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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 …
Drag from higher interest rates intensified in December December’s money and credit figures revealed that higher interest rates further dampened economic activity at the end of last year. Moreover, the drag on activity will continue to intensify this year …
Economy likely to contract in first half of 2023 The small increase in France’s GDP in Q4 last year was worse than it first appears as household consumption fell sharply and investment growth slowed. It looks as if a (mild) recession in the first half of …
Weakening industrial production outlook heralds recession Retail sales rebounded in December and industrial production was mostly flat in December. However, firms’ forecasts are consistent with sharp contractions in industrial output over the coming …
Unemployment rate to rise before long The unemployment rate stayed unchanged in December, but labour market conditions are beginning to betray signs of loosening. We are expecting unemployment to rise to 2.8% by mid-year due to a recession. The labour …
30th January 2023
Recession not off the table yet The fall in German GDP in Q4 suggests that the energy crisis started to dent activity at the end of last year. This pours cold water on the recent optimism about the prospects for the euro-zone and suggests that a technical …
Slump in spending suggests recession could have already started The monthly income and spending figures reveal that, despite the apparent resilience of fourth-quarter GDP growth, the economy was on the precipice of a recession, and may already have fallen …
27th January 2023
January print likely the peak for inflation Tokyo inflation rose to 4.4% in January as fresh food and services inflation rose, signalling a similar jump at the national level. But due to the government’s energy subsidies we expect it to fall below the …
26th January 2023
Underlying pace of growth already much weaker The 2.9% annualised rise in fourth-quarter GDP was a little stronger than we had expected, but the mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter …
Bank hints that smaller 25 bp hike likely to be the last The Bank of Canada accompanied its smaller 25 bp hike with new guidance that it intends to hold the policy rate at the current 4.5% while it assesses the impact of the cumulative interest rate …
25th January 2023
Recession might be avoided, but outlook still poor The renewed increase in the Ifo Business Climate Index in January confirms that the recovery in German business sentiment that started at the end of 2022 has continued this year. But the fall in its …
Recession on the cards in 2023 The renewed fall in the flash UK Composite PMI in January suggests that some of the resilience in economic activity towards the back end of 2022 started to peter out in early 2023. While still very high, the price indices …
24th January 2023
Borrowing overshoot further limits chances of big Budget giveaways December’s public finances figures provided more evidence that the government’s fiscal position is deteriorating fast. And high government spending in the early months of 2022/23 and the …
Disappointing end to a difficult year The surprise 1.0 % m/m fall in retail sales volumes (consensus +0.5%) meant that sales volumes fell by 1.3% q/q over Q4 as a whole and ended the year a disappointing 5.4% below their level at the start of the year. …
20th January 2023
Government measures to lower inflation from January Inflation hit 4% in December but due to the government’s energy subsidies we expect it to fall to around 3.0% in January, and further below the Bank of Japan’s 2.0% target by mid-year. The increase in …
19th January 2023
Unemployment rate to rise in earnest before long The labour market struggled in December and it won’t be long before unemployment starts to rise in earnest. The 14,600 drop in employment in December was well below the analyst consensus of +22,500. And …
Exports heading into 2023 on the backfoot While the trade deficit narrowed further in December, most of that reflects falling import prices. Export volumes likely fell slightly and with the global downturn weighing on external demand, export growth will …
Manufacturing falls into recession, with output at a 15-month low Echoing the recent slump in the survey-based indicators, industrial production declined by a worse-than-expected 0.7% in December, with November’s decline revised up to 0.6% m/m, from 0.2%. …
18th January 2023
Consumers starting to buckle under higher rates The 1.1% m/m fall in retail sales in December, which follows a downwardly-revised 1.0% fall in November, adds to the evidence from the surveys that the economy was rapidly losing momentum towards the end of …
Inflation is falling, but services inflation still too strong for comfort The small fall in CPI inflation from 10.7% in November to 10.5% in December (consensus forecast 10.5%) and unchanged core rate 6.3% (consensus 6.2%) suggests it is too early for the …
New Governor will ditch Yield Curve Control in April The Bank of Japan kept policy settings unchanged today, but the increase in its medium-term inflation forecasts supports our view that Yield Curve Control will be abandoned once a new Governor takes …
Further signs of investment slowdown Weakness in the manufacturing sector led to “core” machinery orders falling to their lowest level since February 2022, and points to a slowdown in investment last quarter. “Core” orders crashed by 8.3% m/m in November …
Some encouraging signs despite elevated core inflation Unfavourable base effects mean that the small falls in CPI-trim and CPI-median inflation in December are better than they look. And with prices falling on the month for the first time since July 2020, …
17th January 2023
Strong wage growth adds pressure on the Bank of England to raise rates Consistent with the economy proving to be more resilient than expected, November’s labour market data show that conditions remain tight and wage growth stayed strong. This will only …
Sentiment rebounding from historically weak level The further rise in the University of Michigan consumer sentiment index to 64.6 in January, from 59.7, illustrates that consumers have taken some encouragement from the fall in energy prices. Nevertheless, …
