Drop in inflation suggests reopening effects remain small Factory gate prices stopped falling last month, as China’s reopening helped to put a floor under global commodity prices. Meanwhile, consumer price inflation dropped back sharply due to a fall in …
9th March 2023
Policy unchanged, but Bank leaves the door open to future hikes There were no surprises from the Bank of Canada today as it kept the policy rate unchanged at 4.5%, as it previously hinted it would, and reiterated that it is still prepared to resume …
8th March 2023
Rates on hold, door for rate cuts this year remains open Poland’s central bank (NBP) left its main policy rate on hold as expected again today, at 6.75%, and we don’t think the NBP will rule out further interest rate hikes just yet. But with inflation …
Surge in exports supported GDP growth at start of 2023 The broad-based jump in exports at the start of the year suggests that net trade should boost GDP growth this quarter. Nonetheless, with the surveys of export orders still very weak, that boost seems …
Strong start to 2023 unlikely to be sustained The widening in the international trade deficit to $68.3bn in January, from $67.2bn, included big rebounds in both imports and exports which, at face value, add to the signs that demand is strengthening at …
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 …
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
No reopening boost to imports yet China’s import volumes were little changed at the beginning of the year, disappointing hopes for a rebound. But we still think that reopening will eventually drive a pick-up in imports. And while exports fared better than …
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
Euro-zone HICP (Feb.) Strength of core inflation means ECB has a long way to go February’s increase in core inflation will reinforce ECB policymakers’ conviction that significant rate increases are needed. For some time we have been forecasting a 50bp …
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 …
A very rapid rebound The latest survey data is exceptionally strong, consistent with our expectation for a rapid near-term rebound in economic activity. The Caixin manufacturing PMI rose from 49.2 in January to 51.6 in February (the Bloomberg consensus …
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 …
Economy stagnates, supporting the Bank’s move to the sidelines The stagnation in fourth-quarter GDP, together with the downward revision to third-quarter GDP growth, leaves the economy in worse shape than the Bank of Canada expected. That is another …
28th February 2023
MNB to keep its base rate on hold as inflation threat persists Hungary’s central bank (MNB) left its benchmark base rate on hold again today (at 13.00%) and, with inflation likely to stay far above target for some time, we don’t expect the MNB to start …
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 …
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
CBRT eases policy after earthquakes hit Turkey’s central bank (CBRT) lowered its key policy rate by 50bp, to 8.50%, today as policymakers sought to support the economy in the wake of the devastating earthquakes this month. Another rate cut in March looks …
Cuts coming sooner than consensus expects The Bank of Korea today left interest rates unchanged (3.5%), bringing an end to the country’s tightening cycle. With the economy struggling badly and inflationary pressures set to ease further over the coming …
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
Further improvement, but headwinds still strong The further rise in the Ifo in February confirms that the German economy may have been a bit more resilient than we had expected in Q1. But with the index still in recessionary territory and the drag from …
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 …
Core prices rise at slowest pace since early 2021 Core prices only inched up in January, which contributed to a larger-than-expected fall in headline inflation. That reinforces our view that the Bank of Canada is unlikely to follow the Federal Reserve in …
21st February 2023
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 …
Economy growing, price pressures remain strong February’s chunky increase in the flash euro-zone Composite PMI highlights the continued resilience of activity and suggests that the economy will grow in Q1. With the labour market still very tight and price …
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
Tourism to drive recovery after fall in Q4 GDP Thailand’s economy contracted sharply in the final quarter of last year as a strong recovery in the tourism sector was unable to compensate for weakness elsewhere. Looking beyond the weak fourth quarter …
No more hikes this year Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%), and signalled that further rate increases this year were unlikely. This supports our view that the tightening cycle has now come to an end. We expect the …
16th February 2023
More tightening still to come The central bank of the Philippines (BSP) today raised its main policy rate by a further 50bps (to 6.00%), and we think more tightening is likely in the near term amid worries about high inflation. The decision was in line …
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 …
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 …
This report has been updated with additional analysis and a Table and Chart of key data. Inflation edges higher to its peak Saudi Arabia’s headline inflation rate nudged up from 3.3% y/y in December to 3.4% y/y in January, which came on the back of a …
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 …
