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Recession may have already begun The unemployment rate stayed unchanged in December, but labour market conditions are beginning to betray signs of loosening. Similarly, the strong rebound in retail sales is likely to give way to slower growth as the …
31st January 2023
Weakening industrial production outlook heralds recession Retail sales rebounded in December and industrial production was mostly flat in December. However, firms’ forecasts are consistent with sharp contractions in industrial output over the coming …
Unemployment rate to rise before long The unemployment rate stayed unchanged in December, but labour market conditions are beginning to betray signs of loosening. We are expecting unemployment to rise to 2.8% by mid-year due to a recession. The labour …
30th January 2023
It’s well known that, with the yield curve inverting the Fed is now racking up losses, but what is less appreciated is that the higher interest payments it is making are going mostly to foreign banks and money market funds. The Fed earns interest on …
We think China’s PMIs picked up in January as its COVID wave ebbed (01.30 GMT) Euro-zone GDP probably flatlined in the fourth quarter… (10.00 GMT) …and economic growth may have weakened in Mexico and the Czech Republic Key Market Themes The Fed , ECB …
The shift away from floating-rate to fixed-rate mortgages presents risks as well as benefits. It will protect homeowners who are lucky enough to have a long time remaining on their fixed rate contract from higher mortgage payments. But that reduces the …
Recession not off the table yet The fall in German GDP in Q4 shows that the energy crisis started to dent activity at the end of last year. This pours cold water on the recent optimism about the prospects for the euro-zone and suggests that a technical …
Recession not off the table yet The fall in German GDP in Q4 suggests that the energy crisis started to dent activity at the end of last year. This pours cold water on the recent optimism about the prospects for the euro-zone and suggests that a technical …
The conventional wisdom is that the annual spring wage negotiations (Shunto) are a bellwether for wage growth. In reality, the small number of employees covered by the talks and their bias towards workers in large manufacturing firms means that the Shunto …
We expect the Fed to slow the pace of interest rate hikes to 25bp… (Wednesday) …but the ECB and Bank of England are likely to raise rates by 50bp (Thursday) We’ve pencilled in a below-consensus gain of 150,000 in US non-farm payrolls (Friday) Key Market …
27th January 2023
Our forecasts for house prices, mortgage rates and incomes over the next few years mean affordability will remain relatively stretched compared with the past 15 years. But there is good reason to think that mortgage payments as a share of income were …
Recession denial in full effect The commentary this week dismissing the validity of the Conference Board’s leading indicator (see here ), which is currently giving an unambiguous recession warning, reminds us of the old quote from JK Galbraith that “faced …
Governor Tiff Macklem stressed on Wednesday that the pause in the Bank of Canada’s tightening cycle is conditional on looser conditions in the labour market and a fall in inflation expectations. The CFIB Business Barometer showed evidence of both a day …
Slump in spending suggests recession could have already started The monthly income and spending figures reveal that, despite the apparent resilience of fourth-quarter GDP growth, the economy was on the precipice of a recession, and may already have fallen …
Yields have continued to surprise on the upside, with the all-property equivalent yield rising by 106bps in the three months to December. That matches the worst months of the GFC, and even though rental growth has held up capital values ended the year …
The recent persistence of inflation leads us to think that the Bank of England will proceed with another 50 basis point (bps) rise in Bank Rate, from 3.50% now to 4.00% next Thursday. (See here .) We will be discussing the policy outlooks for the BoE, the …
PM Kishida, demographic doomsayer In his speech on Monday kicking off the first Diet session of the year, PM Kishida proclaimed that it is “now or never” when it comes to addressing Japan’s demographic decline. To that end, he pledged to double spending …
Balanced risks to our 2023 inflation view Tokyo inflation rose to 4.4% in January as fresh food and services inflation rose. But with the boost from the weaker yen fading and lower commodity prices due to feedthrough, inflation should fall this year. …
January print likely the peak for inflation Tokyo inflation rose to 4.4% in January as fresh food and services inflation rose, signalling a similar jump at the national level. But due to the government’s energy subsidies we expect it to fall below the …
26th January 2023
Resilient new home sales set for gradual recovery The small rise in new home sales in December confirmed that the new build sector is holding up better than the wider market. This likely reflects builders offering generous incentives to attract buyers as …
Although we think there is still a decent case for UK equities to continue outperforming those in the US over the next few years, we don’t expect the UK’s stock market to perform significantly better than stock markets in the euro-zone over that period, …
Market sentiment declined further in Q4 as the outlook deteriorated The latest RICS Survey conveyed a further decline in confidence following a turning point in the previous quarter. Comments from surveyors point to high interest rates as the main …
We expect a more modest 150,000 gain in non-farm payrolls in January. The annual benchmark revisions may also show a sharper slowdown in employment growth over the second half of last year than previously reported. Payrolls on borrowed time The labour …
Underlying pace of growth weakens The 2.9% annualised rise in fourth-quarter GDP was a little stronger than we had expected, but the mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter went on. We …
Underlying pace of growth already much weaker The 2.9% annualised rise in fourth-quarter GDP was a little stronger than we had expected, but the mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter …
