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Bank maintains hawkish bias, but next move likely to be a cut The Bank of Canada accompanied its decision to leave interest rates unchanged with a pledge to hike again if needed, but we doubt it will need to follow through. With recession risks rising and …
6th September 2023
Modest rise leaves index at subdued level The rise in the ISM services index to a six-month high of 54.5 in August, from 52.7, is a further sign that activity growth is holding up in the third quarter. That said, a weighted average of the two ISM surveys …
Trade deficit widens, as consumer goods imports rebound Net external trade is on track to provide a modest positive contribution to third-quarter GDP growth, despite the widening in the monthly trade deficit to $65.0bn in July, from $63.7bn. Exports …
BC port workers’ strike weighs heavily on imports As the BC port workers’ strike weighed far more heavily on imports than exports, the trade data suggest that there are modest upside risks to the preliminary estimate that GDP was unchanged in July. That …
Mortgage rates continue to weigh on demand Mortgage applications for home purchase continued to slip in August, recording the largest monthly fall since February. This latest drop has kept mortgage applications at their lowest level since 1995. While we …
This page has been updated with additional analysis since first publication. Stronger-than-expected GDP growth won’t prompt RBA to resume rate hikes While GDP growth held up better last quarter than the RBA had anticipated, we doubt this will encourage …
RBA is done tightening and will cut rates earlier than most expect The RBA retained its tightening bias when it kept interest rates unchanged at 4.10%, but we think the Bank’s next move will be a rate cut, perhaps as early as the first quarter of next …
5th September 2023
This page has been updated with additional analysis since first publication. Still consistent with weak output growth and slower inflation The further rise in the ISM manufacturing index to a six-month high of 47.6 in August, from 46.4, is another sign …
1st September 2023
This page has been updated with additional analysis since first publication. Labour market strength fading rapidly The 187,000 gain in non-farm payrolls, jump in the unemployment rate and slowdown in wage growth in August all add to the evidence that …
Consumption boosted by heatwave Real consumption increased by a bigger than expected 0.6% m/m in July, which will result in another round of upward revisions to third-quarter GDP growth. Our own forecast is now up to 2.3%. But the strength in July is …
31st August 2023
This page has been updated with additional analysis since first publication. Resilience of business investment poses upside risks to growth We don’t think the ongoing strength in private fixed investment will last. However, the balance of risks to our …
Note: We’ll be discussing the China growth/stimulus question, the BOJ’s policy outlook, Indian food price inflation and more in our monthly Asia Drop-In on Thursday, 31 st August . Register here to join the online briefing. This page has been updated with …
Seattle sees record decline in information jobs in July Employment growth in July was near the average seen in 2023 thus far, at a seasonally-adjusted 0.5% 3m/3m across the 30 metros we cover. But the disappointing performance of information jobs …
30th August 2023
Big gap between GDP and GDI persists Second-quarter GDP growth was revised down marginally to a still-healthy 2.1% annualised from 2.4%, but the alternative GDI (gross domestic income) measure suggests the economy expanded at a much slower 0.5% annualised …
Renewed surge in mortgage rates begins to take its toll The decline in mortgage approvals to a five-month low in July showed the renewed surge in mortgage rates since April has begun to take its toll. But given the lag between quoted mortgage rates and …
This page has been updated with additional analysis since first publication. Higher interest rates are weighing more heavily on lending The drag on bank lending from higher interest rates grew further in July, particularly in the housing market. We think …
This page has been updated with additional analysis since first publication. Rapid fall in inflation may prompt earlier rate cuts The sharp fall in inflation in July confirms that the RBA is done tightening and raises the chances that the Bank will start …
June saw house prices rise again for the fifth month in a row The limited supply of existing homes for sale helped house prices rise for the fifth consecutive month in June, according to Case-Shiller. Given the sizeable increase in prices in Q2 and that …
29th August 2023
This page has been updated with additional analysis since first publication. RBA will look past upswing in retail sales We don’t believe that the healthy uptick in retail sales in July represents a second wind for the Australian consumer. Accordingly, …
28th August 2023
Solid growth not yet prompting Fed rethink Fed Chair Jerome Powell underscored the FOMC’s commitment to data dependence in his Jackson Hole speech today, but there was no suggestion that signs of economic resilience have already prompted Fed officials to …
25th August 2023
This page has been updated with additional analysis since first publication. Underlying inflation losing momentum While underlying inflation remained at a 40-year high in the August Tokyo CPI, the momentum of price increases has slowed markedly which …
Equipment investment set to stagnate The 5.2% m/m fall in durable goods orders mainly reflected a reversal of the earlier jump in aircraft orders and wasn’t actually as bad as we had expected, with core orders also surprising on the upside. But the …
24th August 2023
Survey consistent with economic stagnation The slump in the S&P Global composite PMI to a six-month low in August casts further doubt on the idea that the economy is accelerating, with the index consistent on past form with GDP growth of close to zero. …
23rd August 2023
Retail sales still struggling as higher interest rates feed through Retail sales volumes broadly stagnated over June and July and would have performed much worse were it not for the improving supply of motor vehicles. While the ongoing wildfires across …
