Slump in exports a downside risk to GDP growth The slump in export volumes presents downside risks to the preliminary estimate that GDP rose strongly in May, and suggests that the earlier boost from easing supply shortages is now largely behind us. With …
6th July 2023
Export weakness to hit Q2 GDP; ADP should be treated with caution The May trade data suggest that falling exports will be a big drag on second-quarter GDP growth, and we suspect the reported surge in ADP employment last month is too good to be true. The …
The shift to fixed mortgage rates and the rise in the number of homes owned outright means that while some borrowers face a sharp rise in mortgage payments other homeowners will sit out this interest rate cycle entirely. The most vulnerable group is …
Demand rebounds marginally from historic lows A slight decline in mortgage rates allowed mortgage applications for home purchase to recover from the previous month’s lows in June. That said, applications remain below the average seen so far this year, …
The surge in Brazil’s exports since the start of the pandemic has helped the economy recover more quickly than we and most others had anticipated. And unlike previous spikes in exports, some of the windfall has been saved, which has caused the current …
Construction slows as interest rates stay higher for longer and recession looms After two months of gains the headline CIPS construction PMI reversed course in May, dropping to a five-month low of 48.9, which indicated a contraction in activity. All …
The acceleration in core CPI inflation in May combined with the reacceleration in wage growth in April shows that domestic inflationary pressures are still strengthening and interest rates will need to rise further. Admittedly, higher interest rates were …
The pandemic-induced shift towards homeworking caused a sharp fall in physical office occupancy rates. They have since recovered significantly but remain below pre-pandemic levels. And while lower physical office occupancy will feed through to weaker …
Retail sales flat in May Euro-zone retail sales remained very weak in May and point to household consumption having fallen in Q2. Further out, low consumer confidence and rising interest rates suggest that household consumption will fall further over the …
Twelve months on from last year’s political and economic crisis, Sri Lanka is slowly getting back on its feet. The economy looks set to rebound steadily over the coming quarters helped by a sharp drop in inflation, lower interest rates, a recovery in …
The meltdown in CRE that’s dominating headlines is a story centred on the office sector. But is this a US or global story and, 18 months into the most aggressive tightening cycle in a generation, is there worse to come or is recovery on the horizon? …
Will the Fed resume rate hikes at its July meeting? Do fresh signs of weakening activity make a US recession more likely? When does policy tightening move to rate cuts? Join our US team for this special briefing in the wake of the June CPI report in which …
Emerging market economies have so far come through the biggest global tightening cycle in a generation in fairly good shape. But their economies are now slowing and their central banks are turning from rate hikes to policy easing. As this cycle turns, …
With the Korean economy slowing and stability concerns growing around the property sector, will the Bank of Korea show it’s ready to move towards policy easing? Economists from our Asia team held a briefing shortly after the Bank’s July meeting to discuss …
BNM to sit on the sidelines Malaysia’s central bank today left interest rates unchanged at 3.0%, and we think this marks the end of the tightening cycle. But unlike other central banks in the region that are set to cut interest rates over the coming …
Net exports will cushion GDP growth in Q2 The rise in the trade surplus, to $11.8bn in May from $10.5bn in April, was stronger than most had anticipated (Refinitiv Consensus: $10.5bn, CE:$10.9bn). Exports of goods and services rose by a solid 4.4% in …
Economy and housing market enjoying renewed momentum Core inflation pressures easing but still too strong for comfort Loosening labour market means Bank unlikely to raise rates above 5.0% Note: We’ll be discussing the Canadian economic and policy outlook …
5th July 2023
Fed largely united in favour of temporary pause The minutes of the Fed’s mid-June FOMC meeting suggest that participants were largely of the same mind as far as the decision to temporarily pause the hiking cycle was concerned. Just as “almost all” …
Chief North America Economist Paul Ashworth and Stephen Brown , who leads our Canada economic coverage, held this post-BoC July meeting briefing. During this 20-minute session, Paul and Stephen will be highlighted key takeaways from the Bank’s latest …
Although we expect emerging market (EM) policy rates to fall vis-a-vis the US this year, we don’t expect EM local-currency sovereign bonds to outperform US Treasuries until global growth picks up over 2024. EM central banks have generally shifted into …
The valuations of equities are, in general, still a long way from being unprecedently high compared to those of government bonds. There are umpteen ways to compare the valuations of equities and government bonds. One recent development in the UK to catch …
The long NHS waiting lists may be one reason why some people are unable to work and may therefore be contributing to inflation being higher in the UK than in other major economies. As the NHS waiting list is unlikely to shorten soon, we think that …
Expectations of fiscal stimulus in China have thrown previously floundering copper prices a lifeline. If policymakers go ahead, that may keep a floor under prices before a turnaround in construction in China and accelerating electric vehicle rollouts …
House prices in the euro-zone have fallen sharply and further declines seem quite likely. This will weigh on construction activity and household consumption, both of which are already weak, and contribute to the euro-zone remaining in recession over the …
A significant number of EMs that were running large current account deficits last year – including much of Central and Eastern Europe (CEE), Peru and Chile – have seen dramatic improvements in their external positions. That limits the downside risks to …
