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Regular earnings growth to maintain quicker pace Labour cash earnings increased by a slower 1.8% in October due mostly to a much smaller gain in volatile bonus payments. Regular earnings held steady due to high inflation and the boost from the reopening, …
5th December 2022
Strength in business investment won’t last Private investment probably rebounded last quarter and while firms’ projections at face value point to a further acceleration over the remainder of the financial year, the figures are consistent with a slowdown …
1st December 2022
Inflation may peak below 8% in Q4 We wouldn’t read too much into the drop in the Monthly CPI Indicator in October because the figures don’t cover the entire CPI basket, but the data suggest that inflation is about to peak. Headline inflation dropped …
30th November 2022
Production to rebound in last two months of 2022 Industrial production saw a steeper contraction in October but firms' output forecasts for November and December point to a rebound. Industrial production contracted by a sharper 2.6% m/m in October, …
Domestic demand contracts for first time since 2021 The stronger-than-expected gain in third-quarter GDP tips the odds slightly toward another 50 bp interest rate hike from the Bank of Canada next week. But, with domestic demand contracting for the first …
29th November 2022
Higher interest rates are weighing on credit and attracting savings October’s money and credit figures reveal further signs that households continue to remain cautious and higher interest rates are starting to weigh on the economy. The £0.8bn rise in …
Soaring inflation weighing on retail sales Retail sales values barely grew in October from September and soaring inflation points to risks that growth will remain muted this quarter. Growth in retail sales values slowed sharply from 1.5% m/m to 0.2% m/m …
Halt to labour market tightening as recession looms The unemployment rate stayed unchanged in August and will hover around 2.5% through 2023 due to a looming economic recession. The job-to-applicant ratio rose from 1.34 to 1.35, the highest it has been …
28th November 2022
RBA to keep hiking for now despite slowdown in consumption Following eight consecutive rises since the start of the year, the decline in retail sales in October isn’t a disaster. A fall in sales volumes across Q4 now looks very likely but we suspect that …
Tokyo prices point to further rises in nationwide inflation Headline inflation in the capital set a new three-decade high in November on aggressive rises in food inflation excluding fresh food and industrial goods inflation. The upshot is that nationwide …
24th November 2022
Small improvement in business climate won’t prevent recession The increase in the Ifo Business Climate Index in November does not change the big picture that the German economy is likely to contract in Q4. November’s uptick in the Business Climate Index …
Downbeat readings reinforce 2023 recession narrative November’s flash PMIs point to further weakness in the manufacturing sector, corroborating other data. At the same time, services activity appears to be struggling under the weight of rising inflation. …
Equipment investment refusing to roll over despite surging rates The solid 1.0% m/m rise in durable goods orders in October indicates that business equipment investment continues to hold up reasonably well in the face of higher borrowing costs, helped by …
23rd November 2022
PMIs suggest we’re already in recession While the composite flash PMI improved marginally in November, it stayed firmly below the no-change level of 50.0, which is consistent with our view that the economy is probably already in recession. The composite …
RBNZ will hike rates above 5.0% The Reserve Bank of New Zealand hiked the overnight cash rate by 75bp as most had anticipated and it now seems likely that rates will peak closer to 5.5% instead of our current forecast of 5.0%. The statement was very …
Bank of Japan to maintain policy despite soaring inflation Headline inflation remained set a new three-decade high in October and will remain near those highs this quarter. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy …
17th November 2022
Chancellor satisfies the markets and helps the economy when it needs it The £55bn (2.0% of GDP) tightening in fiscal policy announced today by the Chancellor, Jeremy Hunt, appears to have been enough to satisfy the financial markets. What’s more, he’s …
Yen rally to help narrow trade deficit The trade deficit widened but stayed below the record high in August, but with the yen strengthening significantly in recent weeks, the deficit should narrow later this quarter. Export values rose by a slower 25.3% …
Core inflation pressures better than they look Headline inflation was unchanged at 6.9% in October and the CPI-median and CPI-trim measures of core inflation increased, but the latter was mainly due to unfavourable base effects. It appears that the …
16th November 2022
Imminent rebound in orders to be soft “Core” machinery orders fell for a second consecutive month in September due to weakness in manufacturing orders. While the usual see-saw patterns in orders point to a rebound that should materialise in October’s …
Economy to rebound in Q4 after Q3 contraction Japan’s economy contracted in Q3, with both private consumption and business investment posting far weaker results than timelier data had suggested. The single largest drag was from net trade due mostly to a …
15th November 2022
Inflation and reopening boost to keep earnings growth high Overall earnings rose 2.1% y/y in September, the fastest since 1997, but we don’t think this can be kept up consistently, given that a large spike in volatile bonus payments was key to hitting …
7th November 2022
Jump in employment and wage growth pressures the Bank to do more The 108,300 surge in employment in October makes a mockery of claims that the economy is on the cusp of recession and, with wage growth accelerating sharply despite favourable base effects, …
4th November 2022
Dovish tilt, but rates may still rise to 5.00% Although the Monetary Policy Committee (MPC) raised interest rates today by 75bps, from 2.25% to a 14-year high of 3.00% (consensus 3.00%), it sent a strong signal that it is unlikely to raise rates to the …
3rd November 2022
Rebound in trade surplus won’t prevent drag from net trade While the trade surplus bounced back in September, we’ve pencilled in a drag from net trade to Q3 GDP growth. The rebound in the trade balance, from $8.7bn to $12.4bn in September, was well above …
