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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 …
6th June 2025
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 …
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 …
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 …
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 …
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 …
3rd June 2025
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 …
2nd June 2025
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 …
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 …
30th May 2025
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
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
