This page has been updated with additional analysis and charts since first publication. A worrying deceleration Broad credit growth slowed sharply in May and has now reversed almost all its reopening recovery. This poses a downside risk to growth and …
13th June 2023
Reacceleration in wage growth supports the case for further rate hikes The labour market became tighter in April and wage growth reaccelerated. That will only add to the heat already on the Bank of England to raise interest rates further at the policy …
This report was first published in response to the PBOC’s cut to its 7-day reverse repo rate. It has since been updated to reflect subsequent developments. 13th June: Additional analysis and charts added. 15th June: Coverage of MLF cut added. 20th June: …
Surprise increase in lending in May, but signs of distress growing While bank net lending to commercial real estate (CRE) turned positive again in May, growing signs of distress for existing loans point to further weakness ahead. (See Chart 1.) The …
12th June 2023
Labour market starting to loosen The increase in the unemployment rate to 5.2% in May will probably not prevent the Bank of Canada from raising interest rates again at its July meeting, as the weakness was partly a statistical effect related to reduced …
9th June 2023
Industry struggling to sustain momentum from early 2023 Mexico’s industrial sector expanded by 0.4% m/m in April but this only partially reversed a sharp decline in March and suggests that the economy is struggling to sustain its momentum at the start of …
CBR turns its hawkish rhetoric up a notch Russia’s central bank left rates on hold at 7.50% as expected today, but delivered an even more hawkish message as it said that pro-inflation risks have increased further and that it will consider the need to hike …
This page has been updated with additional analysis and charts since first publication. Inflation remains low as initial reopening effects begin to fade Producer price deflation deepened further last month to a 87-month low. Consumer price inflation …
Inflation drops, but rate cuts still some time away Headline inflation in Mexico dropped to a 21-month low of 5.8% y/y in May and will continue to decline over the coming months. That said, the strong labour market and rapid wage growth mean that …
8th June 2023
EZ already in recession, outlook still poor News that GDP contracted in Q1 after all means that the euro-zone has already fallen into a technical recession. We suspect that the economy will contract further over the rest of this year. Data released today …
RBI could be laying groundwork for cuts before long The RBI’s decision to keep the repo rate on hold (at 6.50%) today comes as no surprise given the recent sharp drop in inflation. The door remains ajar for further hikes but with headline inflation set to …
Net trade to boost GDP in Q2 The rise in the import bill in April likely overstates the strength of domestic demand in Australia. The decline in the trade surplus to $11.2bn in April, from a downwards-revised $14.8bn in March, was sharper than most had …
Bank resumes rate hikes and probably another to come in July The Bank of Canada’s 25bp interest rate hike today is unlikely to be the last, with the rapid turnaround in the housing market and concerning underlying inflation dynamics raising the case for …
7th June 2023
Exports still benefitting from easing supply shortages Easing supply shortages continued to support export growth in April but, with export orders still very weak, that resilience is likely to fade soon. Canada’s goods trade surplus widened from a …
Slump in exports to weigh on Q2 GDP growth The widening in the trade deficit to a six-month high of $74.6bn in April, from $60.6bn, means that net external trade is on track to be a big drag on second-quarter GDP growth, with the latter still tracking …
This webpage has been updated with a table and chart of key data Inflation hits multi-year low, but rate cuts still some way off The fall in Brazilian inflation to 3.9% y/y in May, alongside the government’s new fiscal framework, has strengthened the …
Demand falls to historic low Mortgage applications for home purchase fell to their lowest level in almost 30 years in May, as a renewed rise in mortgage rates weighed on demand. This points to further near-term weakness for home sales, which we think will …
Pause in May will give way to renewed falls ahead House prices were unchanged in May according to Halifax. Given that lack of momentum, the increase in mortgage rates following the bad inflation data published on the 24th of the month is set to tip house …
Weak demand to weigh on industry The 0.3% m/m rise in industrial production in April was much smaller than the 2% rebound we had anticipated and weaker than the consensus forecast (+0.6%). Although the decline in March was revised down to 2.1% (previously …
This page has been updated with additional analysis and charts since first publication. Exports stumbled but imports jumped China’s exports contracted year-on-year in May for the first time in three months, with export volumes falling below their …
Flagging productivity raises risk of higher terminal interest rate Although the economy is clearly slowing, dismal productivity gains raise the risk that the RBA will have to raise interest rates above the 4.35% peak we have pencilled in. The 0.2% q/q …
NBP remains on pause The National Bank of Poland (NBP) left its main policy rate on hold again today, at 6.75%, and we think that rates will remain unchanged for at least the next few meetings. While we maintain our forecast that interest rates will be …
6th June 2023
This webpage has been updated with a table and chart of key data Technical recession dodged, but outlook bleak The 0.4% q/q rise in South Africa’s GDP in Q1 means that the economy once again skirted a technical recession, but the outlook remains bleak. …
The headline CIPS construction PMI increased for a second month in a row in May to 51.6, indicating a small rise in activity. But in line with last month there was a marked difference between the commercial and housing sectors, with the former rising to …
RBA will deliver another 25bp hike next month The Reserve Bank of Australia lifted the cash rate by 25bp today and the hawkish tone of the statement suggests that the risks to our terminal rate forecast of 4.35% are tilted to the upside. Today’s decision …