Although the resignation of Liz Truss as Prime Minister leaves the UK without a leader when it faces huge economic, fiscal and financial market challenges, the markets appear to be relieved. The pound has climbed from $1.12 to $1.13 and 30-year gilt …
2nd November 2022
Labour market strength will encourage RBNZ to hike by 75bp this month New Zealand’s labour market remained very tight last quarter and coupled with the continued strength in inflation. the RBNZ will probably hike by 75bp in a couple of weeks. The 1.3% q/q …
1st November 2022
RBA will lift rates more sharply than most anticipate The Reserve Bank of Australia hiked rates by 25bp today and the upward revision to its inflation forecasts are consistent with our view that rates will peak at an above-consensus 3.85%. The Bank’s …
Households take caution as real spending power falls September’s money and credit figures point to further signs that consumers have been become more cautious in response to the weakening economic outlook. The £0.7bn rise in consumer credit (consensus …
31st October 2022
Retail sales will come off the boil before long While retail sales kept rising for the ninth consecutive month in September, growth in volumes is slowing sharply and will remain subdued over coming quarters as real incomes fall and the savings rate …
Weakening global economy weighing on manufacturing outlook Industrial production declined in September whereas retail sales values saw another relatively strong rise. We are expecting a strong fourth quarter for retail sales, but industrial output looks …
Wage growth gradually slowing, even as economy holds up Although core PCE inflation rebounded to 5.1% in September and real consumption looks to have more momentum than previously thought, the Fed may still draw some encouragement from the more modest …
28th October 2022
Window for tighter policy is closing The Bank of Japan revised up its medium-term inflation forecasts while keeping policy unchanged today, but we still think that it won’t snuff out the budding virtuous cycle between prices and wages. As widely …
Tokyo inflation to start falling next month The unemployment rate rose slightly in September on the back of a large jump in the labour force and a continued rise in the job-to-applicant ratio suggests that the labour market will continue to tighten. …
Inflation hasn’t peaked yet The stronger-than-expected rise in consumer prices in Q3 is consistent with our forecast that the Reserve Bank of Australia will hike rates more aggressively than most anticipate. The 1.8% q/q increase in consumer prices last …
26th October 2022
Yet more evidence of recession The Ifo Business Climate Index held up better than expected in October but was still extremely low. With other business surveys also persistently weak, we think Germany will experience the deepest recession among euro-zone …
25th October 2022
Weaker yen means higher inflation for longer Headline inflation remained at a three-decade high in September and will climb slightly higher by early 2023. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy monetary policy. …
21st October 2022
Unemployment rate will remain low for now Australia’s labour market is starting to sputter but with unemployment set to remain low, the RBA will continue to hike interest rates. The number of employed people rose by just 900 last month, well below the …
20th October 2022
Weaker yen an obstacle to deficit narrowing again The trade deficit narrowed from its record high in August, but with the yen weakening dramatically in recent days, any further narrowing of the deficit will likely be delayed. Export values accelerated to …
Q3 investment growth outlook still strong Although “core” machinery orders dropped sharply in August due to a crash in non-manufacturing orders, Q3’s average still points to an expansion in non-residential investment growth this quarter, chiming with …
12th October 2022
August surge largely due to favourable base effects Labour cash earnings jumped in August, but this was largely due to favourable base effects for hours worked and should slow over coming months. Preliminary estimates for August showed overall earnings …
7th October 2022
Capex projections scaled new heights Today’s Tankan survey suggests that while the services sector is benefitting from the subsiding virus wave, the outlook for the manufacturing sector continues to worsen. The Tankan’s headline index for large …
3rd October 2022
Industry to struggle while retail sales outlook improves Both industrial production and retail sales growth quickened in August and while the rebound in industrial production will lose steam, retail sales will continue to expand as the record virus wave …
30th September 2022
Post-virus services recovery underway September’s flash PMIs indicate yet another slowdown in the manufacturing sector, with the manufacturing PMI falling from 51.5 in August to 51. Demand weakened again but this appeared to be mostly caused by domestic …
26th September 2022
Inflation in final stages of ascent Headline inflation jumped in August to yet another high since 1991 and it still has a stretch higher to climb. That said, the Bank of Japan will remain steadfast in maintaining its ultra-easy monetary policy. Headline …
20th September 2022
Deficit to shrink as import prices ease Japan’s trade deficit widened to yet another record high in August, but the peak shouldn’t be far away now. Commodity prices continue to ease, and the yen should end the year stronger than its current lows, which …
15th September 2022
Business investment to remain strong this quarter Although the surge in “core” machinery orders growth in July was driven by a handful of non-manufacturing sectors, the result still points to strong non-residential investment growth this quarter, chiming …
14th September 2022
No respite in sight for German industry German industrial output fell a bit less than anticipated in July but that was mainly due to a rebound in construction activity and there were signs that manufacturing production is starting to be hit hard by the …
7th September 2022
Real wages to continue shrinking but spending will be supported by savings Labour cash earnings growth weakened slightly in July as growth in bonuses slowed and further moderation is in store from August with the end of the summer bonus season. Overall …
6th September 2022
Recovery to stall by September Industrial production made another stride towards pre-virus levels in July but the recovery should stall by September. Meanwhile, retail sales are in for a weak quarter despite a decent showing in July, as soaring inflation …
31st August 2022
