We still think investors are expecting too many Fed cuts over the remainder of this year, and our base case remains that Treasury yields will rise and the US dollar will strengthen. The Fed struck a very cautious tone in Wednesday’s policy statement, and …
8th May 2025
Around half of the recent surge in gold exports reflects soaring prices. While the latter may encourage mining firms to expand output, it will probably take years for gold production to return to its 2019 peak. Accordingly, gold exports won’t fill the gap …
Copom hikes again, but tightening cycle near an end (if not already over) Brazil’s central bank hiked the Selic rate by a further 50bp, to 14.75%, today and officials made clear in the accompanying statement that the tightening cycle is near an end. We …
7th May 2025
The minimalist statement issued by the Fed at the conclusion of the FOMC meeting gave no hint that it was considering a further cut to the fed funds rate, at least not any time soon. As was almost universally expected, officials voted unanimously to leave …
Fed offers no hint that a rate cut is coming any time soon The minimalist statement issued by the Fed at the conclusion of the FOMC meeting gave no hint that it was considering a further cut to the fed funds rate, at least not any time soon. As was almost …
Although our base case remains that the hit to UK GDP growth from US tariffs will be relatively small, the downside risks to our below consensus forecast for GDP growth of 0.8% in 2025 have increased. And the growing likelihood that the influence of US …
We expect government bonds in China to continue to perform well against a backdrop of looser monetary policy, but suspect its currency won’t depreciate as much against the greenback as we had previously envisaged. Meanwhile, we have mixed feelings about …
If limited just to Kashmir, a period of fighting between Pakistani and Indian forces would have a small impact on the economy of either country. Pakistan would have more to lose than India from a broader conflict, though that would also risk reversing the …
NBP cuts by 50bp ... but easing cycle may be more limited than most expect The decision by the National Bank of Poland (NBP) to cut its policy rate by 50bp today, to 5.25%, rather than opt for a smaller 25bp cut, suggests a slightly more dovish balance on …
Single-family homes have outperformed other residential sectors over the past four years as a race for space and stretched homebuyer affordability have supported demand, at the same time as developers have offered bulk discounts in the face of waning home …
CNB cuts by 25bp, but easing cycle may now be over The Czech National Bank (CNB) cut its policy rate by 25bp today, to 3.50%, but we think that this may mark the end of its easing cycle. Our forecast for the policy rate to remain on hold at 3.50% over the …
The gradual recovery in European investment continued in Q1 but going forward transaction totals are likely to be weak as a result of uncertainty around tariffs and the potential downside to property values. As a result, we now think euro-zone investment …
Retail sales edged down in March This publication has been updated with additional analysis Euro-zone retail sales declined in March, reversing part of the increase in February. We expect spending growth to remain weak for the rest of the year as any …
Increased uncertainty weighs on commercial construction The headline CIPS construction PMI edged up to 46.6 in April, from 46.4 in March. That left the balance below 50 and consistent with a contracting construction sector. A small rise in the housing and …
The future of Europe …
Chinese policymakers will probably find ways to keep the published unemployment rate close to their “around 5.5%” target for this year. But this may mask broader weakness in the labour market as a downturn in exports reduces new hiring, increases …
Inflation lower than expected, but the core rate to remain high for rest of year Sweden’s CPIF inflation was unchanged in April which will give the Riksbank little cause for concern going into its policy decision tomorrow. We expect it to keep the policy …
Our CE China Labour Market Indicator (CLMI) brings together a range of timely indicators to provide a comprehensive view of the cyclical health of China's labour market. Our index extends further back in time than the official unemployment rate, is less …
Chinese policymakers have announced a raft of new monetary easing measures. These will help to shore up growth at the margin. But any boost to credit demand will be modest and today’s moves are no substitute for an expansion in fiscal support. China’s …
This page has been updated with additional analysis since first publication. Ample spare capacity in the labour market will support disinflation Although New Zealand’s unemployment rate held steady in Q1, the details of today’s jobs report were far from …
Early signs are that Vietnam is doing well as US buyers look to find alternative suppliers outside China. Asia publishes export data much faster than other regions, providing some of the most timely evidence of how trade is being affected by Trump’s …
6th May 2025
Pharmaceuticals imports push trade deficit to new record high The widening in the trade deficit to a new record high in March was driven entirely by imports of pharmaceutical products as firms looked to front-run tariffs. This was broadly in-line with the …
Tariffs bite, but strong demand elsewhere softens the blow The surprise improvement in Canada’s goods trade balance in March, despite the imposition of US tariffs, was thanks to a surge in exports to other countries. Nonetheless, as the survey indicators …
Given the shift in OPEC+ policy over the weekend, the global oil market will, all else equal, be better supplied over the coming years than previously looked likely. Accordingly, having consistently flagged the downside risks to oil prices over the past …
Merz significantly weakened by first round election failure The failure of CDU leader Friedrich Merz to be elected Chancellor in the first round of voting will probably not prevent him and the Grand Coalition from taking power in the coming days or weeks. …
