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PPI gives Fed green light to keep cutting rates Ignore the fact that PPI final demand prices increased by a slightly bigger than expected 0.4% m/m in November. The components that feed into the Fed’s preferred PCE index were universally weak and, together …
12th December 2024
This page has been updated with additional analysis since first publication. RBA to stay its hand as labour market tightens With the labour market still firing on all cylinders, there’s little need for the RBA to rush to loosen policy. Accordingly, we …
50bp cut will not be repeated Although the Bank of Canada cut interest rates by another 50bp today, the accompanying communications were more hawkish than might have been expected, with the Bank no longer indicating that further cuts are guaranteed and …
11th December 2024
Core price pressures remain slightly elevated, as housing eases The 0.31% m/m increase in core CPI in November, which left the annual core inflation rate unchanged at 3.3% for a fourth month in a row and pushed the three-month annualised rate up to an …
RBA will only ease policy in Q2 next year The Reserve Bank of Australia today signaled greater confidence that inflation will return towards target over the next couple of years, but we still expect the first rate cut to happen only in Q2 next year. As …
10th December 2024
Upward trend in consumer confidence continues While the headline University of Michigan Consumer Sentiment Index remains below its average over the first half of the year, the jump in December suggests that household spending growth is likely to remain …
6th December 2024
Strong employment gain more important for the Bank than jump in unemployment rate We disagree with the market reaction to November's Labour Force Survey, implying that the jump in the unemployment rate makes a 50bp cut much more likely. A slowdown in …
Reversal of disruptions lifts payrolls The solid 227,000 gain in non-farm payrolls in November was driven partly by the reversal of the disruptions that weighed on hiring in October, but still implies that underlying employment growth was a touch stronger …
This page has been updated with additional analysis since first publication. Post-Budget relief rally more than offsets higher mortgage rates The leap in Halifax house prices in November mirrors the jump in the Nationwide measure and suggests that some …
Base pay rose the most since 1992 in October and we think it will continue to hold strong through to the end of next year. According to today’s preliminary estimate, labour cash earnings rose by 2.6% in October, which was just a tad higher than the 2.5% …
5th December 2024
ISM services index drops back to three-month low The fall in the ISM services index to 52.1 in November is not too concerning, given it was driven partly by a slump in the supplier deliveries index, but it does lend some support to our view that GDP …
4th December 2024
Purchasing activity rebounds despite higher borrowing costs The rebound in purchase mortgage applications in November shows that there were some signs of life in the market, despite the return of 7% mortgage rates. But taking a step back, activity remains …
Weak activity points to RBA easing policy before long GDP growth remained sluggish in the third quarter, adding to the case for the RBA to start easing policy before long. The 0.3% q/q rise in GDP in the third quarter was a touch weaker than the analyst …
This page has been updated with additional analysis since first publication. Shrugging off higher mortgage rates November’s surprisingly large rise in the Nationwide house price index suggests the housing market is picking up momentum despite recent rises …
2nd December 2024
Consumption growth may pick up further in Q4 Retail sales rose rather strongly in October and suggest that real consumption growth will continue to accelerate this quarter. The 0.6% m/m rise in retail sales values in October followed a muted 0.1% m/m rise …
50bp rate cut hopes not dead yet The 1.0% annualised gain in third-quarter GDP was not as bad as it looks, with most of the weakness due to a big drag from the volatile inventories component and the Bank of Canada likely to be encouraged by the sharp …
29th November 2024
This page has been updated with additional analysis since first publication. Pre-Budget jitters clearly influenced households’ financial decisions October’s money and lending figures suggest that Budget worries prompted households to become more cautious …
Underlying inflation set to remain above 2% The Tokyo CPI suggests that inflation excluding fresh food and energy rose further above the Bank of Japan’s 2% target in November, supporting our long-held view that the Bank will hike rates in December. In …
28th November 2024
Another above-target-consistent rise in core PCE prices The 0.27% m/m rise in the core PCE deflator in October was a little lower than we feared based on the earlier CPI and PPI data, but still confirms that prices rose at an above-target rate for the …
27th November 2024
RBNZ will cut rates by another 50bp in February The RBNZ didn’t provide a clear signal about the speed of future rate cuts when it lowered the overnight cash rates by 50bp today, but we think it will deliver another 50bp cut at its February meeting. The …
Underlying inflation will reach top end of RBA’s target range next quarter The stagnation in headline inflation in October belies a renewed uptick in trimmed mean inflation and we’re sticking to our forecast that the RBA won’t cut interest rates before Q2 …
Fed slows pace of rate cuts The minutes of the Fed’s early-November FOMC meeting, when it slowed the pace of policy loosening with a smaller 25bp cut, tell us little about whether to expect another smaller quarter-point cut at the upcoming policy meeting …
26th November 2024
House price growth picks up momentum in the summer The second consecutive moderate 0.3% rise in house prices in September reflects the market picking up momentum over the summer as mortgage rates fell. However, timelier indicators, like the sales-to-new …
Consumption outlook improving fast The strong increase in retail sales volumes in September confirms that they grew by around 5% annualised last quarter, suggesting that household consumption growth picked up strongly. The October preliminary estimate …
22nd November 2024
This page has been updated with additional analysis since first publication. Budget and Trump may have triggered slowdown in activity At face value, the fall in the composite PMI from 51.8 in October to 49.9 in November suggests that real GDP growth is …
