Electronics reprieve may prove short lived The US tariff exemptions announced last Friday on various electronics products, including on smartphones, semiconductors and TVs, represent a further let-off for Asia after the decision to pause the reciprocal …
17th April 2025
The news on inflation this week was pretty good even before any influence from the US tariffs chaos has been felt. Although average earnings growth stayed close to 6.0% in February, pay growth on the more timely PAYE measure slowed to 5.4%. (See here .) …
Both sides are taking an axe to economic ties We’ve argued for years that geopolitical forces are fracturing the global economy into blocs, with the key fault line being the US-China rivalry. Until recently, this had been a gradual shift that was …
Gulf reins in oil overproducers Recent moves to hike OPEC+ oil output quotas but make overproducers cut production suggests that the Gulf economies are taking a firmer line on regaining global oil market share. But fresh falls in oil prices could scupper …
The Spring Meetings of the World Bank and IMF take place next week under the cloud not just of US trade protectionism but also the Trump administration’s seeming hostility towards multilateral institutions – and the threat of US withdrawal. An end to (or …
RBA will go slow and steady The minutes of the RBA’s April meeting revealed that the Bank’s decision to leave rates unchanged at 4.10% was underpinned by its view that risks to its outlook were two-sided. Granted, that assessment was made prior to Trumps’ …
The Bank of Korea today left interest rates unchanged, but the dovish commentary from the press conference and the statement suggest further cuts are coming. We are sticking with our view that rates will end the year at 2.0% (from 2.75% currently). The …
Tariff impact may not be as big as feared The OIS markets imply that it’s a coin flip whether the Bank of Japan will raise rates again this year. That makes sense because the Bank sent some rather dovish signals this week. Governor Ueda noted in an …
Strong labour market lessens the need for aggressive cuts With the labour market broadly on solid ground, we expect the RBA to deliver only a shallow easing cycle. The 32,00 rise in employment in March was a touch softer than the 40,000 increase that we …
Interest rates on hold, but BoK to resume easing cycle soon The Bank of Korea today left its main policy rate unchanged at 2.75%, but we think this represents a pause not an end to the easing cycle. The decision was correctly predicted by 24 out of 37 …
Exports will rebound across Q2 While export values fell in March, we expect them to rebound over the coming months as US consumers rush to place orders before the suspension of reciprocal tariffs ends in July. The annual increase in export values slowed …
RBNZ won’t fret the modest uptick in inflation Although headline inflation in Q1 was stronger than it had anticipated, we suspect the RBNZ will take comfort from the fact that measures of core inflation continued to fall towards the mid-point of its 1-3% …
The Bank of Canada’s decision to keep interest rates at 2.75% today was not a big surprise given recent above-target core CPI gains, concerns about tariff-induced price rises and uncertainty about the extent to which the economy requires additional policy …
16th April 2025
The February activity figures out of South Africa showed that the economy was struggling even before the added headwind from US import tariffs. But while there are downside risks to growth, we still believe a combination of easing loadshedding and …
Overview – Our working assumption is that the 90-day pause on the Trump administration’s reciprocal tariffs will be made permanent, with tariffs remaining at 10% for most countries apart from China. Providing Congress soon recycles the tariff revenue into …
Bank holds but further cuts likely amid dovish communications The Bank of Canada’s decision to keep interest rates unchanged at 2.75% today was not a huge surprise given recent above-target gains in core prices, concerns about future price increases and …
The extremely high US import tariffs imposed on China will likely strengthen the forces that have driven multinational corporates to shift production for the US market away from China and towards other EMs in recent years. Those EMs with spare capacity in …
Tariff hit yet to come The fall in industrial production in March was not as bad as it looks given that it was driven solely by a large weather-related drop in utilities output. Manufacturing enjoyed a strong first quarter with output rising by 5.1% …
Consumption growth rebounds following weather-related weakness A presumably temporary pre-tariff surge in motor vehicle sales drove the strong 1.4% m/m increase in retail sales in March. But there was also a big 3.3% m/m rebound in building materials …
Middle East & North Africa Chart Pack (Apr. '25) …
German retail performance has been among the worst in the euro-zone for most of the last decade. A combination of declining vacancy, better affordability and reduced online leakage point to a relative improvement. But any recovery is likely to be slow and …
March’s decline in services inflation was entirely due to transport, which in turn reflected past moves in oil prices and Easter timing effects. But the fundamentals still point to continued declines in underlying price pressures this year. And higher US …
Africa Chart Pack (Apr. 2025) …
We think China will continue to allow the renminbi to weaken, perhaps all the way to 8.0/$ . Today’s market moves in China emphasise yet again how US trade policy remains the key driver of financial markets right now. Despite a stronger-than-expected Q1 …
This page has been updated with additional analysis since first publication. Dip in inflation won’t last, but weak economy will quash inflation eventually The dip in CPI inflation from 2.8% in February to 2.6% in March (CE forecast 2.6%, consensus 2.7%) …
