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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 …
30th May 2025
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
Officials worried that tariff inflation boost could become persistent The minutes of the Fed’s early-May policy meeting were, on balance, slightly hawkish. In particular, “almost all participants commented on the risk that inflation could prove to be more …
28th May 2025
Muted PPI suggests core PCE inflation still on downward trend The March PPI data show the folly of relying too much on the CPI data. Our calculations suggest that, based on the combined inputs from PPI and CPI, core PCE prices increased by a more muted …
RBNZ cuts by 25bp, signals further easing is likely With the RBNZ clearly concerned about the health of the economy, we continue to believe that its easing cycle has much further to run. The RBNZ’s decision to cut rates by 25bp, to 3.25%, at its meeting …
Hot CPI print will give the RBA pause for thought With underlying price pressures proving somewhat persistent, we're sticking to our view that the RBA won't cut rates as far as markets are anticipating. According to the monthly CPI indicator, headline …
Resilience of core orders likely to be temporary The rebound in core durable goods orders in April wraps up a month of solid activity data, underscoring that tariffs have yet to inflict the severe damage on the economy some had feared. Nonetheless, the …
27th May 2025
Tariff front-running supports retail sales The jump in motor vehicle sales in March suggests that tariff front-running has supported consumption, although the big picture is that retail sales were strong in most of the key sectors. Likewise, the …
23rd May 2025
This page has been updated with additional analysis since first publication. The sun won’t shine on the retail sector forever Although for the first time since 2015, excluding the pandemic, retail sales volumes have risen for four months in a row, April’s …
Strong inflation will prompt rate hikes later this year Underlying inflation remained strong in April despite the slashing of public high school fees and we still expect the Bank of Japan to tighten policy further this year. Headline inflation was …
This page has been updated with additional analysis since first publication. Weak economy helping to reduce upside inflation risks Despite the modest rebound in the composite activity PMI in May, at face value it is consistent with the bumper 0.7% q/q …
22nd May 2025
This page has been updated with additional analysis since first publication. Disappointing borrowing figures highlight Chancellor’s lack of wiggle room April’s public finances figures showed that despite the boost from the rise in employers’ National …
PMIs point to a cooling economy The ongoing weakness in activity, coupled with softer price pressures, will keep the Bank of Japan in wait and watch mode in the near term. According to today’s flash estimate, Japan’s composite PMI fell from 51.2 in April …
Output growth slows, inflationary pressures ease The step-down in business activity this month, combined with signs of easing price pressures, supports our view that the RBA’s easing cycle has further to run. According to today’s flash estimate, the …
This page has been updated with additional analysis since first publication. More than one-off rises The bigger-than-expected jump in CPI inflation in April suggests that the persistence of inflation is a bit stronger and/or businesses are passing on more …
21st May 2025
Exports slump as US auto tariffs kick in With US tariffs weighing on Japanese exports, net trade will continue to act as a drag on activity in the near term. The annual increase in export values slowed from 4% in March to 2% in April. The slowdown in …
Sharp drop in headline rate masks hot underlying inflation The removal of the carbon tax sent energy prices tumbling in April, pushing headline inflation below the 2% target. More concerningly, the Bank’s preferred CPI-trim and CPI-median core measures …
20th May 2025
RBA cuts by 25bp, leaves the door open for further easing With the Bank growing increasingly concerned about downside risks to the economy, there is a good chance that it will cut rates further than we are currently anticipating this cycle. The RBA’s …
GDP growth set to remain sluggish this year With the economy already shrinking on the eve of the trade war, the Bank of Japan will probably wait even longer before resuming its tightening cycle than we had anticipated. The 0.2% q/q fall in Q1 GDP was …
16th May 2025
Retail sales and PPI show few signs of adverse tariff impact Despite fears raised by the slump in sentiment, retail sales edged up by 0.1% m/m in April, following a massive 1.7% m/m gain the month before. Admittedly, control group sales fell by 0.2% m/m …
15th May 2025
Sharp drop in manufacturing sales volumes The sharp decline in manufacturing sales volumes in March suggests the earlier boost from US tariff front-running is now reversing. A modest rise in new orders supports our view that the watered-down tariffs that …
