This page has been updated with additional analysis since first publication. The start of another retail recession The 0.9% m/m fall in retail sales volumes in September meant sales volumes fell 0.8% q/q in Q3 and suggests that after the 18-month-long …
20th October 2023
This page has been updated with additional analysis since first publication. Buoyant economy to date increases scope for pre-election giveaways September's public finances figures continued the recent run of better-than-expected news on the fiscal …
One more hike for the road Labour market data published yesterday showed that Australia's unemployment rate fell anew, from 3.7% to 3.6% in September, due largely to a pullback in workforce participation. As we explained in this Update , it increasingly …
Export values hit record high in September Export volumes bounced back by 4.6% m/m in September following the 6.1% m/m plunge in August. However, that left them a touch below the record high reached in July and means that export volumes have largely tread …
Japan’s trade unions are demanding an even larger pay hike in the upcoming spring wage negotiations and we believe that the talks will result in a base pay hike of around 2.5%. While the Bank of Japan may wait until the first round of results of the talks …
We think both the recent outperformance of China’s sovereign bonds relative to those in the US and the underperformance of its equities will end – and may even reverse somewhat – in the near future. Chinese government bonds (CGBs) have largely been spared …
This page has been updated with additional analysis since first publication. Inflation will only fall below 2% by end-2024 While inflation weakened in September, we think inflation will only fall below the BoJ’s 2% target by the end of next year. The …
Russia and Turkey had a strong first half to the year, but large policy tightening is likely to result in a sharp slowdown in 2024. Inflation pressures look set to keep building and further interest rate hikes lie in store. In contrast, downturns across …
19th October 2023
Senior economists from across our euro-zone, US and UK services held an online briefing on the October/November meetings of the Fed, ECB and Bank of England and the latest messaging from their policymakers. During this 20-minute briefing, the team …
2023 is on track to be the warmest year on record, but somewhat ominously the headwinds to the green transition have strengthened this year. Some of these will prove temporary, particularly as short-term policy interest rates start to come down. That …
Big banks in the US have reported quite strong earnings in Q3 but, given our pessimistic view of the economy there, we doubt that their stocks will outperform much in the next couple of months. Earnings season started last week in the US, and most major …
While the global backdrop continues to favour the US dollar, its rally has stalled in recent weeks and we think that, absent a major deterioration in risk sentiment, the greenback will struggle to make significant further gains. So far this month, there …
Anticipation of legislation requiring minimum standards of energy efficiency is already impacting CRE values as investors price in transition risk and this pressure is likely to ramp up in the coming years as compliance deadlines harden. This note …
Market grinds to a halt Existing home sales fell to their lowest level since October 2010 in September as the increase in mortgage rates to a fresh 23-year high caused buyers and sellers to withdraw from the market. A decline in mortgage applications for …
After a brief respite earlier this year, property yields are once again on the rise, driven by a further increase in gilt yields. We don’t expect a repeat of the surge seen last year, but we also think any compression beyond this year will be minimal as …
EM GDP has held up well this year, but we expect growth to disappoint in the coming quarters. Inflation has surprised to the upside recently, which will delay the start of interest rate cutting cycles in some places. But we still expect easing cycles to …
We still expect the 10-year Treasury yield to fall in the coming quarters. But we’ve revised up our projections for that yield from now to end of 2025, and now think it will reach its cyclical low in 2024. There are two key reasons why we have pushed up …
Could Egypt’s financing fears be set to ease? Reports over the past week have suggested that Egypt could be poised to leverage its position in the region to receive financial support in exchange for helping to de-escalate the Israel-Hamas conflict . …
There are mounting signs that labour market conditions in many parts of Latin America are starting to loosen, but wages are still rising at a rapid pace and it will take time for wage growth to return to levels that are consistent with central banks’ …
House prices are rising according to the Office for National Statistics (ONS) but falling according to Halifax and Nationwide. Consistent downward revisions to the ONS House Price Index mean that we think the Nationwide and Halifax indices are a more …
After several years in a post-Fukushima wilderness, nuclear power’s ability to provide low-emission and reliable electricity generation has slowly brought it back into favour around the world. Several countries, particularly in Asia, are likely to bring …
In a surprise move, Bank Indonesia (BI) today hiked its main policy rate by 25bps (to 6.0%) in an attempt to support the currency. But there is a good chance this will be a case of “one and done”. Our forecast is that US bond yields will drop back over …
The ECB is almost certain to leave interest rates unchanged at next week’s meeting. Emphasis will be on monetary policy staying tight for extended period. Bond market sell-off will persuade policymakers to delay decision to accelerate QT. There is …
Surprise hike aimed at supporting the currency In a surprise move, Bank Indonesia (BI) today hiked its main policy rate by 25bps (to 6.0%), and made clear that supporting the currency would remain its key priority over the coming months. However, with …
We'll be discussing the implications of the end of the ultra-low interest rates era and the rise in r* in an online Drop-In at 12:30 GMT on Tuesday 31st October. (Register here .) As our new higher estimate of the real neutral interest rate, or r*, for …
