Improvement in trade balance may not point to economic strength Stronger commodity exports boosted the trade figures in April, with the goods deficit narrowing to $1.0bn, from a downwardly revised $2.0bn in March. However, weaker import volumes suggest …
6th June 2024
ECB cuts but future easing uncertain Any celebrations about today’s 25bp rate cut by the ECB are likely to be muted at best, given that the decision was fully discounted by financial markets and the most recent inflation and wage data have dampened …
Net trade set to weigh on GDP again this quarter The April trade data suggest that net trade is on track to weigh on GDP growth again this quarter, but that is primarily due to continued strength in imports, which paints a better picture of domestic …
Aggregate EM GDP growth remained strong in Q1, though we still expect a slowdown later this year. At a regional level, Emerging Asia will lead the pack, however there are tentative signs that recoveries in parts of Central and Eastern Europe and Latin …
OPEC+’s decision to roll over its production cuts into Q3 will keep supply constrained in the near term. But the unwinding of some of these cuts from October will mean that the oil market is better supplied over 2025 and oil prices should fall. Ample gas …
This page has been updated with additional analysis since first publication. Euro-zone sales ticked down but past the worst Retail sales ticked down in April we expect them to rise gradually from here. The 0.5% m/m decline in retail sales in April was a …
Construction activity picks up in both housing and commercial sectors The headline CIPS construction PMI rose to a two-year high of 54.7 in May. Both the commercial and housing balances improved, with the latter rising above 50 for the first time since …
India’s election result isn’t, in our view, reason to turn downbeat on the country’s equity market, its wobbles earlier this week notwithstanding. But with a very positive story seemingly still priced in to India’s equities, both on the political and …
Bank may reduce its bond purchases next week, though we think it will wait until July. Next rate hike should happen in July as BoJ increasingly worried about weaker yen. However, sharp slowdown in underlying inflation will forestall a series of rate …
Although the gap between 10-year Treasur y and Canadian Government Bond (CGBs) yields has reached the highest level in at least three decades today, we think it will widen even further in the next couple of years . The 10-year CGB yield has fallen ~15bp …
5th June 2024
Activity softens slightly, but still running hot Russia’s economy appears to have had a slightly softer start to Q2, with industrial production and retail sales growth both slowing in April. Still, the latest indicators for May have remained strong and …
Today’s interest rate cut from the Bank of Canada will be the first of many, and the dovish tone of the accompanying communications suggests another rate cut in July is nailed on. As Governor Tiff Macklem shrugged off any potential concerns about exchange …
ISM services index rebounds, but still consistent with lower inflation The rise in the ISM services index to 53.8 in May, from 49.4, meant that the weighted ISM index rebounded last month, despite a decline in the manufacturing index. That still leaves it …
Our 2020 analysis of the impact of changed working patterns on office demand correctly estimated the share of fully remote work, but underpredicted the extent of hybrid work. Yet with office job growth set to stay strong for the rest of the decade, the …
One down, many more to come Today’s interest rate cut from the Bank of Canada will be the first of many, and the dovish tone of the accompanying communications suggests that another rate cut in July is already nailed on. For now, our forecast is that …
Disinflationary trend gradually reasserting itself Economy and labour market losing momentum New projections should still show one or two rate cuts this year With no prospect of the Fed adjusting policy next week, the focus of the FOMC meeting will be the …
Whoever wins the general election on 4 th July will have three main choices when it comes to spending and taxes. First, the new government could change the fiscal rules to give itself more fiscal space. Second, it could keep the current fiscal rules and …
Rates on hold until 2025 Poland’s central bank (NBP) left its policy rate on hold at 5.75% today and policymakers are likely to maintain fairly hawkish communications as inflation rebounds in the second half of the year. We don’t expect the easing cycle …
The agreement by OPEC+ to rollover voluntary production cuts into Q3 will keep global oil supply constrained and should support oil prices over the rest of this year. Meanwhile, natural gas prices have continued to rally on the back of risks to Europe’s …
Mortgage applications fall to three-month low The decline in mortgage rates in May was not enough to stop home purchase mortgage applications from falling to a three-month low. The chances of a quick turnaround in June currently look slim, as the increase …
GDP growth will accelerate over the second half of the year While GDP growth slowed to a crawl in Q1, a rebound in real household incomes should contribute to a pick-up in activity over the second half of the year. The 0.1% q/q rise in Q1 GDP was a …
This page has been updated with additional analysis since first publication. Wage growth will climb above 2.5% this year Base pay rose the most since 1994 in April and we think it will accelerate a bit further as the strong pay hikes agreed in the spring …
The April JOLTS data provided further evidence of normalisation, with job openings falling further, layoffs still at historically low levels and the leading indicators all pointing to wage growth cooling. The job openings rate fell to 4.8% in April, from …
4th June 2024
The US stock market has been pulled in different directions by economic data since last week. But we suspect that the general trend in the next year or so will be up, as equities benefit from at least moderate economic growth, looser monetary policy, and, …