Rates on hold throughout this year Romania’s central bank (NBR) kept its main policy rate unchanged at 7.00% today and we think it will keep rates on hold throughout this year. The central bank is likely to be the last in the region to transition to …
After fluctuating between $500 and $600 per 1,000 board feet for most of this year, we expect the US lumber price to fall from around $520 today to $475 by the end of the year due to weaker demand. The key risk to our forecast is that concern grows about …
Activity in Saudi Arabia’s non-oil sector has continued to hold up well, but that is merely cushioning the blow to the economy from oil output cuts. The Kingdom’s economy contracted by 1.4% q/q on a seasonally-adjusted basis in Q1, which was driven by …
The recent strength of net lending to commercial property can’t be explained by a rise in investment. Instead, we suspect some investors are borrowing against older assets to provide additional equity when refinancing newer acquisitions whose loans are …
Corporate credit spreads have fallen back in the US over the past couple of weeks, while they have risen in the euro-zone and the UK. However, given our pessimistic view of the US economy, we suspect that the divergence will end before long, with US …
This page has been updated with additional analysis and a Chart of the key data. Gulf non-hydrocarbon sectors enter second half of the year with strong momentum June’s batch of PMIs for the region improved almost entirely across the board and the strength …
Economy weakened at the end of Q2 The downward revision to the euro-zone Composite PMI for June, from 50.3 to 49.9, left it consistent with the economy stagnating at best at the end of Q2. Given that the PMI overstated growth in Q1, and that other data …
Lira depreciation starting to feed through Inflation in Turkey fell to 38.2% y/y in June but the impact of the recent sharp fall in the lira is now starting to work its way through. Inflation is likely to rise in July and we think it will end this year at …
Press reports suggest that Department of Finance Secretary Jenny Wilkinson is the front-runner to become the next Governor of the Reserve Bank of Australia, though Treasury Secretary Steven Kennedy and RBA Deputy Governor Michelle Bullock are in the …
RBNZ will leave rates unchanged next week With economy in recession and inflation expectations falling, tightening cycle is over But resilient labour market conditions will delay rate cuts until early-2024 Having raised rates more aggressively than any …
Processed food inflation hit a fresh high in May but the recent moderation in food import prices as well as likely declines in domestic fertiliser prices suggest it will soon start to moderate. Food inflation reached an eye-watering 15.5% in the euro-zone …
China has stepped up its support of the renminbi, which has rebounded over the past couple of days. This may well prove a turning point for the currency. Three key points are worth emphasising. First, China’s approach to managing its exchange rate has …
4th July 2023
Industry struggling in Q2 The weaker-than-expected 0.3% m/m rise in Brazilian industrial production in May only partly reverses April’s 0.6% m/m decline and suggests that industry remained weak over the course of the second quarter. At the margin, this …
Further falls in inflation and the weakness of the most recent activity data support our view that the Bank of Korea (BoK) will shift to loosening monetary policy sooner than when others expect. Inflation figures for Korea published earlier today show the …
The Reserve Bank of Australia’s decision to keep rates unchanged at 4.10% today suggests that interest rates may not rise all the way to 4.85% as we expect, but further tightening still seems likely . Today’s decision was a very close call: 15 economists …
Tightening cycle not over yet The RBA’s decision to keep rates unchanged today suggests that interest rates may not rise all the way to 4.85% as we currently expect, but further tightening still seems likely. Today’s decision was a very close call: 15 …
US stock markets ’ gains in recent months , both in absolute terms and relative to their European peers, owe a lot to their rising valuations. But equities in the US are now arguably quite highly valued, which in our view will contribute to them …
3rd July 2023
The widespread falls in the EM manufacturing PMIs for June suggest that industry continued to struggle in Q2 and we think further weakness lies in store. Taken together with the easing price pressures shown by the surveys, it looks like an EM monetary …
The latest PMIs suggest that not only did global manufacturing activity contract at the end of Q2, but the outlook for the manufacturing sector also seems to have deteriorated further. At least the improved supply-demand imbalance seems to be having an …
We recently held a Drop-in titled “Industry’s decarbonisation challenge – From aviation to property”, which you can view on-demand here . This Update addresses some of the questions we received during the event, including those that we did not have time …
In the 1980s Europe responded to competition from Japanese auto producers with protectionist policies known as Voluntary Export Restraints (VERs). We think its response to competition from China in the 2020s will be different and less effective, …
This page has been updated with additional analysis since first publication. Still consistent with recession and disinflation The further fall in the ISM manufacturing index to 46.0 in June, from 46.9, is difficult to square with claims from some …
The risk is that interest rates rise above our current peak forecast of 5.25%. Persistent core inflation has driven up UK market interest rate expectations and has lifted the 2-year gilt yield above its peak after the “mini-budget”. But we think there is …
China’s PMI aren’t consistent with some of the worst fears around China’s reopening recovery and weak commodities demand. But neither are they positive enough to warrant the boost to prices, such as steel, last month. For that, hopes of fiscal stimulus …