The Bank of Korea today left its policy rate unchanged (at 3.5%), and while Governor Rhee left open the possibility of further interest rate hikes, there are signs that some members of the central bank are becoming more dovish. With growth struggling but …
This page has been updated with additional analysis since first publication Fall in joblessness complicates picture for the RBA The September data suggest that the labour market could take longer to cool than the RBA currently expects. Accordingly, we …
On hold again, central bank in no rush to loosen policy The Bank of Korea (BoK) today left interest rates unchanged (at 3.5%) for a sixth consecutive meeting. The decision came as no surprise and was correctly predicted by 49 economists polled by …
Drag from net trade unlikely to persist Net trade probably was a large drag on GDP growth in Q3, but we suspect it will become less of a drag this quarter. The 4.3% annual rise in export values in September was stronger than the analyst consensus of 3.1% …
Recession risks rising and inflation falling again Bank to remain on hold but stress too soon to declare victory Bank’s latest analysis implies QT could continue until as late as 2026 The business surveys point to rising recession risks and core inflation …
18th October 2023
Aggregate EM goods exports have struggled for momentum in recent months and, while there were more positive signs from some of the timely September trade data, we think that exports are likely to struggle as demand in advanced economies weakens. That …
We think China’s improving economy may help stop the fall in the country’s stock markets, and see them outperform those of the US for a bit. China’s stronger-than-expected Q3 GDP data, released earlier today, seem to have given the Hang Seng Index a small …
We expect demand to be weakest in the six major markets, but new supply is also set to be low in those markets. Elsewhere, we think southern metros will continue to see stronger absorption, though Austin and Miami have large completions pipelines over the …
Starts rebound, but headwinds remain Single-family starts edged higher in September to 963,000 annualised from 933,000 in August and building permits also rose to a 15-month high. However, we don’t think this means single-family construction activity has …
The ongoing outflow of funds from the Fed’s reverse repo facility has completely offset the downward pressure on bank reserves from quantitative tightening (QT), suggesting that the Fed could continue to let its asset holdings run down for longer than …
The weakness of GDP growth in the second and third quarters means that the Bank of Canada is likely to make a marked re-assessment of its output gap estimates in its October Monetary Policy Report (MPR). Some indicators suggest that output has already …
India’s economy appears still to be holding up well in the second half of the year. And although inflation has dropped back sharply to within the RBI’s target range, the outlook is still clouded by uncertainties related to food prices. This is a key risk …
There is a growing body of evidence that suggests wage pressures are past their peak, but it’s not clear how quickly wage growth will slow. The gradual loosening in the labour market and the experience in the US suggests that UK wage growth may ease only …
Activity improves, but slow growth set to continue The batch of South African activity data for August was a mixed bag, but the overall picture is that the economy struggled for growth in Q3. And tight policy means that growth in 2024 will be modest too. …
The surge in mortgage rates to a 23-year high has caused both buyers and sellers to withdraw from the market, and total home sales to drop to their lowest level since 2011. While we’ve revised down our near-term sales volumes forecasts, our view that the …
This page has been updated with additional analysis since first publication. Fall in inflation in September will not change ECB's tune The breakdown of euro-zone HICP inflation data for September, published today, reveals that there was a significant fall …
Inflation rise means SARB won’t cut rates until 2024 The larger-than-expected rise in South Africa’s headline inflation rate, to 5.4% y/y, in September supports our view that the Reserve Bank will only turn towards interest rate cuts from next year. The …
The failure of CPI inflation to fall in September from August’s rate of 6.7% will be a bit of a disappointment to most (consensus forecast 6.6%, CE forecast 6.8%). But at 6.7% it is still below the 6.9% rate the Bank of England projected back in August …
This page has been updated with additional analysis and charts since first publication . According to official GDP, growth more than doubled in q/q terms between Q2 and Q3, reaching a healthy 5.3% annualised rate. Our China Activity Proxy suggests that …
Economists from our ANZ and Markets teams held an online briefing following the release of Australian Q3 inflation data. During this discussion, Asia-Pacific head Marcel Thieliant, ANZ Economist Abhijit Surya and Senior Markets Economist Tom Mathews …
17th October 2023
We have recently published detailed analysis arguing that equilibrium interest rates in advanced economies are now higher than they were before the pandemic, and that they will continue to rise over the rest of this decade. (See here .) The key …
We think equilibrium real policy rates in advanced economies will continue to rise over the next decade or so. That has profound implications for government bond yields and risky asset valuations. Discussions of ‘higher for longer’ generally relate to the …
Switzerland’s government looks set to remain largely unchanged after the federal elections this Sunday, and we do not expect a significant change in economic policy. But voters’ grievances about the failure of Credit Suisse will keep the pressure on …
House prices heading lower again The renewed increases in mortgage rates and new listings mean we now expect house prices to fall by 5% over the next six months. The big risk, however, is that we are underestimating the degree to which forced sales are …
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