Retail sales picked up in February This publication has been updated with additional analysis Euro-zone retail sales rose in February for the first time since September last year, and we expect consumer spending to grow at a modest pace over the coming …
7th April 2025
Australia and New Zealand are safe havens in the current global trade storm because they have small manufacturing sectors, export little to the US and haven’t been hit with high US tariffs. We’re therefore sticking to our forecast that the RBA will only …
This page has been updated with additional analysis since first publication. Housing market loses steam in Q1 The 0.5% m/m fall in Halifax house prices in March provides further evidence that the boost from buyers rushing to complete home purchases before …
German industry already weak of tariff hit The fall in German industrial production in February left it very weak. With US demand generating around 7% of German manufacturing value added, the sector will be hit hard by US tariffs. And higher defence and …
Underlying wage growth remains strong We suspect that the sharp slowdown in regular earnings growth in February is just a sampling anomaly rather than a sign of genuine weakness. With this year’s spring wage negotiations resulting in a larger pay hike …
Clinton adviser James Carville famously quipped that he would like to be reincarnated as the bond market but, as President Donald Trump is now finding out, the equity market can be pretty intimidating too, with the S&P 500 down by more than 10% since his …
6th April 2025
At the end of one of Lenin’s “weeks when decades happen”, senior economists from Capital Economics briefed clients on the implications of the news that China is retaliating aggressively to Donald Trump's reciprocal tariffs plan, including whether Europe …
4th April 2025
President Trump’s extraordinary “Liberation Day” announcement has prompted a major risk-off event across financial markets, sending safe-haven currencies soaring and commodity currencies crashing. It has also put paid to the idea that his aggressive …
Republicans need to get with the recycling program President Donald Trump’s big “Liberation Day” announcement went down badly in the markets, as fears mounted that the bigger-than-expected reciprocal tariffs would trigger a recession. The surge in March …
It’s not often that the US Employment Report is a sideshow. But that’s been the case today, as the ongoing fall-out from Donald Trump’s swingeing “reciprocal” tariffs and China’s strong response to them have had a bigger effect on the markets. Admittedly, …
President Trump’s tariffs, retaliation by China, and OPEC+’s decision to accelerate the pace of oil output increases have caused the price of Brent crude to tumble to its lowest level in four years. If the Gulf states persist with the production plans set …
A weaker renminbi, just not against the dollar China’s response today to President Trump’s 34% “reciprocal tariff” on China was more aggressive than we had anticipated . (Initial thoughts on Trump’s tariff on China can be found here .) The moves take the …
If the US tariffs on imports from the EU announced this week are kept in place, our current assessment is that this will lower GDP growth across Central and Eastern Europe (CEE) by 0.3-0.4%-pts on average over the coming year. Judging by the sharp …
Despite being one of the first targets in President Donald Trump’s crosshairs following his return to the Oval Office, Canada made it through “Liberation Day” relatively unscathed. We gave our full thoughts in a note published on Thursday. (See here .) …
Dodging large tariffs Governments across Latin America are likely to be breathing sighs of relief following US President Trump’s tariff announcement on Wednesday. Mexico will remain subject to the duties announced through March which contained large …
Direct hit from Trump tariffs to be limited African economies will, for the most part, be relatively unaffected by US President Trump’s tariff announcement this week, at least directly. But it may cause indirect harm through lower commodity prices. And …
Payrolls brings better news The bumper 228,000 rise in non-farm payrolls in March offers some welcome good news amid the escalating global trade war, showing that the labour market remains healthy despite the drag from DOGE-led federal job cuts. We expect …
Tariffs not entirely to blame for employment fall While US tariffs will be the obvious culprit for the fall in employment in March, two-thirds of the decline was concentrated in the services sector, suggesting that other factors were at play. Nonetheless, …
Asian economies were hit with some of the highest “reciprocal” tariffs by the US. (See Chart 1.) Our initial response is here , and more of our coverage can be found on this page . Chart 1: “Reciprocal” Tariffs Sources : White House, Capital Economics …
China has responded to US tariffs with an additional 34% tariff on all US goods, the most sweeping it has ever imposed. Some US companies have also been added to China’s unreliable entities list and export controls have been expanded. This is an …
President Trump’s decision to hit the EU with a 20% tariff on all imports has roiled European markets – the Euro Stoxx is down more than 7% since the announcement – and pose a growing risk to the global and European economies. Our forecast before the …