Wage growth still set to fall sharply in H2 Labour cash earnings rose by 1.0% y/y in April, marking a slowdown from 1.3% in March. That was due to a 0.3% fall in overtime pay and bonus payments staying virtually flat with just a 0.2% rise. By contrast, …
ISM surveys suggest economy has stalled In contrast to the strength of payroll employment growth last month, the fall in the ISM services index to a five-month low of 50.3 in May, from 51.9, suggests the economy is barrelling towards recession. On past …
5th June 2023
Despite strength of employment, unemployment rises and wage growth moderates The bigger-than-expected 339,000 increase in non-farm payroll employment in May will dominate the headlines, but the employment report was not all positive – with a big drop in …
2nd June 2023
Largest minimum wage hike in 41 years adds pressure on RBA The 5.75% increase in the minimum wage is the largest on record and adds to the case for the RBA to raise interest rates further. The Fair Work Commission today announced that both the minimum …
ISM survey suggest recession risks remain high The slight decline in the ISM manufacturing index to 46.9 in May, from 47.1, reinforces our view that the jump in manufacturing output in April won’t be sustained. But the bigger news was the renewed plunge …
1st June 2023
The renewed decline in mortgage approvals in April will have dashed hopes that the jump in March marked the start of a recovery. Moreover, with mortgage rates now on their way back up, lending is likely to remain weak throughout the second half of the …
Core inflation coming down, but won’t stop further ECB tightening May’s decline in euro-zone core inflation to a four-month low left it below the published consensus forecast and was driven in part by lower services inflation. While further gradual …
Higher interest rates start to weigh more heavily on bank lending While the £7.3bn rebound in total UK bank deposits in April followed the £16.1bn decline in March and suggests that concerns over the stability of UK banks have faded, the more interesting …
Net lending to property staged a recovery in April, rising to a 10-month high of £1.18bn. Both standing and development lending increased, with the latter now positive for each of the past three months. The pick-up in lending is in line with the Q1 RICS …
House prices flattened off in May after a rise in April. But with mortgage rates now on their way back up we suspect that the stabilisation in prices over the last couple of months will soon give way to renewed falls. The -0.1% m/m fall in house prices in …
Job growth holding up across metros; southern markets continue to lead Total employment growth reached a solid 0.7% 3m/3m on average in April for the second consecutive month, led by Boston, Las Vegas, Charlotte and Orlando. But for office-based jobs, …
31st May 2023
Upside surprise further boosts the case for another rate hike The larger-than-expected 3.1% annualised rise in first-quarter GDP and the strong preliminary estimate in April boost the case for another interest rate hike from the Bank of Canada, which …
Good news on inflation but core rate still high The fall in German headline inflation in May along with signs that core price pressures eased echoes the message from the inflation figures for France and Spain and supports the case for the ECB to limit …
Further tightening unlikely The Bank of Thailand (BoT) raised its policy rate by 25bps, to 2.0%, today but given the relatively benign outlook for inflation we think this marks the end of the tightening cycle. In the accompanying statement to today’s …
Encouraging inflation data from France The larger-than-expected fall in headline inflation in France and the fall in both services and core goods inflation bode well for euro-zone HICP inflation which will be published tomorrow and will strengthen the …
Renewed acceleration in inflation will prompt further RBA tightening With inflation set to overshoot the RBA’s forecasts this quarter, the Bank will continue to increase interest rates, perhaps as soon as next week. According to the Monthly CPI …
Further contractions in industrial production in store The weakness in both industrial activity and retail spending in April points to a poor start to Q2 for the economy after it expanded by 0.4% q/q last quarter, posing downside risks to our current …
Fall in inflation much faster in Spain than elsewhere At face value, the fall in Spain’s HICP inflation rate to below 3% in May is encouraging for the ECB. However, it largely reflects country-specific factors which may not be replicated elsewhere for …
30th May 2023
Looming recession will see unemployment rate hit 3% The unemployment rate fell from 2.8% to 2.6% in April, a better outturn than the 2.7% we and the consensus had pencilled in. The job-to-applicant ratio was unchanged at 1.32, arresting a downtrend that …
Although President Joe Biden and House Speaker Kevin McCarthy have finalised a deal to raise the debt ceiling, we wouldn’t be surprised if legislative delays mean that deal doesn’t get passed by Congress until late this week. There is little of any …
29th May 2023
Turkish economy’s day of reckoning may now just be around the corner The victory for President Erdogan in Turkey’s presidential election on Sunday is likely to result in a continuation of distortive economic policies and push the economy down a path …
Core inflation still elevated The 0.5% m/m increase in real consumption in April got the second quarter off to a good start, although that followed two months’ of declines. We now expect second-quarter consumption growth to be around 2% annualised, which …
26th May 2023
Improving outlook for retailers, but higher interest rates to weigh on spending before long The 0.5% m/m rise in retail sales volumes in April was better than we expected (consensus +0.2%, CE -0.5%) and reversed some of the 1.2% m/m fall in March (revised …
Weak consumption adds to case for RBA pause The weakness in retail sales in April supports our view that the Reserve Bank of Australia is done hiking interest rates. Retail sales values were unchanged last month, a weaker result than the analyst consensus …
Inflation has just a bit more to climb Headline inflation in Tokyo fell from 3.5% to 3.2% in May, largely due to a sharp 8.2% fall in energy inflation, which took away almost 0.5%-pts from headline inflation. The drop shows that lower energy import prices …
