rapidly than the Fed is expecting. Markets …
Overview – Housing market activity is likely to recover only gradually from its current lows, which means we think 2023 will be the weakest year for sales since 2012. Affordability will remain stretched by past standards, especially in the first half of …
Confidence still near historic lows, despite recent rebound The further modest rise in the University of Michigan consumer sentiment index in early February still only left it in line with its average level during the depths of the financial crisis in …
Almost three years on from the pandemic, only middle-income households are yet to recover financially. In the face of a looming downturn, we expect this will drive growth for discounters as middle-income households trade down their spending habits, …
It doesn’t really matter if the economy was in recession last year or not (although according to the technical definition it was not). (See here .) Two other factors are more important. First, recession or no recession, the economy is weak. Real GDP …
The main development of the week happened in the past few hours: the reported nomination of Kazuo Ueda as the next BoJ Governor. Our initial response is here . While analysts and investors are looking for clarity on Mr Ueda’s views, there is little to …
The nomination of Kazuo Ueda to lead the Bank of Japan could be read as a sign that the Kishida government is seeking a shift away from ultra-loose policy, but we aren’t fully convinced that this is the case. According to media reports, Japan’s government …
Recession may come this year as resilience recedes The economy escaped a recession in 2022 by the skin of its teeth (£77m to be precise). But with the full drags from high inflation and high interest rates yet to be felt, we think there will be a …
Avoiding a recession in 2023 will prove harder The 0.5% m/m fall in real GDP in December was worse than expected (consensus -0.3%), but the 0.0% change in Q4 (consensus 0.0%, BoE +0.1%) meant that the economy avoided a recession last year by the skin of …
With trimmed mean inflation surpassing the Bank’s November forecast in Q4, the RBA turned more hawkish when it lifted the cash rate by 25bp on Tuesday. Today’s Statement on Monetary Policy shows that the Bank expects inflation to only touch the top end of …
We doubt the recent renewed outperformance of the “big-tech” sectors of the US stock market will continue in the coming months given the prospect of a mild recession, even if TIPS yields fall again. Despite some disappointing news on the earnings front, …
9th February 2023
We expect stretched affordability and rising unemployment to lead to an increase in rental arrears and evictions in the coming quarters, causing rental household formation to turn negative and apartment demand to soften. We have argued since mid-2022 that …
We anticipate interest rate hikes in Mexico and Peru… (Thu.) … but think Russia’s central bank will leave rates on hold (Fri.) UK GDP data likely to show that the economy avoided a recession in 2022 (Fri.) Key Market Themes Shrinking central bank …
Overall services price growth has already slowed but, for the Bank of Canada to loosen policy, we will need to see far more convincing signs of lower inflation in the most labour-intensive service sectors. The Bank has stressed that it is following …
We think business insolvencies may rise to a record high of around 8,400 per quarter by Q2 2024 and take until at least early 2025 to return to a more “normal” level of just over 4,000 per quarter. The total rise in insolvencies above this normal level is …
German inflation statistics debacle continues The main takeaway from German flash inflation figures for January, which were finally released today after a week of delay, is that headline inflation in both Germany and the euro-zone fell further in January, …
Survey delivers reality check to new year optimism There was some hope that, in keeping with the pause in house price falls recorded by Halifax in January, the RICS survey would show a recovery in demand on the back of the modest decline in mortgage …
Refinery activity to remain subdued this quarter Commercial crude stocks rose again this week, despite a rise in inputs to refineries. That said, refinery activity is unlikely to pick up markedly in the coming weeks given ongoing maintenance and only …
8th February 2023
A surge in property yields helped commercial property valuations improve for the first time in two years in the final quarter of 2022. Jumps in alternative asset yields late last year following the ‘mini-Budget’ meant the shift was modest, but those …
The unexpected surge in payroll employment in January has led to claims of an economic resurgence that will force the Fed to keep hiking interest rates but, on balance, we still think the real economy is losing momentum and will eventually tip into …