The global economy has been marked by the outperformance of the US economy and its financial markets. But past performance is no guarantee of future results. Will the structural, financial and political forces which have driven the success of the US …
Inflation has been stickier than we had expected and we have therefore pushed back when we think the Bank will start cutting interest rates. That may put a little upward pressure on property yields over the next couple of months. But we still think …
Narendra Modi will begin his third term as India’s Prime Minister with a weakened mandate and that will make the passage of contentious economic reforms more difficult. But he will still be able to work as the head of a stable coalition, and the broader …
The rally in industrial metals prices over the last few months has begun to unwind and, because it seemed based on excessive optimism, we think prices will fall further over the coming months. After all, while industrial metals demand will recover this …
Q1 pick-up likely to be followed by weaker Q2 The sharp pick-up in Brazil’s GDP growth to 0.8% q/q in Q1 is a temporary rebound from a weak patch in the second half of last year and doesn’t mark the start of a strong recovery. Still, the pace of economic …
At long last, OPEC+ outlined a plan on Sunday for when and how members would unwind the large production curbs currently in place. We assume that this plan is followed th rough and that output gradually increases from October, pushing the crude market …
This response has been updated with additional analysis of the UAE's May release. Gulf continues to lead the way as Egypt shows positive signs May’s batch of PMIs showed that private non-oil sectors have remained a point of strength in the Gulf economies …
Modest contraction in Q1, shows 2024 growth likely to be muted at best South Africa’s economy contracted by 0.1% q/q in the first quarter of the year and the latest evidence suggests that fragility has continued into Q2. A less acute drag from …
Global demand is giving a bigger boost to China’s economy than we had anticipated this year and foreign tariffs will make little difference to aggregate export performance in the near term. We now think that China’s economy will expand 5.5% this year as a …
The recent weakness of wage growth in Korea seems at odds with the country’s low unemployment rate. But a closer look at the data suggests that the unemployment rate is overstating the health of the labour market and, on top of that, compositional changes …
This webpage has been updated with additional analysis. Headline inflation unchanged in May, doubts about future rate cuts Switzerland’s inflation rate remained at 1.4% in May as an increase in rents was offset by a further fall in core goods prices. …
Overview – A rebound in real household incomes should ensure that the recent slump in output should turn into above-trend GDP growth of 1% over the next couple of years. Regardless, inflation will continue to slow as the influence of the previous import …
The EM manufacturing PMI remained at a three-year high in May but the picture is becoming increasingly nuanced at a country level. Meanwhile, the PMIs also showed price pressures rose again last month, matching the signs of recent strength seen in other …
3rd June 2024
Our initial response to Claudia Sheinbaum’s victory in Mexico’s presidential election can be found here . We also held a Drop-in earlier today. This Update summarises the key points that we discussed and answers some of the client questions that we …
Elections in South Africa, India, and Mexico have generated sizeable reactions in financial markets. Those moves may not last – often the immediate reaction to political events proves overdone – but they highlight the potential for electoral surprises to …
The latest manufacturing PMIs suggest that the recovery in global industry has continued to gather momentum so far in Q2 and that price pressures have increased somewhat. But that probably won’t prevent central banks from loosening policy in the coming …
The decision by OPEC+ to keep oil production lower over the rest of this year means that oil sectors in the Gulf will grow more slowly than we had previously anticipated and we have revised down our GDP growth forecasts for this year and next. The …
Having lagged behind other emerging market (EM) currencies for most of the post-pandemic period, the Polish zloty has lead the pack over the past six months. While we think that most of this rally has now run its course, we expect the zloty to stay …
Fall in ISM manufacturing index suggests economy losing momentum The drop in the ISM manufacturing index in May adds to the sense that the economy is losing momentum, while the drop back in the prices paid index should soothe concerns about a potential …
With the government debt-to-GDP ratio likely to trend up over the medium term, and the budget deficit set to stay above 3% of GDP, we suspect that France will be subject to further rating downgrades in future. The risks are significantly higher in the …
South Africa’s final election results confirmed that support for the ANC fell far short of a majority, leaving it reliant on a coalition with one of the larger opposition parties to stay in power. The newsflow over the weekend suggests that the chances of …
PMI plummets due to tight policy and weaker credit conditions South Africa’s manufacturing PMI plummeted in May and, while we expect conditions to improve as the electricity situation continues to stabilise, alongside recent activity data it underlines …
OPEC+ keep screws tight for another quarter The agreement by OPEC+ to rollover voluntary production cuts for another quarter will, in our view, push the crude oil market into a sizeable deficit in Q3. Oil supply will be more constrained than we had …
Russia outperforming, CEE continues to struggle The manufacturing PMIs for May show a divergence in the region, with conditions improving slightly in Czechia and Russia’s economy continuing to boom. But industry weakened sharply in Poland and Turkish …
Sheinbaum is president-elect, Morena coalition on course for majority The ruling Morena candidate, Claudia Sheinbaum, is on course to be declared the country’s next (and first female) president after Sunday’s election and the party’s coalition also …