With President Trump announcing reciprocal tariffs of 34% and 20% on all US imports from China and the European Union respectively this week, the news that UK goods exports to the US will be subject to the minimum 10% “baseline” tariff from 5 th April …
The aftermath of “Liberation Day” It was notable that most commodities received exemptions from the latest round of US tariffs. Nonetheless, commodity prices have fallen sharply on the back of global growth concerns. See here for our full assessment of …
Near-term hit from tariffs for India won’t be big Our response to the Liberation Day tariff announcements includes analysis of the global macro impact here , the financial market impact here , online briefings that can be viewed on demand here and various …
Rising interest rates and costs weigh on construction activity The headline CIPS construction PMI saw a small rise in March to 46.4, from 44.6 in February. But that still left the balance below 50 and consistent with a contracting construction sector. …
There has been a marked dovish shift on th e Polish National Bank’s (NBP’s) MPC and it now looks like interest rate cuts will come this year , rather than in 2026 as we'd previously thought . But we think this will be another punctuated cycle of interest …
Underlying inflation to remain elevated for the rest of the year Despite easing in March, CPIF inflation excluding energy remained elevated and is likely to remain high throughout this year. We are forecasting the Riksbank to keep its policy rate at 2.25% …
Korea’s Constitutional Court upheld President Yoon’s impeachment today which should ease concerns around Korea’s institutional frameworks. With fresh presidential elections now set to occur soon, there is a chance that fiscal policy will be loosened but …
More policy support may be forthcoming Although the RBA left rates unchanged on Tuesday, it sounded a lot more dovish than it did in February. Indeed, it significantly toned down its concerns about upside inflation risks and the dangers of prematurely …
Tankan consistent with further tightening Compared to other Asian economies, the 24% US tariff on imports from Japan announced this week looks rather modest. Nonetheless, the chances that the Bank of Japan will hike rates in May as we’re forecasting have …
The exemptions granted to many commodities from reciprocal tariffs suggests that the Trump administration is reticent to drive a further wedge between US and international metals prices and/or risk boosting gasoline prices. More generally, against the …
3rd April 2025
Services sector weakens but not a disaster The fall in the ISM services index in March shows that the weakness isn’t isolated to the manufacturing sector. Our weighted average ISM index is consistent with the economy contracting, although it has …
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
Canada has escaped much more lightly than we feared from President Trump’s big announcement, with the import-weighted US tariff likely to be 8% based on current plans and potentially below 5% in the near future. Nonetheless, the much larger tariff rate on …
Gold playing a key role in the slight narrowing of the trade deficit The narrowing of the trade deficit in February was driven by stronger exports, mainly of non-monetary gold, while imports remained at record levels, as businesses continued to rush …
Tariffs knock trade balance back into deficit The large fall in exports in February was to be expected given the (albeit temporary) imposition of tariffs on goods imports into the US that month. While Canada may have gotten off relatively lightly on …
MENA can’t escape Trump’s trade war The Executive Order signed by US President Trump yesterday brought a flat 10% tariff on all countries’ exports to the US with an additional reciprocal rate for some economies. While the Middle East may be less …
We are significantly downgrading our end-2025 forecast for the S&P 500 for two key reasons. The first is yesterday’s announcement of greater tariffs on US imports than we had assumed . In such circumstances, we no longer think the economic backdrop will …
Mexico got off lightly from the tariffs announced by President Trump yesterday and the overall hit to the economy from US trade measures may be a bit smaller than we’d initially thought. Even so, we think growth will be very modest this year, perhaps just …
The pandemic triggered an exodus from large cities in both the UK and US as households used the freedom of remote work to move to cheaper locations with larger homes. In the rental market, that trend has largely reversed, with younger households valuing …
If the 20% US tariff on the EU is sustained it is likely to reduce economic activity in the euro-zone by more than the 0.1-0.2% of GDP we had previously assumed. The impact on inflation should be small but risks to growth and confidence cement the case …
Markets were roiled after Trump announced “Liberation Day” tariffs that were clearly bigger than many (including us) had expected. (Our first thoughts on the economic implications in general are here , and we have already written about the implications …
Softer inflation gives CBRT some breathing space The softer-than-expected Turkish inflation figure for March, of 38.1% y/y, suggests that the sell-off in the lira last month hasn’t exerted significant upwards pressure on consumer prices (yet). And as …
