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 …
Easter-driven rise in services inflation won’t concern ECB April’s rise in services inflation is unlikely to worry the ECB too much as it was probably driven mainly by Easter timing effects. We think services inflation will start falling again in the …
Tariff front-running drives a strong start to the year Hong Kong’s GDP growth saw a strong pick-up in Q1, expanding by 3.1% y/y in Q1, up from 2.5% y/y in Q4 of last year (the Bloomberg median was +2.1% and our forecast was +3.4%). In q/q terms the …
PMIs not as good as they look The manufacturing PMIs across Central and Eastern Europe (CEE) held up relatively well in the face of higher US tariffs, but forward looking components of the surveys suggest conditions may deteriorate ahead. Meanwhile, price …
RBA still on track to deliver shallow easing cycle This week we learnt that Australia’s trimmed mean inflation fell from 3.2% in Q4 to 2.9% in Q1, returning it to the RBA’s 2-3% target band for the first time in over three years. While that outturn was …
The April PMIs for Asia fell sharply, providing the first sign that Trump tariffs are weighing on sentiment in the region. With concerns about growth mounting and inflation worries continuing to ease, we think most central banks in the region will …
Few signs of sharp slowdown in activity With trade tensions clouding prospects for Japan’s economy, the Bank of Japan revised down its GDP growth forecasts sharply at its meeting on Thursday and sounded more dovish than it did in January. One channel …
Weak retail spending raises risk of looser monetary policy With consumers spending remaining sluggish, risks to our interest-rate forecasts are tilted to the downside. The 0.3% m/m rise in sales values in March was a bit softer than the 0.4% increase the …
It’s possible that the recent blackout on the Iberian peninsula goes down in history as a catalyst for widescale electricity grid upgrades which ultimately help to bolster the pace of the renewable rollout. But at least in developed economies, it’s …
1st May 2025
Headwinds are gathering for the Swedish economy, and we expect the Riksbank to strike a dovish tone in its statement next week. But it will probably stop short of cutting the policy rate as it waits for some of the economic uncertainty to fade. Meanwhile, …
Oil prices have now fallen by about 18% since ‘Liberation Day’, and one could make the case for them being in oversold territory – particularly if US tariffs are rowed back further, as we expect. But further signs that Saudi Arabia is willing to push oil …
Saudi pushing for a more aggressive OPEC oil hike It already looked like next week’s OPEC+ meeting could see another plan outlined to hike to oil output from the group in June. But if anything, supply could be raised further given signals from Saudi …
Manufacturing activity holding up The small fall in the ISM manufacturing index in April suggests that, while tariffs are weighing on the economy, they are not crushing it. And although the prices paid index is still some way below its pandemic peak, it …
The prospect of a flood of low-cost Chinese exports to African shores may help those economies suffering from high inflation but it risks undermining the growth of domestic industry. Governments in the likes of Nigeria, with a history of employing …
Overview – While the more uncertain global backdrop due to the new US tariffs regime means we have become more confident in our below-consensus UK GDP forecast, the prospect of falling mortgage rates suggests UK housing demand is well insulated from US …
This Update answers some key questions on the recently agreed US-Ukraine minerals deal. In short, estimates of Ukraine’s mineral wealth seem to be overblown. The deal may provide more US support for Ukraine in peace talks, but Russia and Ukraine remain …
A soft start to 2025 Saudi Arabia’s flash estimate of Q1 GDP showed that the Kingdom’s economy grew by 0.9% q/q , translating into a year-on-year increase of just 2.7% to kick off the year. But with revisions and rebases to the data, it suggests the Saudi …
Despite the Bank of Japan’s dovish tone today we think it won’t be long before JGB yields start to rise again. And even though concerns about Japanese capital repatriation have seemingly been back on investors’ minds lately, we don’t think higher JGB …
Net lending to property falls back Net lending to property weakened to a one year low in March, with total lending of £514m down from £1.59bn in February. The drop was driven by lending to standing investments, which fell to £530m from £1.49bn. Debt …
This page has been updated with additional analysis since first publication. Households tighten their purse strings March’s money and lending data suggest households were starting to spend more cautiously even before the full hit to consumer confidence …
The Bank of Japan revised down its growth forecasts and sounded more dovish when it left policy settings unchanged today. However, we believe that the Bank has become far too downbeat about the outlook for inflation and we’re sticking to our forecast of …
Data published for Korea from the past few days suggests the economy remains weak, but that the trade war so far appears to be having a minimal impact. While exports to the US fell in April, the declines were relatively small and were more than made up …
Bank of Japan will hike rates again in July The Bank of Japan revised down its growth forecasts and sounded more dovish when it left policy settings unchanged today. However, we believe that the trade war won’t be as damaging as feared and we’re sticking …
Stretched housing affordability continues to keep a lid on house price growth. And if we’re right that the RBA will only lower rates by another 50bp, it will remain a headwind. But with the housing market no longer creating upside risks to inflation, …
We think the recent outperformance of euro-zone equities over US ones has run its course. The eight-day winning streak in the S&P 500 may break today, after the market opened down over 1% on news that the US economy unexpectedly contracted in Q1 , on …
30th April 2025
Contraction in first-quarter GDP not a worry Core inflation yet to capture tariff impacts Fed will remain in “wait-and-see” mode for some time A contraction in GDP and near-flatlining in core PCE prices would usually be more than enough to persuade …