This page has been updated with additional analysis since first publication. Higher interest rates dragging the economy into recession The fall in the activity PMI to below the boom-bust level of 50.0 in August supports our long-held view that the economy …
This page has been updated with additional analysis since first publication. PMIs point to continued strength in economic activity The composite PMI remained high in August which points to continued strength in GDP growth, but a slowdown from the bumper …
This page has been updated with additional analysis since first publication. Limited scope for pre-election splurge despite borrowing undershoot July’s public finances figures continued the recent run of better-than-expected news on the fiscal position. …
22nd August 2023
This page has been updated with additional analysis since first publication. Under the weather The 1.2% m/m fall in retail sales volumes in July probably had more to do with the unusually wet weather than the impact of higher interest rates on consumer …
18th August 2023
This page has been updated with additional analysis since first publication. Underlying inflation will peak soon Headline inflation was unchanged in July as falling energy prices offset a further pick-up in underlying inflation. While we expect goods …
This page has been updated with additional analysis since first publication. Unemployment rate ticks higher A boost to the labour supply is helping to take the heat out of Australia’s tight labour market. Accordingly, we’re sticking with our view that the …
17th August 2023
This page has been updated with additional analysis since first publication . Net trade boost reversing in Q3 The July trade data suggest that the huge boost from net exports in Q2 will unwind this quarter, which will result in a sharp slowdown in GDP …
Fed officials in wait-and-see mode The minute of the Fed’s late July meeting suggest that, amid “tentative signs that inflation pressures could be abating”, officials were in no rush to follow up the 25bp rate hike at that meeting with another in …
16th August 2023
Single-family starts rebound, but confidence slips Single-family starts rose again in July, in line with a 13-month high in homebuilder confidence in the month. However, confidence slipped again in August. Furthermore, with the Fed unlikely to start …
Manufacturing boosted by seasonal adjustment problems The 1.0% m/m surge in industrial production in July was partly due to a weather-related jump in utilities output and, although manufacturing output also rebounded by a solid 0.5%, the surveys suggest a …
This page has been updated with additional analysis since first publication. Services inflation still uncomfortably high CPI inflation fell to a 17-month low of 6.8% in July, as the effects of the lower utility price cap kicked in. But with services price …
RBNZ signals extended pause All 29 of the analysts polled by Reuters, including ourselves, correctly predicted the RBNZ’s decision to leave the OCR unchanged at 5.50%. The minutes of the meeting reiterated the RBNZ’s tightening bias. The Committee appears …
Encouraging signs under the surface This page has been updated with additional analysis since first publication. While the continued above-target gains in the CPI-trim and CPI-median core measures may cause some concern for the Bank of Canada, there were …
15th August 2023
This page has been updated with additional analysis since first publication. Consumer resilience continues The 0.7% m/m jump in retail sales in July suggests that tighter monetary policy is still having remarkably little impact on real economic activity, …
This page has been updated with additional analysis since first publication. Accelerating wage growth supports the case for one more rate hike The fall in employment in the three months to June and further rise in the unemployment rate will be welcomed by …
This page has been updated with additional analysis since first publication . Underwhelming wage growth bolsters case for RBA to stay put The sluggish pace of wage growth in Q2 reinforces our view that the Reserve Bank of Australia won't lift interest …
This page has been updated with additional analysis since first publication. Above-trend growth won't be sustained Japan’s economy expanded at an extremely rapid pace last quarter, but we expect a renewed slowdown across the second half of the year. The …
Total rise in July hides slowdown in commercial lending July saw the amount of outstanding debt secured against real estate rise (albeit marginally) after a sharp drop in June, driven by a strong rebound in residential lending. Across the commercial real …
14th August 2023
Falling expectations drag down confidence The University of Michigan consumer sentiment index stalled in August, with the index slipping back to 71.2, from 71.6. With tighter credit conditions and a weaker labour market likely to weigh on confidence …
11th August 2023
This page has been updated with additional analysis since first publication. Resurgence in activity unlikely to last The 0.5% m/m rise in real GDP in June and 0.2% q/q increase in Q2 (CE, BoE, consensus 0.1% q/q) confirmed that a recession has so far been …
Apart from lagging shelter prices, Fed already hit its inflation target The disinflationary pressures continued to build in July, with both headline and core CPI increasing by a moderate 0.2% m/m. Admittedly, the annual headline inflation rate actually …
10th August 2023
Net trade weighed on second-quarter GDP growth Weaker global demand and the fading boost from easing supply shortages took a toll on exports in June, confirming that net trade weighed on second-quarter GDP growth. While the surveys point to further …
8th August 2023
Exports set for renewed weakness soon The narrowing in the trade deficit to $65.5bn in June, from $68.3bn, mainly reflected a further slide in imports, with exports little changed. But with the survey evidence suggesting that renewed weakness in exports …
This page has been updated with additional analysis since first publication. Wage growth should slow as labour market slackens Wage growth remained strong in June as summer bonuses rose, but regular pay growth slowed and is unlikely to become strong …
Halifax prices edged lower in July With mortgage rates rising to around 6% in July, it was no surprise that the slide in the Halifax house price index continued. Although there might be a modest fall in mortgage rates in the near term, we think they will …
7th August 2023