This page has been updated with additional analysis since first publication. Slow start to the golden quarter, but the outlook is improving The bigger-than-expected 0.7% m/m fall in retail sales in October (consensus forecast -0.3% m/m) suggests that …
This page has been updated with additional analysis since first publication. Flash PMI points to continued rebound in activity The renewed rise in the composite PMI supports our view that activity will continue to expand at a robust pace in the remainder …
Pick-up in underlying inflation will prompt rate hike next month The slowdown in headline inflation in October was due to base effects from utilities prices. With underlying inflation climbing further above the Bank’s 2% target, the case for another rate …
21st November 2024
Modest rise in homes sales does not mark the start of the recovery The modest rise in existing home sales in October reflects the earlier drop in mortgage rates over the summer and is unlikely to be repeated, as borrowing costs have since rebounded to 7%. …
We have updated this page with additional analysis since first publication. Disappointing borrowing figures highlight Chancellor’s lack of wiggle room October’s disappointing public finances figures underline the fiscal challenge that the Chancellor still …
This page has been updated with additional analysis since first publication. Surprisingly big rebound suggests BoE will leave rates at 4.75% in December October’s surprisingly large rebound in CPI inflation from 1.7% to 2.3% (CE 2.1%, consensus & BoE …
20th November 2024
Upside surprise not only due to property tax update With headline inflation still at target and given the Bank’s recent emphasis on the need to ensure that GDP growth and the labour market pick up again, the upside surprise to core inflation in October …
19th November 2024
RBA still in “wait and watch” mode With the RBA maintaining its neutral stance, we’re sticking to our view that the Bank won’t begin cutting rates before Q2 2025. The minutes of the RBA’s November meeting confirmed that the decision to leaves interest …
Temporary disruptions weigh on production again The fall in manufacturing output in October was driven mainly by temporary disruptions which should soon reverse. Excluding these disruptions, industrial production would have remained unchanged, suggesting …
15th November 2024
Manufacturing sales weak, but tentative signs of a recovery Despite the 0.4% m/m decline in manufacturing sales volumes in September, the data still appear consistent with the flash estimate that GDP rose by 0.3% that month. Although manufacturing has …
This page has been updated with additional analysis since first publication. Q3 GDP growth muted, Q4 will be better The 0.1% m/m contraction in GDP in September meant that the economy still grew by 0.1% q/q in Q3 (consensus and CE forecasts 0.2% q/q), but …
GDP growth set to remain sluggish The economy lost momentum in the third quarter and we think that GDP growth will remain around trend over the coming quarters. According to today’s preliminary estimate, GDP growth slowed from a downward-revised 0.5% q/q …
PPI points to another above-target-consistent rise in core PCE The price data released this week suggest that inflationary pressures are proving stronger than the Fed anticipated. Based on the combined CPI and PPI data, we calculate that the Fed’s …
14th November 2024
This page has been updated with additional analysis since first publication. Resilient labour market heightens risk that policy easing will be delayed With the labour market still on sturdy ground, there is a growing risk to our forecast that the RBA will …
CPI points to target-consistent gain in core PCE The third consecutive 0.3% m/m gain in the core CPI in October is somewhat concerning, with our preliminary calculations pointing to another above-target-consistent 0.22 m/m gain in core PCE prices, …
13th November 2024
This page has been updated with additional analysis since first publication. Slowdown in wage growth has further to run Wage growth eased markedly in Q3, as workers in the awards system received much smaller pay hikes than last year. Although wage growth …
This page has been updated with additional analysis since first publication. BoE will look through rebound in pay growth Even though the rise in pay growth in September will probably be followed by a bigger gain in October, as the new 5-6% public sector …
12th November 2024
Confidence buoyed by lower inflation expectations The rise in the University of Michigan consumer sentiment index, despite uncertainty ahead of the US election, shows that economic developments remain the key driver of confidence in the aggregate. While …
8th November 2024
Muted job gain even worse that it seems The muted rise in employment in October was even weaker than it seems, as, like in September, it was propped up by strong gains in youth employment. While the unchanged unemployment rate will reassure the Bank that …
Fed slows pace of rate cuts As expected, after a run of stronger activity and inflation data since it started its rate cutting cycle with a 50bp reduction in mid-September, the Fed opted for a more modest 25bp cut at the conclusion of its two-day FOMC …
7th November 2024
Surge in ULC illustrates upside risks to services inflation The BLS finally incorporated the upward revisions to its labour compensation estimates into the productivity and unit labour costs data, and the results are likely to trigger some inflation …
Watch a recording of our post-MPC online briefing here . Budget means Bank may not cut rates as fast and far While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only …
This page has been updated with additional analysis since first publication. Retail sales strong in September but unlikely to keep rising rapidly Euro-zone retail sales rose in September rounding off a good quarter for retailers. We suspect that sales …
This page has been updated with additional analysis since first publication. House prices rise to record high and will accelerate next year October’s 0.2% m/m rise in Halifax house prices suggests that the recent momentum in house prices has a bit further …
Regular wage growth may already have peaked The strong pay hikes in this year’s spring wage negotiations now seem to be fully reflected in labour cash earnings and we expect wage growth to slow again next year. According to today’s preliminary estimate, …
