Survey data point to decent end to Q2 The batch of survey data for June from Brazil and Mexico released this week suggest that both economies gathered momentum at the end of Q2. In Brazil, having fallen back in May, the FGV confidence surveys generally …
7th July 2023
The data this week showed big improvements in supply in both the labour and housing markets, which should give the Bank of Canada confidence that CPI inflation will continue to decline. We still expect the Bank to raise interest rates by 25bp next week to …
The 10-year Treasury yield climbed back above 4% this week, as markets interpreted the minutes of the mid-June FOMC meeting as hawkish and reacted to signs that, although labour market conditions may be easing, wage growth remains too high. Most …
The El Niño weather pattern is on its way and threatens to hit agricultural production across much of Africa over the coming months, curtailing GDP growth, pushing up inflation and dealing a fresh blow to fragile balance of payments positions. There’s …
Overview – Further downgrades to our national office outlook have driven corresponding cuts to return prospects in our metro-level forecasts this quarter. San Francisco still has the poorest outlook, with our projections for demand implying vacancy rises …
We still think the yields of long-dated sovereign bonds in Canada, Australia and New Zealand will fall by the end of this year, but no longer expect them to do so by much more than the yields of bonds elsewhere. Canada, Australia and New Zealand have led …
Market-implied interest rate expectations have continued to rise this week as investors have concluded that in order to squeeze high inflation out of the system, the Bank of England will have to raise interest rates further, from 5.00% now to a peak of …
Russian ruble depreciation gathering pace The depreciation of the Russian ruble gathered pace this week amid a continued squeeze on Russia’s trade surplus and growing capital outflows. A weaker currency will support the fiscal position, but at the same …
We think the euro-zone economy will remain in recession over the coming quarters, and the subsequent recovery will be sluggish due to the lagged impact of monetary policy tightening as well as tight fiscal policy. Headline euro-zone inflation will …
China has stepped up its support of the renminbi and Japan appears to be edging closer to direct intervention to prop up the yen. While pressure from higher US interest rates may well continue in the short term, we think that both currencies will rebound …
This page has been updated with additional analysis since first publication. Easing wage growth despite jump in employment The surge in employment in June was not quite as strong as it looks, with hours worked essentially unchanged last month, but still …
This page has been updated with additional analysis since first publication. Easing employment growth offset by stubborn wage growth The 209,000 rise in non-farm payrolls in June was the weakest gain since December 2020 and suggests labour market …
Fall in Chilean inflation paves the way for start of easing cycle later this month The larger-than-expected decline in inflation in Chile to an 18-month low of 7.6% in June seals the deal on an interest cut at the central bank’s next meeting later this …
Vegetable price spike a key upside risk to inflation We noted in our previous Weekly that the sharp rise in vegetable prices was posing an upside risk to the inflation outlook, particularly given the large weighting of food in India’s CPI basket. Since …
Weak activity data The latest data support our view that euro-zone GDP contracted in Q2, in contrast to the consensus view that it rose. In May, euro-zone retail sales were weak and industrial output in Germany edged down, while in June the euro-zone …
Inflation falls back further in June The latest inflation data from across the region paint an encouraging picture, with the headline rate falling back for every country that has so far published figures for June. (See Chart 1.) Falling food and energy …
How will the combination of El Niño and human-driven global warming affect commodities and economic performance over the short and long term? … El Niño – Macro, policy and market …
A fragile plateau The decline in the Halifax house price index in June was surprisingly modest given the scale of the increase in mortgage rates in the same month. But the current level of house prices looks unsustainably high given where mortgage rates …
Renewed fall in May and outlook is bleak German industrial production fell in May and is likely to have declined in Q2. We think industry will continue to struggle over the rest of this year. The 0.2% m/m fall in industrial production in May was worse …
Wage growth to climb higher in Australia The big news out of Australia this week was the RBA’s decision to skip a rate hike at its meeting on Tuesday. However, the decision to stay put was largely motivated by a desire to reassess the outlook with a new …
China to restrict germanium and gallium exports Retaliating against joint American-Dutch-Japanese efforts to limit Chinese access to American semiconductor technology, China announced on Monday that it will restrict exports of germanium and gallium. These …
Stronger RMB by year-end The PBOC’s Q2 Monetary Policy Report, published last Friday, included new language pledging to “prevent large fluctuations in the exchange rate”. Then, with the renminbi approaching 7.3/$ at the start of this week, the PBOC pushed …
Strong wage growth in May won’t last Regular wage growth hit a near three-decade high in May and bonus payments surged, resulting in a jump in labour cash earnings. But we wouldn’t read too much into the result, since it appears to be mostly driven by a …
The fall in job openings in May suggests that labour shortages continue to ease, although the rebound in the job quits rate implies that wage growth is set to slow only gradually. The renewed fall in the job openings rate to 5.9%, from 6.2% in April, …
6th July 2023
Tanzania’s economic growth will remain sluggish by past standards over the next couple of years due to the effects of persistent drought and tight fiscal policy. But with policymaking shifting in a more business-friendly direction under President Hassan …
