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Tariff shock slowly beginning to pass The rise in home sales in May suggests a nascent recovery is underway in the housing market following a tariff-induced shock. While we see further upside for house prices this year, as lower mortgage rates boost …
16th June 2025
The 2025 Spending Review is the tightest (outside of the austerity years in the early 2010s) since 2000 and the tough decisions for Chancellor, Rachel Reeves, won’t end here. The government’s U-turns on benefit and welfare spending and higher borrowing …
11th June 2025
A slump in the number of foreign visitors to the US could prove to be a helpful source of deflationary pressure this year, while having a limited impact on GDP growth. Amid the Trump administration’s fretting over the goods trade deficit, it is often …
9th June 2025
If President Trump succeeded in his aim of cutting prescription drug prices by 50% “almost immediately”, it could subtract more than 1%-point from headline PCE inflation. There is little indication of how the administration will achieve that aim, however, …
5th June 2025
Visa approvals for temporary residents have picked up, which suggests that, rather than contracting as the government previously outlined, the population will continue to grow this year. This will keep upward pressure on labour force growth and we now …
The Bank of Canada avoided surprising markets by keeping its policy rate at 2.75% today, as it continues to wait to see the full impact of US trade policy on the economy. Nonetheless, the Bank confirmed that its bias remains toward loosening policy …
4th June 2025
According to the measures of wage growth that we consider the most useful and the fundamentals of the recent easing in the demand for labour relative to the supply, it is only a matter of time before wage growth slows to rates that are more consistent …
The latest PMIs suggest that global industrial activity has weakened so far in Q2. Meanwhile, goods price pressures remain subdued in most countries apart from in the US, where tariffs already seem to be having an impact. The output component of the …
3rd June 2025
While this year’s minimum wage hike will be only slightly smaller than last year’s, it is unlikely to prevent a further slowdown in wage growth over the coming quarters. That said, with capacity pressures still elevated, we continue to believe that the …
The suggestion that the Chancellor may be considering cutting 50,000 civil service job cuts wouldn’t weigh on employment growth much over the next few years. Only if the government were to cut public sector employment towards its post-austerity and …
2nd June 2025
Australian house prices edged up a notch in May, and leading indicators suggest they will gather further momentum over the coming months. However, with debt-servicing costs set to remain onerous despite the RBA’s rate cuts, the cyclical upswing is likely …
U-turns on benefit and welfare spending, increased pressure to ramp up defence spending and higher borrowing costs have left the Chancellor, Rachel Reeves, in a sticky position. If she wishes to avoid a political backlash and/or an adverse reaction in the …
29th May 2025
Leading indicators suggest most of the recent weakness in housing demand and prices is due to the temporary influence of the change in stamp duty rather than any longer-lasting influence of the softer outlook for the UK economy. This lends support to our …
The recent substantial volatility in global sovereign bond markets hasn’t altered our view that in most cases 10-year government bond yields will end this year near, or below, their current levels. We also think corporate bonds will continue to do quite …
As was widely expected, the RBNZ cut its Official Cash rate by 25bp, to 3.25%, today. The revelation that the decision to cut was not a unanimous one has been interpreted as a hawkish signal by financial markets. However, we would put more emphasis on the …
28th May 2025
The bulk of the evidence suggests that the recent sharp slowdown in regular earnings growth is a statistical anomaly rather than genuine. With this year’s spring wage negotiations resulting in the fastest pay hikes in decades, we still expect the Bank of …
27th May 2025
The latest flash PMIs point to weak activity and a softening of price pressures in advanced economies outside the US. But the surveys suggest that tariffs are already having an inflationary impact in the US. Our estimate of the weighted average of the …
22nd May 2025
With housing affordability still extremely stretched, we expect house price growth to remain muted even as mortgage rates are set to fall further. However, there’s more scope for dwellings prices to rise in the smaller capital cities, while apartment …
The budget reconciliation bill currently working its way through the House of Representatives, which includes a permanent extension of the original Trump tax cuts plus cut-down versions of his campaign pledges, should be mostly offset by the additional …
20th May 2025
When the Reserve Bank of Australia cut rates by 25bp at its meeting today, it signalled greater confidence that it had brought inflation under control, while sounding increasingly concerned that global developments would bear down the domestic economy. …
Fears that single-family housing starts are on the verge of collapse because of the large buildup of new homes for sale are overblown. The accumulation largely reflects smaller private builders struggling to shift inventory, unlike their publicly-listed …
12th May 2025
Commercial real estate investment climbed on a y/y basis in Q1, but recent surveys revealed that the unpredictability of policy changes and tariffs have dampened investor confidence. We expect this to weigh on Q2 activity, before continued improvement …
The UK-US trade deal announced by President Trump and Prime Minister Starmer today won’t make a big difference to the UK economy as a whole, although it is more significant for certain sectors such as cars and steel. The upcoming UK-EU reset won’t be a …
8th May 2025
The latest data from the Census Bureau show that regional and metro-level migration trends seen in the post-pandemic years persisted up to mid-2024. But the six major markets, along with other large metros like Miami, San Jose and Seattle, remained …
Student loan default rates are set to soar and the government will soon begin collections against defaulted loans for the first time since the pandemic. This is unlikely to be a big drag on households’ finances but, at the margin, it is another reason to …