The upcoming federal election on 3 rd May appears likely to result in a hung parliament. Although the ruling Labor party’s recent uptick in the polls suggest that it is in pole position to form a minority government, we wouldn’t count out the …
Q1 ended on a stronger note thanks to fiscal boost China’s economy regained some momentum in March thanks to fiscal support, which helped the Q1 GDP figures beat expectations. Still, this wasn ’t enough to deliver faster growth over the quarter as a …
Concerning signs for Canada’s housing market The housing market took another leg down in March, with the larger decline in single-family home prices suggesting that owner-occupiers rather than investors are behind the most recent weakness. Nonetheless, …
15th April 2025
While the dust from the market sell-off continues to settle, there are few signs that the turmoil in equity and sovereign bond markets has sparked broader instability or a self-reinforcing downward cycle. Our base case is that market conditions will …
Latin America generally got off lightly on ‘liberation day’, but the indirect effects on confidence and, more importantly, demand from China could be larger. Meanwhile, the sell-off in the region’s currencies amid the recent turmoil in financial markets …
While the big easing in market rents inflation over the past few years suggests falls in all-tenancy rents inflation are in the offing, both measures of rents inflation will probably stay above pre-pandemic rates. At its heart, rental price inflation is …
Punitive tariffs have the potential to cause a substantial fall in US imports from China – a 60% tariff, for example, could cut imports from China by about a third over the next two years, with further falls after that. Some countries that face lower US …
Gasoline-driven fall in headline inflation The downward surprise to CPI inflation in March, along with the first target-consistent gains in CPI-trim and CPI-median in eight months, at the margin raise the odds of a rate cut by the Bank of Canada tomorrow. …
Although the EU is likely to respond to US tariffs at some point, recent developments reinforce our view that it will move slowly and that any retaliation will be moderate. This should limit the damage from the trade war for Europe and is one reason why …
The ongoing fallout across financial markets from President Trump’s “Liberation Day” announcement has resulted in a sharp fall in the dollar and what looks increasingly like a generalised loss of confidence in the US as a safe haven in currency and bond …
Further fall in inflation paves way for more interest rate cuts The larger-than-expected fall in Indian consumer price inflation in March, which pushes it further below the Reserve Bank of India’s (RBI’s) 4% target, reinforces our view that the central …
Outlook clouded by tariff tensions This publication has been updated with additional analysis The increase in euro-zone industrial production for a second consecutive month in February is not a sign of a sustained recovery for the sector. Instead, it is …
The ECB’s Bank Lending Survey paints a positive picture of the housing market. Conditions for consumer credit and corporate loans were less encouraging, and the tariff chaos of the past two weeks might have made banks more cautious about lending and …
Broad-based strengthening of price pressures Saudi Arabia’s headline inflation rate picked up to 2.3% y/y in March, the fastest pace since the middle of 2023. (See Chart 1.) And inflation strengthened across most categories of the CPI basket, suggesting …
This page has been updated with additional analysis since first publication. Jobs growth weakens with more to come While the jobs market weakened further, there were few signs this is feeding through to slower wage growth. But if the more uncertain …
Japan's economy will be hit less hard than many other large economies by the recent escalation of the trade war. While mounting uncertainty will keep the Bank of Japan on the sidelines for a few months, we expect the labour market to remain tight and …
The market turmoil sparked by the tariffs announced by US President Donald Trump on “Liberation day” has somewhat eased in the past couple of trading days. Absent further bad news, we think the worst has probably passed for US markets, although we see …
14th April 2025
Available data don’t give a definitive answer to whether sales by Chinese institutions contributed to the recent volatility in the US bond market. But China’s state managers of foreign assets still appear to have more than half of their portfolios …
Argentina’s latest IMF programme and the move to partially dismantle some capital controls and liberalise the exchange rate suggests policymakers are moving more quickly than we’d anticipated to restore macro orthodoxy. The parameters of the exchange rate …
The recently-announced fiscal plan in Bahrain is a welcome shift towards fiscal consolidation, but there’s a high risk of slippage and the public debt dynamics are alarming. Although other Gulf states would almost certainly step in if Bahrain faced major …
The IMF’s Resilience and Sustainability Facilities with Egypt and Pakistan will incentivise policymakers to implement climate adaptation and mitigation policies. That said, both countries still need to attract significant amounts of private investment to …
Nobody knows where US tariff policy will ultimately land but one thing is starting to become clear: the Trump administration has China in its sights. The exemptions for various electronic goods, including smartphones and laptops, announced over the …
While the recent drop in crude oil prices would lower inflation a bit, that drag will be more than offset by a boost from the weaker Australian dollar. The upshot is that barring a sharp fall in business confidence, we’re sticking to our forecast that the …