We still think a recession is on the way in the UK, and that it will bring gilt yields back down. Developed market sovereign bond yields have been on the rise again so far today , as investors have continued to price back in the “higher for longer” …
Saudi and Russia add to bearish oil tone Saudi Arabia announced that it will extend its voluntary 1mn bpd oil output cut at least one more month, which came along with the news that Russia plans to cut exports by 500,000bpd too. The decision to roll over …
Labour markets across Central and Eastern Europe (CEE) have remained tight over the past year despite the weakness in economic activity and we think this will remain the case as recoveries gather pace into 2024 and structural demographic headwinds remain …
We expect the Brazilian real to reverse its gains against the US dollar by the end of the year as Brazil’s central bank eases policy and risk sentiment deteriorates. Although it has fallen a bit over the past few weeks, the Brazilian real has risen nearly …
The fading of China’s reopening rebound will weigh on recoveries in EMs like Thailand and Hong Kong whose tourism sectors depend heavily on Chinese visitors, but otherwise we think it presents relatively limited headwinds to the rest of the emerging …
Tunisia is struggling to get an IMF deal over the line and, unless President Saied’s government agrees in the near-future to allow the dinar to fall and to implement a large fiscal consolidation, the risk of a messy balance of payments crisis and …
Services activity rebounds; job openings still trending lower The rebound in the ISM services index to a four-month high of 53.9 in June, from 50.3, leaves a weighted average of the services and manufacturing indices at a level that, historically, has …
Interest rate cuts coming into closer vision The National Bank of Poland (NBP) left its main policy rate on hold again today, at 6.75%, but it seems that the balance of the MPC is shifting in a more dovish direction. We expect the first interest rate cut …
The Fed’s new FCI does a better job of illustrating the tightness of US financial conditions than various other measures. But our own FCI has had a better record at capturing turning points in real activity in recent decades, is timelier, more versatile, …
Slump in exports a downside risk to GDP growth The slump in export volumes presents downside risks to the preliminary estimate that GDP rose strongly in May, and suggests that the earlier boost from easing supply shortages is now largely behind us. With …
Export weakness to hit Q2 GDP; ADP should be treated with caution The May trade data suggest that falling exports will be a big drag on second-quarter GDP growth, and we suspect the reported surge in ADP employment last month is too good to be true. The …
The shift to fixed mortgage rates and the rise in the number of homes owned outright means that while some borrowers face a sharp rise in mortgage payments other homeowners will sit out this interest rate cycle entirely. The most vulnerable group is …
Demand rebounds marginally from historic lows A slight decline in mortgage rates allowed mortgage applications for home purchase to recover from the previous month’s lows in June. That said, applications remain below the average seen so far this year, …
The surge in Brazil’s exports since the start of the pandemic has helped the economy recover more quickly than we and most others had anticipated. And unlike previous spikes in exports, some of the windfall has been saved, which has caused the current …
The acceleration in core CPI inflation in May combined with the reacceleration in wage growth in April shows that domestic inflationary pressures are still strengthening and interest rates will need to rise further. Admittedly, higher interest rates were …
The pandemic-induced shift towards homeworking caused a sharp fall in physical office occupancy rates. They have since recovered significantly but remain below pre-pandemic levels. And while lower physical office occupancy will feed through to weaker …
Retail sales flat in May Euro-zone retail sales remained very weak in May and point to household consumption having fallen in Q2. Further out, low consumer confidence and rising interest rates suggest that household consumption will fall further over the …
Twelve months on from last year’s political and economic crisis, Sri Lanka is slowly getting back on its feet. The economy looks set to rebound steadily over the coming quarters helped by a sharp drop in inflation, lower interest rates, a recovery in …
Construction slows as interest rates stay higher for longer and recession looms After two months of gains the headline CIPS construction PMI reversed course in May, dropping to a five-month low of 48.9, which indicated a contraction in activity. All …
The meltdown in CRE that’s dominating headlines is a story centred on the office sector. But is this a US or global story and, 18 months into the most aggressive tightening cycle in a generation, is there worse to come or is recovery on the horizon? …
Will the Fed resume rate hikes at its July meeting? Do fresh signs of weakening activity make a US recession more likely? When does policy tightening move to rate cuts? Join our US team for this special briefing in the wake of the June CPI report in which …
Emerging market economies have so far come through the biggest global tightening cycle in a generation in fairly good shape. But their economies are now slowing and their central banks are turning from rate hikes to policy easing. As this cycle turns, …
With the Korean economy slowing and stability concerns growing around the property sector, will the Bank of Korea show it’s ready to move towards policy easing? Economists from our Asia team held a briefing shortly after the Bank’s July meeting to discuss …
BNM to sit on the sidelines Malaysia’s central bank today left interest rates unchanged at 3.0%, and we think this marks the end of the tightening cycle. But unlike other central banks in the region that are set to cut interest rates over the coming …
Net exports will cushion GDP growth in Q2 The rise in the trade surplus, to $11.8bn in May from $10.5bn in April, was stronger than most had anticipated (Refinitiv Consensus: $10.5bn, CE:$10.9bn). Exports of goods and services rose by a solid 4.4% in …