We think sovereign bond yields in Canada, Australia, and New Zealand will drop further by end-2023. The central banks of Canada, Australia, and New Zealand have generally been at the forefront of this tightening cycle in terms of starting to hike rates ( …
Since the full effects of the previous surge in energy prices and the hike in interest rates have yet to be felt, we still think the economy will succumb to a recession this year. Admittedly, pandemic savings and the government’s handouts appear to have …
Q1 2023 to still see decent consumption growth Current readings dipped slightly in January's Economy Watchers Survey but the jump in outlook readings, suggests spending growth this quarter will still be decent. “Current conditions” dipped slightly from …
We think India’s central bank will deliver a final rate hike, of 25bp, to 6.5%... (04.30 GMT) … but expect policymakers in Poland to keep rates unchanged at 6.75% Inflation in Russia probably rose a bit, to 12%, in January (16.00 GMT) Key Market …
7th February 2023
Deficit rebounds as easing supply shortages boost imports The December trade data show a rebound in both real exports and imports but, with those gains following steep declines in previous months and the surveys pointing to renewed weakness to come, the …
Rebound in auto exports offsets decline in commodity export prices A surge in motor vehicle exports drove export volumes higher at the end of 2022, even as lower commodity prices weighed on export values. While there is scope for motor vehicle exports …
The surge in interest rates and tightening in credit conditions last year resulted in a broad-based plunge in loan demand in the fourth quarter. Most banks expect to continue tightening standards this year, suggests the recent drop back in long-term …
Rebound in autos exports offsets decline in commodity export prices A surge in motor vehicle exports drove overall export volumes higher at the end of 2022, even as lower commodity prices weighed on export values. As the export order surveys are still …
Deficit rebounds as easing supply shortages boost imports The December trade data show a rebound in both real exports and imports but, with those gains following steep declines in previous months, the data still suggest that domestic and external demand …
House price falls pause (for now) We suspect that the pause in house price falls in January reported by Halifax will prove temporary. Despite the slight decline in mortgage rates, affordability still looks far too stretched for house prices to have …
Slump in industrial production points to recession After proving resilient for most of 2022, German industrial production slumped in December, adding to the reasons to expect the economy to fall into recession. December’s 3.1% m/m fall in industrial …
RBA signals further interest rate hikes ahead The RBA raised interest rates by another 25bp and signalled that further tightening will be needed. We’re sticking to our forecast that the Bank will lift the cash rate to an above-consensus 3.85% by April. …
Decades-high wage growth won’t be sustained The large jump in wage growth in December was mostly due to a surge in volatile bonus payments and it will slow over the coming months. The much quicker wage growth in December, rising from 1.9% y/y to 4.8%, …
Boost from net trade should ensure decent rise in Q4 GDP Export volumes probably edged up last quarter while import volumes plunged so net trade should provide a sizeable boost to Q4 GDP growth. The decline in the trade surplus in December, from $13.5bn …
6th February 2023
Germany’s industrial production probably didn’t change much in December (07.00 GMT) We think the trade deficit in the US widened last month… (13.30 GMT) …while Canada’s merchandise trade balance fell back into deficit (13.30 GMT) Key Market Themes …
Most, but not all measures of house prices show that they are falling. That has led some to contend that cash buyers may be supporting prices. But we think it is just a matter of time before the ONS House Price Index (HPI) catches up with the Nationwide …
Commercial and housing activity falls further, but expectations brighten The headline CIPS construction index showed a contraction in activity in January, with the housing index seeing a substantial decline. But the forward-looking indicators improved, …
We think euro-zone retail sales contracted sharply in December (Tuesday) UK Q4 GDP is likely to confirm the economy avoided recession in 2022 (Friday) We expect central banks in Australia, Sweden, India, Mexico and Peru to hike rates next week Key …
3rd February 2023
The US dollar looks likely to record its largest weekly rise against other major currencies since its cyclical peak in September of last year. While investors’ dovish interpretations of announcements by the Fed, BoE, and ECB led the dollar on a roundtrip …
We expect a further slowing in office completions over the next few years as a combination of factors weigh on the profitability of new projects. But our latest review of the metro-level completion forecasts saw large upward revisions for Austin, NYC and …
