Tariff and inflation fears ease substantially The stronger-than-expected June University of Michigan consumer sentiment index suggests that, despite ongoing policy uncertainty, consumers have become much less worried about both tariffs and inflation. …
13th June 2025
Add manufacturing to list of weak areas in the economy Manufacturing sales volumes plunged in April as the temporary boost to exports from tariff front-running unwound. Prospects for a meaningful rebound over the coming months look slim, with new orders …
Private demand continues its decline Bank loan growth continued to slow last month, but broad credit growth held steady, thanks to the continued strength of non-bank borrowing. With deflation keeping real lending rates elevated, despite the recent small …
A third target-consistent gain in core PCE deflator The softer-than-expected PPI data mean we now estimate that core PCE prices rose by 0.16% m/m in May, marking the third consecutive target-consistent gain. Much like for the CPI, there was only limited …
12th June 2025
Headline inflation drops to 75-month low; has now bottomed out India’s headline consumer price inflation fell to a 75-month low of 2.8% y/y in May. Inflation may now have bottomed out, but we think it will rise only very gradually back towards the Reserve …
This page has been updated with additional analysis since first publication. Economy coming back down to earth The fall in GDP in April supports our view that the strength of the economy in Q1 was a red herring and that GDP growth will be more subdued …
Trump 1 - 0 Economists The muted 0.1% m/m rise in the core CPI in May is not quite as good as it looks, with our preliminary estimate pointing to a 0.20% rise in the Fed’s preferred core PCE deflator ahead of the PPI data tomorrow. Nonetheless, the data …
11th June 2025
Inflation drops, but Copom likely to hike one final time next week The slightly larger-than-expected fall in Brazil’s headline inflation, to 5.3% y/y, was driven by weaker food inflation. Underlying price pressures continued to strengthen and, against …
10th June 2025
This page has been updated with additional analysis since first publication. Looser labour market driving softer wage pressures With payrolls plunging, the unemployment rate climbing and wage growth easing, today’s labour market release leaves us more …
Inflation rise won’t prevent further cuts from Banxico Mexico’s headline inflation rate jumped to 4.4% y/y in May but this was mainly driven by stronger non-core prices and so is unlikely to trouble officials at the central bank. Indeed, with the economy …
9th June 2025
US tariffs start to weigh on overall exports The slowdown in export growth in May should partially reverse this month, as it reflects the drop in US orders before the trade truce, which took time to feed through to actual shipments. But with tariffs …
Overcapacity set to keep China in deflation Headline inflation remained in negative territory last month but core inflation continued to recover and is now at its highest in almost a year. This improvement looks fragile, however, and we still think …
Labour market continuing to struggle The rise in employment in May was better than expected but, paired with recent data, still shows that the labour market is struggling. We are therefore sticking to our view that the Bank of Canada will cut interest …
6th June 2025
Tariffs taking only a limited toll The 139,000 gain in non-farm payrolls was not as good as it looks, given its narrow breadth and the 95,000 downgrade to payroll gains over the prior two months. Nevertheless, it shows that tariffs are having little …
CBR delivers dovish surprise as overheating pressures ease The decision by the Central Bank of Russia (CBR) to cut its policy rate by 100bp today, to 20.00%, came as a dovish surprise, and we now think the policy rate will now end this year at 17.00% …
Euro-zone GDP and Employment (Q1 2025) Front-running boost will be unwound in second quarter The upward revision to euro-zone Q1 GDP growth to 0.6% q/q from 0.3% is largely due to a surge in pharmaceutical exports which we already know is being reversed …
This page has been updated with additional analysis since first publication. We’ll be discussing the outlook for fiscal policy and the economy shortly after the Chancellor’s Spending Review is released in a 20-minute online Drop-In at 3pm BST on Wednesday …
Tariff front-running already reversing German industrial production and export figures for April suggest that the boost to activity from US tariff front running is already reversing and that underlying industrial activity remains weak. With US tariffs …
RBI ends easing cycle with a bang The Reserve Bank of India’s (RBI’s) decision to cut the repo rate by a larger-than-expected 50bps (to 5.50%) while also changing its policy stance from “accommodative” to “neutral” today are clear indications that it has …
Trade deficit narrows dramatically, as tariffs end import surge The huge narrowing of the trade deficit in April was largely driven by a steep drop in pharmaceutical product and gold bullion imports, reversing their earlier surge as tariff front-running …
5th June 2025
Reversal of tariff front-running sends deficit to record high The jump in the trade deficit to a record high in April was larger than expected as tariff front-running reversed with “Liberation Day” and Canadian exporters paused to make more of their …
ECB likely to cut further The ECB’s decision to cut the deposit rate by 25bp to 2.0% and give no clear signals about the future path of monetary policy was in line with expectations. We forecast one more rate cut in the second half of the year with risks …
Updated Q1 Ireland data to prompt massive revision to euro-zone outturn We think that the huge upward revision to Ireland’s Q1 GDP data this morning, to show a rapid expansion that was in large part driven by tariff front-running, will lead to euro-zone …
Construction activity improves as tariff uncertainty falls back The headline CIPS construction PMI rose for the third consecutive month in May, although the rise from 46.6 to 47.9 still suggests that construction activity is contracting. Within the …
Wage pressures showing signs of strengthening With base pay growth on a new upswing, we think the Bank of Japan will restart its hiking cycle before long. According to today’s preliminary estimate, growth in labour cash earnings remained unchanged at 2.3% …