We see a few reasons to be sceptical about the chances of a broad-based upwards revaluation of Asian currencies, despite recent moves. At the time of writing the breakneck rally in Asian currencies vs. the US dollar seemed to have come to a screaming …
In current circumstances it would take a large strengthening of the yen to push inflation below the Bank of Japan’s 2% target. And with profit margins close to record highs, the hit from a stronger yen to corporate profitability probably won’t result in a …
Service sector shrugs off tariff uncertainty The rebound in the ISM services index to 51.6 in April, from 50.8, is another illustration that most firms are able to shrug off the tariff chaos. Admittedly, at 51.3, our weighted composite of the …
5th May 2025
Simion’s lead leaves Romania on the verge of a big political shift Far-right candidate George Simion emerged as the clear frontrunner in the first round of Romania’s rescheduled presidential election and is now the favourite to win the second round on 18 …
We pay little attention to the official Indonesia GDP figures, which once again showed growth was unchanged at around 5% last quarter. While the official figures are likely to show growth remaining stable over the coming quarters, we expect activity to …
Labor expands majority in election blowout The Australian Labor party, led by Prime Minister Anthony Albanese, is cruising towards victory in yesterday’s federal election. Given that our forecasts assumed policy continuity, we are inclined to leave them …
4th May 2025
If you’re looking for evidence of the negative hit from Donald Trump’s tariffs, you’ll struggle to find it in the hard data. Group Chief Economist Neil Shearing is on The Weekly Briefing from Capital Economics minutes after the release of the US …
2nd May 2025
The dollar is ending the week on the backfoot, despite the ongoing normalisation and returning risk appetite across financial markets, as well as a generally decent set of US economic data. Somewhat surprisingly, the greenback remains well below its pre-2 …
The manufacturing PMIs show that US trade policy weighed on sentiment across the emerging world, although the falls in the surveys arguably weren’t as bad as might have been feared. In India’s case, there may also be some tentative signs of a pickup in …
The stronger-than-expected April US Employment Report published today leaves us comfortable with our central scenario that the trade war won’t be enough to tip the US economy into recession. So, we think the Fed will keep its focus on inflation and stand …
SA 2025 Budget: fiscal slippage is coming South Africa’s 2025 Budget will be tabled for a third time later this month and, to be approved, we think the ANC and DA will need to agree on some spending cuts, although it probably won’t be enough to avoid some …
Hold in Chile, BanRep turns dovish Andean central banks sent very different signals this week. In Chile, the central bank left its policy rate unchanged at 5.00% as expected. And policymakers still sounded somewhat concerned about inflation, highlighting …
The 0.3% annualised contraction in first-quarter GDP generated a lot of headlines this week. In contrast, final sales to private domestic purchasers rose by a solid 3.0%, implying there was plenty of strength in the underlying economy. Nevertheless, the …
Additional fiscal easing may be needed before long Our China Activity Proxy published earlier this week showed that China’s economy slowed in Q1, growing by just 3.9% y/y. That’s despite the fact that the trade war with the US was only just getting …
Overview – President Trump’s inflationary trade and immigration policies leave no clear path to the lower borrowing costs that the housing market desperately needs. A tariff-driven resurgence in inflation will likely keep the Fed from cutting this year, …
Magic Carney The Liberals won 169 seats in the election this week, just missing out on the 172 required for a majority. Nonetheless, that was still a momentous result for the Liberals considering they were, at one point earlier this year, projected to …
The larger-than-expected fall in the Nationwide measure of house prices in April has raised concerns about how quickly the housing market is losing momentum. After price gains of 1.1% m/m and 0.7% m/m in November and December last year, prices are down …
This webpage has been updated with additional analysis since first publication. Labour market remains resilient even after tariff announcements The healthy 177,000 rise in non-farm payrolls in April and unchanged unemployment rate will reassure the Fed …
Riyadh ups the ante ahead of OPEC+ meeting Developments in the oil market once again took centre stage this week, with Brent crude prices set for their second consecutive weekly fall. The biggest news event of the week came courtesy of reports that Saudi …
We think there are two key takeaways from the flurry of activity figures released this week. First, the euro-zone economy held up better than we expected in Q1. GDP expanded by 0.4% q/q. That was partly due to a very strong outturn in Ireland, where data …
A 25 basis point (bps) rate cut in May is a done deal Markets have got ahead of themselves in expecting four 25bps rate cuts in 2025 But the risks are tilting towards rates being cut further than markets expect, perhaps to 3.00% The Bank of England will …
A cut more likely than a hold Malaysia is one of the few countries in the region not to have cut interest rates this cycle. Concerns about the inflation outlook and healthy economic growth have meant the central bank has been in no hurry to loosen. …
Russia’s economy may be starting to break ... The latest economic data released out of Russia have given clear signals that growth has slowed sharply, with GDP having potentially contracted outright in q/q terms in Q1. We had expected a slowdown to …
Exporters relatively well-placed to benefit US Treasury Scott Bessent said this week that “India would be one of the first trade deals we [the US] would sign”, brightening the prospects of India avoiding large tariffs once the 90-day reprieve comes to an …
Paul Samuelson famously quipped in 1966 that the stock market had predicted nine of the last five recessions in the US. We suspect it just sent another false signal about an economic downturn. We can quibble over whether we just had a bear market. On a …