Overview – 2023 will be the most difficult year for the housing market since 2008. Mortgage rates remain very high by the standards of recent years and can’t drop materially until the Bank of England shifts from raising interest rates to cutting them. …
We forecast the 10-year Treasury yield to decline between now and the end of the year, as inflation eases further and the Fed transitions to monetary loosening. A key risk to this projection, in our view, is the weak outlook for demand for Treasuries, …
Despite some good news, another 50bps rate hike is most likely Next phase will be MPC pausing to assess influence of higher rates, but we’re not there yet Next big surprise may be that rates are cut by more than investors expect in 2024 Another 50 basis …
Occupier demand contracts further as the economy slows The slowing economy led to a further fall in occupier demand in Q4, with retail seeing the largest contraction. So far, the fall in rental expectations has been relatively modest and surveyors expect …
Sharper markdowns mean worst quarter for total returns since Q2 2009 The 4.45% hit to all-property capital values in Q4 was more substantial than our end-2022 forecasts implied, although recent news of bigger valuation markdowns in December made this less …
25th January 2023
We think the US economy expanded by nearly 2% annualised in Q4... (13.30 GMT) South Africa’s central bank will probably hike by 50bp on Thursday Sign up here for our Drop In on the latest economic and market developments in Asia Key Market Themes …
The Bank of Canada accompanied its smaller 25 bp hike with new guidance that it intends to hold the policy rate at the current 4.5% while it assesses the impact of the cumulative interest rate increases so far. While the Bank did not rule out future …
Bank hints that smaller 25 bp hike likely to be the last The Bank of Canada accompanied its smaller 25 bp hike with new guidance that it intends to hold the policy rate at the current 4.5% while it assesses the impact of the cumulative interest rate …
Recession might be avoided, but outlook still poor The further increase in the Ifo Business Climate Index in January confirms that the recovery in German business sentiment that started at the end of 2022 has continued this year. But the fall in its …
Recession might be avoided, but outlook still poor The renewed increase in the Ifo Business Climate Index in January confirms that the recovery in German business sentiment that started at the end of 2022 has continued this year. But the fall in its …
As 2023’s calendar of central bank meetings began, we held a special briefing on the first Federal Reserve, European Central Bank and Bank of England policy decisions of the year. Chief Global Economist Jennifer McKeown lead a discussion with economists …
24th January 2023
Recession on the cards for 2023 The renewed fall in the flash UK composite PMI in January suggests that some of the resilience in economic activity towards the back end of 2022 petered out in early 2023. That supports our view that the economy is …
Recession on the cards in 2023 The renewed fall in the flash UK Composite PMI in January suggests that some of the resilience in economic activity towards the back end of 2022 started to peter out in early 2023. While still very high, the price indices …
Big Budget giveaways will have to wait until March 2024 December’s worse-than-expected public finances figures suggest the Chancellor will wait until closer to the next election before announcing any significant tax cuts and/or spending rises. Public …
Borrowing overshoot further limits chances of big Budget giveaways December’s public finances figures provided more evidence that the government’s fiscal position is deteriorating fast. And high government spending in the early months of 2022/23 and the …
The flash PMI might have edged up in the euro-zone in January… (09.00 GMT) … but we think it fell back in the UK (09.30 GMT) We expect central banks in Hungary and Nigeria to keep interest rates on hold Key Market Themes We don’t think government bond …
23rd January 2023
The sharp fall in hiring intentions in the Bank of Canada’s Business Outlook Survey suggests that the 104,000 surge in employment in December is not a sign of things to come. The survey points to a slowdown in average monthly employment growth to just …
The CPI-trim and CPI-median measures of core inflation will be revised up next month but that does not change our view that they will fall sharply over the first half of this year. We think the 25 bp hike from the Bank of Canada next week will mark the …
20th January 2023
We expect the slowdown in investment activity in the second half of 2022 to persist into the first half of 2023. But we think transactions will begin to recover later this year once interest rates have topped out and much of the valuation adjustment has …
Join Paul Ashworth , our Chief North America Economist, Stephen Brown , who leads our Canada coverage, and Jonathan Peterson , Senior FX Markets Economist, held a 20-minute briefing shortly after the Bank’s January decision announcement. Paul, Stephen …
We now think German industry will continue to grow in the coming months as lower gas prices, easing supply shortages and high backlogs of orders support production. One of the reasons for the resilience of the German economy in the face of the energy …
With inflationary pressures easing and the global growth outlook improving, we no longer expect the US dollar to breach its late September peak. But we still think that souring risk appetite associated with recessions in developed markets will boost the …
The weakness of retail sales and manufacturing output over the final two months of 2022 has reignited market fears of a hard landing this week, with the Fed’s latest Beige Book acknowledging that activity appears to have ground to a halt. Admittedly, …
CPI inflation is falling and the Bank of England Governor, Andrew Bailey, sounded optimistic this week when he said that “a corner had been turned on inflation”. But he and most other Monetary Policy Committee (MPC) members will probably still be …
Disappointing end to a difficult year The 1.0% m/m fall in retail sales volumes in December was much worse than both we and the consensus (+0.5% m/m) had expected. That meant sales volumes fell 1.3% q/q in Q4 and were a disappointing 5.4% below their …