Tariffs causing problems for the service sector The surprise fall in the ISM services index for May suggests that tariff effects are weighing on activity outside of the manufacturing sector, but the Fed is likely to be more concerned by the further rise …
4th June 2025
Rate cuts delayed, but still coming The Bank of Canada avoided surprising markets by keeping interest rates unchanged at 2.75% today, as it continues to wait to see what the full impact of uncertain US trade policy on the economy will be. The accompanying …
Rates left on hold, but easing cycle to resume before long The National Bank of Poland (NBP) left its policy rate on hold today, at 5.25%, but this is only likely to mark a short pause in the easing cycle. We think that interest rates will be cut again at …
Some positive news, but outlook still poor The rise in home purchase mortgage applications in May still leaves them just shy of where they were in January and very low by historical standards, supporting our view that homebuying activity will remain weak …
Jump in inflation to prompt CBE to stick with cautious approach to rate cuts Egypt’s headline inflation rate climbed from 13.9% y/y in April to 16.5% y/y in May, the fastest pace since January, and while we expect the Central Bank of Egypt (CBE) to …
GDP data put RBA between a rock and a hard place Although activity was off to a poor start in 2025, the persistent strength in unit labour cost growth will constrain the RBA’s ability to provide much policy support. The 0.2% q/q rise in real GDP in Q1 was …
Growth slowdown strengthens case for more rate cuts South Africa’s muted 0.1% q/q growth in the first quarter of the year on the back of a downwardly revised 0.4% expansion in Q4 of last year suggests the recovery is losing momentum. That will only …
3rd June 2025
Services inflation down and further declines to come May’s steep decline in services inflation, to its lowest level in more than three years, confirms that the previous month’s jump was just an Easter-related blip and that the downward trend in services …
Downside inflation surprise re-opens the door to monetary easing The larger-than-expected fall in Turkish inflation in May, to 35.4%, will increase the CBRT’s confidence that it can restart its easing cycle soon. While we had thought the easing cycle …
RBA still wary of adopting an expansionary policy stance Although the RBA’s easing cycle has further to run, the Bank is unlikely to cut rates as far as markets are anticipating. The minutes of the RBA’s May meeting confirmed that the Board had considered …
Limited optimism after China-tariff-pause The surprise decline in the ISM manufacturing index in May indicates that tariffs continue to weigh significantly on the sector. While the May data is less gloomy than initially appears, as a sharp decline in …
2nd June 2025
Tariffs may be beginning to take their toll on CEE industry The fall in the manufacturing PMIs out of Central and Eastern Europe (CEE) last month suggest that US tariffs may be holding back the region’s industrial sectors. Elsewhere, inflation pressures …
This page has been updated with additional analysis since first publication. Further signs consumers are starting to spend a bit more freely April’s money and lending figures provided little indication that the US trade war and the deteriorating jobs …
Opposition victory will continue to block government reform drive The victory for Karol Nawrocki, the candidate of the nationalist opposition party (PiS), in Poland’s presidential election will continue to stymie the government’s efforts to push through …
This page has been updated with additional analysis since first publication. Soft patch for prices already over May’s 0.5% m/m increase in Nationwide house prices adds to the evidence that the recent soft patch for the housing market was a temporary blip …
Drop back in imports & consumer resilience point to big Q2 GDP rebound With imports slumping after President Trump imposed his tariffs in early April and consumer spending continuing to recover after this year’s unusually severe winter, we now forecast …
30th May 2025
Fall in domestic demand could still persuade the Bank to cut Despite the upside surprise to first-quarter GDP growth, the contraction in domestic demand means we are sticking to our view that the Bank of Canada will cut interest rates again next week. The …
Bumper growth keeps door open for another rate hike The 1.4% q/q expansion in Brazil’s GDP was partly driven by a boom in the agricultural sector at the start of the year, which is likely to unwind. But it now looks like the economy is on course to expand …
Economy grew at a rapid pace in Q1 GDP figures for Q1 2025 show that India’s economy grew at a robust pace at the start of the year and we think that growth may remain strong over the coming quarters as lower interest rates filter through into the economy …
Encouraging signs for the rebalancing process The slowdown in Turkish GDP growth, to 1.0% q/q, in Q1 and, more importantly, the fact that net trade is propping up growth provide positive signs that policymakers’ efforts to rebalance the economy and bring …
Pullback in retail sales complicates matters for the RBA Despite the ongoing slump in consumer spending, we’re not convinced the RBA will cut rates as aggressively as markets are anticipating. The 0.1% m/m fall in retail sales was a much weaker outturn …
Japan’s economy shrugging off trade tensions If anything, the April activity data suggest that Japan’s economy is benefitting from trade tensions, which bodes well for our view that the Bank of Japan will hike rates again soon. Taking industrial …
Strong inflation opens up chance of July rate hike The Tokyo CPI showed a further broad-based acceleration in inflation in inflation, which suggests that the Bank of Japan may hike even earlier than our current forecast of October. Headline inflation held …
Court ruling adds another layer of uncertainty on Trump’s tariffs The ruling by the three-judge panel of the Federal Court of International Trade blocking President Trump’s reciprocal tariffs will presumably be appealed by the administration all the way …
29th May 2025
Further easing coming With the economy set to struggle and concerns about inflation unlikely to resurface anytime soon, we expect the Bank of Korea to remain in easing mode after today’s 25bp cut. The decision to lower the policy rate to 2.50% – the …