This page has been updated with additional analysis since first publication. A temporary burst rather than a sign of a fundamentally stronger economy The bumper 0.7% q/q rise in GDP in Q1 is unlikely to be repeated as a lot of it was due to a leap in …
Labour market continues to fire on all cylinders With the labour market going from strength to strength, we’re more convinced than ever that the RBA will be reluctant to cut rates aggressively. Accordingly, we’re sticking to our forecast for a terminal …
Wage growth should moderate again before long The pick-up in wage growth in Q1 won’t prevent the RBA from cutting interest rates next week but it will limit the scope of additional easing thereafter. The 0.9% q/q rise in the wage price index last quarter …
14th May 2025
Little sign of tariff effects yet The CPI data suggest that core PCE prices rose at a target-consistent rate in April for the second month running, although it is likely to be a different story this month as tariff effects start to feed through. The 0.24% …
13th May 2025
This page has been updated with additional analysis since first publication. Sticky wage growth will mean the Bank of England remains cautious The jobs market weakened further in the face of April’s rise in payroll taxes and the national minimum wage. But …
Tariffs weigh hard on manufacturing employment Employment would have fallen again in April were it not for the boost from the federal election, which supports our view that the Bank of Canada will resume its loosening cycle next month and ultimately cut …
9th May 2025
Weakness in regular earnings very difficult to explain We still believe that the labour cash earnings figures are understating the strength of wage growth but taken at face value they reduce chances of further tightening by the Bank of Japan. According to …
The “full and comprehensive” trade deal between the US and the UK announced in a rush today by President Donald Trump and PM Keir Starmer is no such thing. As Trump admitted in his press conference, the “final details” still need to be “written up in the …
8th May 2025
For an updated and more detailed version of this analysis, click here . More rate cuts coming, but not as quickly as the markets expect While cutting interest rates from 4.50% to 4.25% today, the Bank of England poured some cold water on the markets’ …
This page has been updated with additional analysis since first publication. Tentative evidence that house price falls are over The 0.3% m/m rise in Halifax house prices (consensus forecast -0.1% m/m, CE 0.0% m/m) provides tentative evidence that the …
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 …
7th May 2025
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 …
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 …
6th May 2025
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 …
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
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
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 …
2nd May 2025
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 …
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 …
1st May 2025
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 …
Inflation slows, but worst yet to come The almost unchanged level of core PCE prices in March is welcome news but, given the data precede the implementation of broad-based tariffs, core inflation will inevitably rebound sharply in the coming months. …
30th April 2025
GDP dragged down by pre-tariff import surge & DOGE cuts The 0.3% annualised decline in first-quarter GDP was entirely due to a pre-tariff 41.3% annualised surge in imports, with net exports subtracting a massive 4.8% points from GDP. This surge now …
Bad but not awful Although the 0.2% m/m contraction in GDP in February was worse than expected, the preliminary estimate of a partial rebound in March should soothe fears that the economy is rapidly falling into recession. We expect GDP growth to slow …
This page has been updated with additional analysis since first publication. House price growth slows as stamp duty relief ends April’s bigger-than-expected 0.6% m/m fall in Nationwide house prices (consensus forecast 0.0% m/m, Capital Economics -0.1% …
CPI data don’t support the case for below-neutral rates Although trimmed mean CPI gained a bit of momentum in q/q terms last quarter, it probably won’t keep the RBA from cutting rates by another 25bp at its May meeting. However, given lingering price …
House price growth should continue to cool February’s 0.4% m/m rise in house prices is still a bit stronger than the timely leading indicators - like rising months’ supply and longer average time on market - would suggest. However, along with a small …
29th April 2025
Pre-tariff import boom points to sizeable Q1 GDP contraction The advance economic indicators revealed a massive surge in consumer goods imports in March, as firms raced to beat the imposition of reciprocal tariffs in early April. As a result, we now …