More UK rate cuts coming, but not as quickly as investors expected The Bank of England predictably cut interest rates from 4.50% to 4.25% today and gave the impression that it will continue to cut rates at the current pace of 25 basis points (bps) every …
Housing market left with no momentum The housing market should pull out of its current funk in the coming months even if the Bank of England were to suggest later today that interest rates won’t fall as fast as the financial markets expect. Meanwhile, a …
Around half of the recent surge in gold exports reflects soaring prices. While the latter may encourage mining firms to expand output, it will probably take years for gold production to return to its 2019 peak. Accordingly, gold exports won’t fill the gap …
The minimalist statement issued by the Fed at the conclusion of the FOMC meeting gave no hint that it was considering a further cut to the fed funds rate, at least not any time soon. As was almost universally expected, officials voted unanimously to leave …
7th May 2025
In current circumstances it would take a large strengthening of the yen to push inflation below the Bank of Japan’s 2% target. And with profit margins close to record highs, the hit from a stronger yen to corporate profitability probably won’t result in a …
6th May 2025
Paul Samuelson famously quipped in 1966 that the stock market had predicted nine of the last five recessions in the US. We suspect it just sent another false signal about an economic downturn. We can quibble over whether we just had a bear market. On a …
2nd May 2025
The Bank of Japan revised down its growth forecasts and sounded more dovish when it left policy settings unchanged today. However, we believe that the Bank has become far too downbeat about the outlook for inflation and we’re sticking to our forecast of …
1st May 2025
Stretched housing affordability continues to keep a lid on house price growth. And if we’re right that the RBA will only lower rates by another 50bp, it will remain a headwind. But with the housing market no longer creating upside risks to inflation, …
While higher lumber tariffs will not significantly impact GDP growth in the US or Canada, they will drive up costs for US homebuilders. As affordability is already stretched, it is unlikely that homebuilders will be able to pass these costs onto buyers in …
29th April 2025
The JOLTS data again showed the labour market stabilising at a healthy level in March. While there were for the first time some signs of the DOGE purge of the federal workforce in the survey, the picture still appears far rosier than that painted by …
President Donald Trump’s first 100 days back in office has been characterised by radical changes to trade policy, immigration and the Federal government, all implemented by an unprecedented use of executive power. In the second 100 days, we expect the …
Although the Liberals have just missed out on a majority, Prime Minister Mark Carney should still be able to implement his fiscal plans with support from the NDP or Bloc Québécois. If anything, the need to grant concessions to those parties means fiscal …
The NCREIF Property Index (NPI) recorded a third consecutive quarter of positive total returns in Q1 2025, driven primarily by income. Although capital value growth turned positive, questions remain over whether appraisal-based valuations fully reflect …
28th April 2025
Our base case is that faster growth in household incomes will result in the recent pick-up in rent inflation broadening from major cities to the rest of the country. However, there’s a risk that population outflows from rural areas will result in rents …
The Q1 RICS US commercial property survey reported steady investment sentiment. That is in line with our belief that the market is headed for an upturn, although the impact of new tariffs and the limited fall in interest rates mean that recovery will be …
25th April 2025
The latest flash PMIs suggest that tariffs and trade policy uncertainty weighed on activity and confidence in most DMs at the start of Q2 and boosted price pressures in the US. Our estimate of the weighted average of the flash composite output PMIs for …
23rd April 2025
Reuters’ latest monthly Tankan survey, which was conducted between 2 nd and 11 th April, showed that business conditions among large manufacturers rose to an eight-month high. Granted, that survey has often lagged behind the manufacturing PMI around …
If President Donald Trump does fire Fed Chair Jerome Powell, we suspect that the initial market reaction might not be disastrous, as long as Trump quickly lines up a relatively-qualified replacement, like Kevin Hassett or Kevin Warsh. In all likelihood, …
21st April 2025
The latest sell-off in equities is still a long way from the scale of those market corrections which coincided with recessions in the past. As things stand, the ~14% fall in the S&P 500 since February is unlikely to have notable negative implications for …
17th April 2025
The Bank of Canada’s decision to keep interest rates at 2.75% today was not a big surprise given recent above-target core CPI gains, concerns about tariff-induced price rises and uncertainty about the extent to which the economy requires additional policy …
16th April 2025
The upcoming federal election on 3 rd May appears likely to result in a hung parliament. Although the ruling Labor party’s recent uptick in the polls suggest that it is in pole position to form a minority government, we wouldn’t count out the …
Concerning signs for Canada’s housing market The housing market took another leg down in March, with the larger decline in single-family home prices suggesting that owner-occupiers rather than investors are behind the most recent weakness. Nonetheless, …
15th April 2025
While the big easing in market rents inflation over the past few years suggests falls in all-tenancy rents inflation are in the offing, both measures of rents inflation will probably stay above pre-pandemic rates. At its heart, rental price inflation is …
President Trump’s trade war has created material downside risks for the global economy. Our forecasts assume that tariffs on most countries outside China will stay at 10% and retaliation by other governments will be moderate. In this scenario, global GDP …
10th April 2025
Despite President Trump’s latest decision to pause the US’s “reciprocal” tariff regime for 90 days, there is still a real risk that the second-order effects of higher US tariffs on the UK economy are bigger and that UK inflation and interest rates fall …
