Prices already surging ahead of tariffs The fall in the ISM manufacturing index in February likely marks the beginning of the end of the recent mini renaissance, as the reality of the disruption to the sector caused by tariffs (including retaliatory …
3rd March 2025
On top of tariff threats and geopolitical ruptures, investors are having to grapple with notable signs of weakness in the recent economic data. With that said, while the outlook has clearly soured, we think fears that the global economy is on the cusp of …
Services inflation finally starting to fall February’s decline in headline inflation was encouraging because it was partly due to lower services inflation. We expect the headline rate to remain above 2% throughout most of this year but services inflation …
Net lending to property has a steady start to the year Net lending to property had a steady start to 2025, with the total of £917mn in January down from £1.28bn in December 2024, but close to the average seen over 2024. The rise in net lending was …
This page has been updated with additional analysis since first publication. Households still in the mood to save rather than spend The stagnating economy is partly because households appear to be continuing to save rather than spend, which is unlikely to …
Small signs of improvement in Central Europe The rise in the manufacturing PMIs in Central Europe last month offers some hope that the region’s struggling industrial sector is pulling out of its slump. Elsewhere, Russia’s PMI suggests that overheating …
250bp rate cut this week on the cards The weaker-than-expected Turkish inflation figure for February, of 2.3% m/m, will provide some reassurance that the spike in January was a one-off. And it keeps the door open for the central bank to lower the one-week …
New Zealand’s current account deficit will remain large as domestic demand rebounds and the government is running a sizeable structural budget deficit. While the New Zealand dollar has recently been among the worst-performing G10 currencies, we expect it …
The modest uptick in Australian house prices last month is unlikely to mark the beginning of a meaningful rally. With the Reserve Bank of Australia set to deliver a shallow easing cycle, housing affordability will remain stretched, weighing on the …
Policy support struggling to deliver sustained rebound The PMIs suggest that a combination of fiscal support and tariff front-running helped China’s economy regain some momentum in February. But growth still looks at risk of slowing this quarter, at …
Following the 0.5% m/m slump in real consumption in January and the massive 10% m/m surge in real goods imports, we now expect first-quarter GDP to contract by 1.0% annualised. Assuming that surge in imports reflects the front-running of tariffs, however, …
28th February 2025
In the latest Capital Economics Weekly Briefing, Group Chief Economist Neil Shearing breaks down just how the policy uncertainty emanating from the Trump administration is – and isn’t affecting – the global economy. He also previews the February US …
The greenback has rebounded this week as market participants have started to take President Trump’s continued tariff threats a bit more seriously and risk sentiment has soured. Even so, we think that the probability of significantly higher tariffs is …
Economy doing well ahead of tariff threats Fourth-quarter GDP growth of 2.6% annualised was much stronger than the 1.8% rate we and the Bank expected, while third-quarter growth was revised up to 2.2%, from the initially reported 1.0%. As a result, growth …
President Putin this week described Moscow’s initial contact with the Trump administration as “inspiring a certain degree of hope”, and we think that the recent thawing in US-Russia relations has increased the probability of the war in Ukraine coming to …
China Chart Pack (Feb. 25) …
This week’s pull-back in the US stock market and the unravelling of US exceptionalism in equities since Donald Trump returned to the White House on 20 th January have been driven by growing concerns about two key risks that we highlighted here to our …
All-property values edged down by 0.1% in Q4 but the magnitude of decline narrowed. Appraisal-based cap rates also fell for the first time since mid-2022. However, we still believe appraisals have further to fall given the narrow spread to risk-free …
No sign yet of SA budget dispute being resolved There’s now less than two weeks until South Africa’s Finance Minister Enoch Godongwana (finally) delivers the 2025 Budget. But the past few days have only further underlined the widening divide between the …
Favourable base effects pull down core inflation The 0.28% m/m rise in core PCE prices in January was a big improvement on last year’s 0.5% m/m gain, but the 2.6% annual core inflation rate is still too hot for the Fed’s liking and, with inflationary …
Fiscal deficit and consumption support will be key China’s National People’s Congress kicks off its annual gathering on Wednesday. While the meeting tends to last around a week, the most important events, including the delivery of the Work Report and …
This page has been updated with additional analysis since first publication. Revisions leave economy in a much better place The 2.6% annualised gain in GDP last quarter was much stronger than the Bank of Canada’s forecast for a 1.8% increase and was …
CBAM caught in the EU’s regulatory slimdown The European Commission (EC) announced its ‘Simplification Omnibus’ this week, which scaled back firms’ reporting requirements with the aim of lowering costs and improving competitiveness. From a climate …
It has not even been a week since the German election and the presumptive next Chancellor, Friedrich Merz, is already dealing with a fiscal dilemma. Specifically, how to finance the increase in defence and public infrastructure spending that Germany …
Metals, minerals, and oil are in Trump’s sights There were three key commodity-related developments from the White House this week. First, the US and Ukraine have agreed to jointly develop Ukraine’s energy and mineral reserves. We wrote about the key …
