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Industrial rebound, but recession still coming The big rebound in German industrial production in January suggests that industry may continue to hold up well in the face of the energy crisis. However, with the renewed drop in retail sales pointing to …
8th March 2023
Powell confirms higher peak in rates Fed Chair Jerome Powell appears to have confirmed today that interest rates are set to rise a higher than we previously anticipated. But with most evidence still pointing to economic weakness and lower inflation this …
7th March 2023
RBA will hike the cash rate to 4.10% The RBA signalled that further tightening will be needed when it hiked the cash rate to 3.6% today and we’re sticking to our forecast that the Bank will lift the cash rate to 4.10% by May. The RBA’s decision to lift …
Net exports will support GDP growth in Q1 Notwithstanding a fall in the trade surplus in January, we think net trade is likely to provide a boost to GDP growth in Q1. The decline in the trade surplus, from $13bn to $11.7bn in January came in below the …
Wage growth should rebound in February We think the surprise sharp fall in wage growth in January was at least in part the result of Lunar New Year disruptions and there should be a rebound in February. The much slower wage growth in January, falling …
6th March 2023
Surveys not consistent with economic reacceleration The marginal fall in the ISM services index to 55.1 in February, from 55.2, suggests activity continues to expand at a reasonably healthy pace, but provides further reason to doubt the idea that there …
3rd March 2023
Tokyo CPI data suggest some upside risks to our inflation forecasts The unemployment rate edged down in January but the job-to-applicant ratio held steady, suggesting the labour market doesn’t have room to tighten much further. Meanwhile, Tokyo inflation …
2nd March 2023
Still firmly in contractionary territory The modest rebound in the ISM manufacturing index to 47.7 in February, from 47.4, leaves it firmly in contractionary territory, and should temper recent talk of a manufacturing resurgence on the back of …
1st March 2023
Higher interest rates hurt housing but not other borrowing January’s money and credit figures suggest that higher interest rates are continuing to act as a drag on the housing market, but they appear to be having less influence in other areas of the …
GDP growth will slow sharply this year GDP growth softened last quarter and inflation slowed sharply in January. But with inflation still very high, that won’t prevent the RBA from hiking the cash rate to a peak of 4.1% in May. The 0.5% q/q rise in Q4 GDP …
Sales volumes will probably fall further this quarter While retail sales bounced back in January, the rebound probably won’t be enough to prevent a contraction in sales volumes across the first quarter. The 1.9% m/m rise in retail sales in January was …
28th February 2023
Industrial output set for February rebound Industrial production contracted sharply in January and we suspect the early start to the Lunar New Year was partly responsible and there should be a strong rebound in February. Meanwhile, retail sales volumes …
Resilience of core orders likely to be temporary The 0.7% m/m rebound in core durable goods orders in January rounds off a month of strong activity releases and suggests business investment will hold up a bit better in the first quarter than we had …
27th February 2023
Resurgence in both real spending and inflationary pressure The unexpectedly strong 0.6% m/m increase in core PCE in January, which pushed the annual rate of core inflation up to 4.7%, from 4.6%, is another sign that the Fed might have to leave its policy …
24th February 2023
Upward momentum in food inflation appears spent Inflation hit a four-decade high in January but due to stalling food inflation and the government's energy subsidies, we expect it to fall below the Bank of Japan's 2.0% target by mid-year. Headline …
23rd February 2023
Fed relatively dovish, but Feb announcement pre-dates run of stronger data The minutes of the Fed’s late-January/early February FOMC policy meeting look relatively dovish, but that is mostly because that meeting pre-dated the run of incredibly strong …
22nd February 2023
Bank will lift rates to 5.25% The RBNZ slowed the pace of tightening this month and we suspect it will now only lift the overnight cash rate to 5.25% instead of our previous forecast of 5.5%. The Bank’s decision to slow the pace of tightening from the …
Wage growth will peak around 4% Wage growth was weaker than the RBA had expected last quarter and we think it won’t accelerate as rapidly as the RBA anticipates. The 0.8% q/q rise in hourly wages excluding bonuses was weaker than the analyst consensus of …
PMIs suggest activity rebounded in February, but we doubt it will last The sharp rebound in the flash UK composite PMI in February suggests the economy continued to remain resilient to the dual drags from high inflation and high interest rates. But we …
21st February 2023
Tighter fiscal policy probably still on its way despite big borrowing undershoot January’s public finances figures suggest the Chancellor may have scope for some giveaways in his Budget on 15 th March. But with the OBR poised to slash its medium-term …
RBA isn’t done tightening just yet The minutes of the RBA’s February meeting, where policymakers lifted the cash rate by 25bp to 3.35%, confirmed the Bank’s pivot to a slightly more hawkish stance. In contrast to its December meeting, the Bank didn't …
Manufacturing downturn gathering speed According to today’s flash estimate, the manufacturing PMI fell deeper into contraction from 48.9 in January to 47.4 in February. The output sub-index fell to 44.9, the weakest reading since July 2020. Firms are …
2023 may be better than 2022 for retailers, but it will still be a struggle The 0.5% m/m rise in retail sales volumes in January was better than the consensus forecast of a 0.3% m/m decline (CE +0.5% m/m), echoes the leap in US retail sales earlier this …
17th February 2023
Labour market will continue to loosen The weakness in January’s labour market data underlines that aggressive monetary tightening is starting to cool activity, but with inflation still far too high, that won’t prevent the RBA from hiking interest rates …
16th February 2023
Exports and machinery orders to trend down in H1 The trade deficit was virtually unchanged in January, as volumes and prices of exports and imports fell across the board. Export volumes likely fell for the second consecutive month and with the global …