13th January 2023
Q4 contraction probably avoided Annual GDP data for Germany suggest that the economy avoided a contraction in Q4 and that the euro-zone as a whole will probably prove more resilient to the energy crisis than we initially feared. But activity clearly …
GDP resilient, but still set for contraction in Q1 The small 0.1% m/m gain in real GDP in November (consensus -0.2% m/m, CE -0.3% m/m) suggests the economy was not as weak in Q4 as we had previously thought. But even if the economy does a bit better than …
Slump in gasoline prices drives decline in headline CPI Consumer prices declined by 0.1% m/m in December, helped by a 9.4% m/m drop back in gasoline prices and a more modest 0.3% m/m increase in food prices. The pace of monthly gains in food away from …
12th January 2023
Net trade to boost GDP growth in Q4 The trade balance widened to a five month high in November even though import prices probably outpaced export prices last quarter, which suggests that net trade provided a sizeable boost to Q4 GDP growth. The trade …
Stubbornly high inflation will prompt further RBA tightening The renewed rise in inflation in November coupled with strong retail sales data will prompt the Reserve Bank of Australia to press ahead with another 25bp rate hike at its February meeting. …
11th January 2023
Sharp decline illustrates that recession still more likely than soft landing The slump in the ISM services index to a 19-month low of 49.6 in December, from 56.5, is another signal from the surveys that despite the resilience of employment growth, …
6th January 2023
Surge in employment locks in another interest rate hike The surge in employment in December and renewed fall in the unemployment rate suggests that the Bank of Canada will raise interest rates again later this month, although the fall in wage growth means …
Wage growth slowing despite employment resilience The solid 223,000 gain in non-farm payrolls and drop-back in unemployment to a 50-year low in December will, at face value, do little to ease the Fed’s concerns about resilient core services inflation. …
Wage growth will settle around 1% The sharp slowdown in wage growth in November was mostly due to a plunge in volatile bonus payments and it will rebound over the coming months. The slowdown in wage growth in November, from 1.4% y/y to 0.5%, was more …
5th January 2023
Goods trade balance moves back into deficit Lower commodity prices have now wiped out the goods trade surplus, while the falls in export and import volumes present downside risks to the preliminary estimate that GDP edged up in November. The merchandise …
Trade hit by domestic and external weakness The sharp narrowing of the trade deficit to $61.5bn in November, from $77.8bn, came as a big fall in exports was offset by an even sharper drop in imports. Net trade still looks to have been a small drag on …
Fed doubling down on hawkish views The minutes of the Fed’s December policy meeting reveal officials in hawkish mood, with participants arguing that “a restrictive policy stance would need to be maintained until the incoming data provided confidence that …
4th January 2023
Weaker ISM shows activity stalling, but labour market conditions remain tight The decline in the ISM manufacturing index to a two-and-a-half year low of 48.4, from 49.0, is another sign that the economy was losing momentum at the tail-end of last year. …
Higher interest rates continue to weigh on the economy November’s money and credit figures showed further signs that higher interest rates are dampening activity, particularly in the housing market. And this will be a constant theme throughout the year …
Q4 growth looking ok, but economy losing momentum Real consumption is on course for solid growth of around 3.5% annualised in the fourth quarter, but the income and spending data show that it stalled in November. The sharp fall in durable goods orders …
23rd December 2022
We are resending this publication due to an error in the previous version. Inflation will fall below 2% by mid-2023 Inflation edged up in November and will peak at around 4% around the turn of the year, but we expect it to fall back below the Bank of …
22nd December 2022
Fiscal stimulus and high inflation pushes borrowing to a record November high November’s public finances figures showed that government borrowing is rising fast. And the trio of the government’s energy price support, cost of living payments and pressures …
21st December 2022
Bank won’t follow band widening with rate hikes The Bank of Japan today widened the tolerance band around its yield target but we don’t expect it to hike its short-term policy rate anytime soon. The Bank’s decision to keep its short-term policy rate at …
20th December 2022
End of RBA’s tightening cycle is nearing The fact that the RBA discussed keeping the cash rate unchanged for the first time since the start of the current tightening cycle at its December meeting suggests that it won’t hike rates much further, though we …
Sentiment recovers further, but recession still coming The renewed increase in the Ifo Business Climate Index in December and the general improvement in the surveys over the past two months suggests the outlook for the German economy has improved. But we …
19th December 2022
PMIs suggest we’re in recession, but inflationary pressures continue to ease The flash PMIs for December are consistent with our view that the UK economy is probably in a recession, although a relatively shallow one at the moment. While the price indices …
16th December 2022
No early Christmas cheer for retailers The 0.4% m/m fall (consensus +0.3%) in retail sales volumes in November resumes the downward trend seen across most of the year. Sales volumes in November were 4.5% lower than at the start of the year. And despite …
Divergence between manufacturing and services to continue According to today’s flash estimate, the manufacturing PMI fell slightly deeper into contraction from 49.0 in November to 48.8 in December. The output sub-index rose to 46.4 but is still the second …
Easing off the brakes, but hikes may not halt until rates hit 4.50% The Bank of England followed the Fed by slowing the pace of interest rate hikes from 75bps in November to a 50bps hike today as widely expected, which took rates from 3.00% to 3.50%. But …
15th December 2022