Things change quickly with Trump as President. Only two weeks ago, the title of our UK Economics Weekly was “Trump’s tariffs tirade becomes more troubling for the UK” as it looked as though the UK’s goods exports to the US would be hit with a 25% …
More concessions may be coming One of the major talking points from our recent meetings with clients, policymakers and contacts in India was (unsurprisingly) the threat of Trump tariffs. As we noted here, India is one of the most exposed countries …
Mexico: tariffs loom (again) The coming days looks set to be dominated by tariffs, with President Trump (after some confusion around the timing) confirmed that the 25% tariff on Mexico (as well as Canada) will “indeed go into effect as scheduled” on …
Europe Commercial Property Chart Pack (Q1 2025) …
Economy slowly emerging from soft patch GDP figures for Q4 2024 show that India’s economy remained fairly soft by its own standards at the end of last year. But with policy now decisively turning more supportive, economic growth should pick up further …
With US tariffs now escalating, the key question is whether the People’s Bank (PBOC) will allow the exchange rate to adjust in response. We think it ultimately will, just as it did during the first trade war. But if we’re wrong and the PBOC attempts to …
Korea: jump in fertility unlikely to last Figures published earlier this week showed the fertility rate in Korea increased last year for the first time in nine years, rising from 0.72 in 2023 to 0.75 in 2024. (See Chart 1.) This uptick, though still below …
Euro-zone inflation drops back in February National data published so far suggest that euro-zone headline inflation dropped back in February, and that core inflation might have finally started to come down more significantly. (Euro-zone data due on Monday …
Rebound in domestic demand could slow pace of rate cuts The strong 1.7% q/q expansion in the Turkish economy in Q4 appears like a setback to the central bank’s efforts to bring down high inflation, but we don’t think this data is enough to throw the …
This page has been updated with additional analysis since first publication. Housing market maintaining momentum as the wider economy is losing it Some of the bigger-than-expected 0.4% m/m rise in Nationwide house prices in February (consensus and Capital …
Soft data belie lingering capacity pressures At first glance, data released this week should give the Reserve Bank of Australia greater confidence that it has brought inflation under control. To start with, the ABS’ Monthly CPI indicator showed that both …
Ratio of deaths to births reaches record high According to preliminary data released this week, the number of births in 2024 fell by 5% to a record low of 721,000, while the number of deaths edged up by 1.8% to a record high of 1,62mn. Even though net …
The near-term picture for China’s equities looks brighter than we’d previously thought, and we’re revising up our forecasts for them significantly. But, we still think they will underperform those in the US, for example, over the remainder of 2025. …
Inflation on track to overshoot BoJ’s forecasts The January activity data suggest that GDP will have fallen this quarter, but that would follow strong gains in previous quarters. With inflation set to overshoot the Bank of Japan’s forecasts, we still …
The EU’s Clean Industrial Deal and Omnibus packages mark a shift in climate policy as pushback against the costs of climate action grows. With the EU less willing to impose costs on the private sector, there is a growing risk that it does not follow …
27th February 2025
An end to the war in Ukraine would fundamentally change the economic outlook for Russia and Ukraine, but a lot would depend on the nature of any peace agreement. A deal that involves large-scale sanctions relief for Russia would be the most positive for …
Saied’s unorthodoxy keeps Tunisia on risky path Tunisia’s President Kais Saied has resumed his attacks on the central bank, Banque Centrale de Tunisie (BCT), and seems set on having the state take over the Bank’s responsibilities. We’ve long warned that …
President Trump’s attempts to reset relations with Russia have led some to suggest that he may be attempting to break apart the Sino-Russian alliance as Nixon did in the early 1970s (although in Nixon’s case, by reaching out to China). But while this may …
We forecast a 170,000 gain in non-farm payrolls in February, given that most of the recent cuts to the federal workforce won’t yet have shown up in the data and employment in weather-sensitive sectors should have rebounded to a degree. Otherwise, we think …
The threat of lower oil prices and the Angolan government’s apparent reluctance to push through (further) fiscal consolidation measures has raised the risk that it will be the next African sovereign to default on its debt. If that transpires, large debts …
ECB set to cut deposit rate by 25bp next week, decision probably unanimous. We expect more dissent over future decisions, and chance of a pause in April has risen. But we still think the ECB will cut rates by more than most expect this year. The ECB looks …
Notwithstanding recent setbacks, we continue to think that this year will see a major rally in US equity markets, higher Treasury yields, and a stronger dollar. Many of the key trends in financial markets in the run-up to and immediate aftermath of the US …
Durable goods orders rebound thanks to strong Boeing orders The increase in durable goods orders in January was due to the volatile transport component, while core orders were unchanged. Although underlying capital goods shipments fell, business …
Could uncertainty weigh on the global economy? Instead of clearing up the uncertainty about the direction of US economic policy, Donald Trump’s victory in last November’s presidential election has only magnified it, with threats of massive punitive …