Further evidence of January rebound The solid 1.0% m/m rebound in manufacturing output in January provides further evidence that the economy began the year on a strong footing. That said, while the survey evidence also appears to be turning a corner, for …
15th February 2023
Surge in sales erases Q1 recession fears The massive 3.0% m/m surge in retail sales in January may have been partly related to the unseasonably mild winter in the Northeast but, alongside the unexpected strength of payroll employment, it nevertheless …
Moderating services inflation makes Bank of England’s life easier The sharp fall in CPI inflation from 10.5% in December to 10.1% in January (consensus and CE forecast: 10.2%) was the most eye-catching part of today’s CPI release. But it is the easing in …
Core inflation eases only gradually The 0.5% m/m increase in consumer prices in January illustrates that inflation is still declining only gradually, but we still expect that downward trend to accelerate soon, as easing goods shortages feed through and …
14th February 2023
Wage growth continues to accelerate despite cooling labour demand December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continues to support strong wage growth. The Bank of …
Weak investment momentum makes recession even likelier Japan’s economy returned to growth in Q4, avoiding a technical recession after the contraction in Q3. However, the rebound was subdued, let down mostly by contractions in business investment and …
Confidence still near historic lows, despite recent rebound The further modest rise in the University of Michigan consumer sentiment index in early February still only left it in line with its average level during the depths of the financial crisis in …
10th February 2023
The nomination of Kazuo Ueda to lead the Bank of Japan could be read as a sign that the Kishida government is seeking a shift away from ultra-loose policy, but we aren’t fully convinced that this is the case. According to media reports, Japan’s government …
Avoiding a recession in 2023 will prove harder The 0.5% m/m fall in real GDP in December was worse than expected (consensus -0.3%), but the 0.0% change in Q4 (consensus 0.0%, BoE +0.1%) meant that the economy avoided a recession last year by the skin of …
German inflation statistics debacle continues The main takeaway from German flash inflation figures for January, which were finally released today after a week of delay, is that headline inflation in both Germany and the euro-zone fell further in January, …
9th February 2023
Rebound in autos exports offsets decline in commodity export prices A surge in motor vehicle exports drove overall export volumes higher at the end of 2022, even as lower commodity prices weighed on export values. As the export order surveys are still …
7th February 2023
Deficit rebounds as easing supply shortages boost imports The December trade data show a rebound in both real exports and imports but, with those gains following steep declines in previous months, the data still suggest that domestic and external demand …
Slump in industrial production points to recession After proving resilient for most of 2022, German industrial production slumped in December, adding to the reasons to expect the economy to fall into recession. December’s 3.1% m/m fall in industrial …
RBA signals further interest rate hikes ahead The RBA raised interest rates by another 25bp and signalled that further tightening will be needed. We’re sticking to our forecast that the Bank will lift the cash rate to an above-consensus 3.85% by April. …
Boost from net trade should ensure decent rise in Q4 GDP Export volumes probably edged up last quarter while import volumes plunged so net trade should provide a sizeable boost to Q4 GDP growth. The decline in the trade surplus in December, from $13.5bn …
Decades-high wage growth won’t be sustained The large jump in wage growth in December was mostly due to a surge in volatile bonus payments and it will slow over the coming months. The much quicker wage growth in December, rising from 1.9% y/y to 4.8%, …
6th February 2023
ISM suggests strong start to the year in services The rebound in the ISM services index to 55.2 in January, from 49.2, reversed almost all of the sharp drop in December and leaves our composite ISM index at a level usually consistent with GDP growth of …
3rd February 2023
Robust payrolls not preventing wage growth slowdown The robust 517,000 gain in non-farm payrolls in January means that, despite most leading indicators of recession flashing red, the economy is clearly not as close to recession as we had suspected. …
Resurgence in productivity and fading ULC growth add to disinflationary pressures Non-farm labour productivity rebounded by 3.0% annualised in the fourth quarter, which means that, despite Fed Jerome Powell’s insistence at yesterday’s press conference, …
2nd February 2023
Rates closing in on their peak, but rate cuts unlikely to come until 2024 While raising rates by 50bps today, from 3.50% to 4.00%, the Bank of England implied that rates are very close to their peak. We still think that rates may rise to 4.50%, but …
Fed sticks to its guns, but shifting data suggest hiking cycle almost done As expected following a blitz of speeches by officials ahead of the blackout window, the Fed raised its policy rate by a smaller 25bp, to between 4.50% and 4.75%, but tempered any …
1st February 2023
Another recession signal flashing red The further fall in the ISM manufacturing index to 47.4 in January, from 48.4, suggests that the factory sector has received little benefit from the recent improvements in manufacturing prospects in Europe and China, …
Weak ADP suggests malaise spreading to labour market The muted 106,000 increase in the ADP measure of private payroll employment will add to fears that the malaise in activity has spread to the labour market. Nevertheless, while this supports our estimate …
Monthly data point to healthy fourth-quarter GDP growth The monthly data suggest that GDP expanded by 1.6% annualised in the fourth quarter. That would mark a sharp slowdown from the gain of 2.9% in the third quarter, but would still be much better than …
31st January 2023
Easing labour market conditions pushing wage growth lower The 1.0% rise in private wages and salaries in the fourth quarter, down from a 1.2% gain in the third quarter, adds to the evidence that wage growth is slowing gradually. The Fed is still likely to …
