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Housing market turning a corner The fourth consecutive rise in home sales in July means that the housing market is developing close to our expectations, with prices stabilising last month. Housing starts recorded another strong month, with multi-family …
18th August 2025
After its July policy meeting, we felt the Bank of Canada had moved closer to our view that inflation risks had diminished. The Bank devoted considerable effort explaining why it expects underlying inflation to fall soon , citing the recent appreciation …
15th August 2025
All eyes on Jackson Hole Ahead of the Fed’s annual Jackson Hole Symposium, which kicks off late next week, markets are still wholly convinced that the Fed will cut rates by 25bp at the upcoming FOMC meeting in September and follow that up with at least …
Consumers still living in fear of tariff-led price increases The slump in the University of Michigan measure of consumer sentiment to a three-month low of 58.6 in August, from 61.7, suggests that households remain very nervous about rising inflation in …
Small rebound masks underlying weakness The small rebound in manufacturing sales in June will provide little relief, given that it barely offsets the weakness in April and May and the breakdown shows that US tariffs still have some sectors, namely motor …
Coming after the bumper 0.7% q/q rise in real GDP in Q1, the better-than-expected 0.3% q/q gain in Q2 (see here ) begs the question of whether the economy is fundamentally stronger than we all thought. After all, in February the consensus forecast was for …
Economy shrugging off higher US tariffs The 0.3% q/q rise in Q2 GDP was stronger than most had anticipated and probably came as a positive surprise to the Bank of Japan as well. After all, Board members’ median forecast for GDP growth for FY2025 in the …
Capacity pressures remain at bay The RBA’s decision to lower its cash rate by 25bp, to 3.60%, at its meeting this Tuesday was widely anticipated. Broadly speaking, the Board’s messaging was little changed from the July meeting. However, there were …
GDP growth will slow again GDP growth rebounded more strongly last quarter than most had anticipated but we still expect a renewed slowdown over the coming quarters. The 0.3% q/q rise in Q2 GDP was stronger than the analyst consensus of 0.1% as well as …
The economy has mostly held up against US tariffs so far, thanks largely to resilient consumer spending. But exports have weakened, and investment is showing signs of slowing. With the upcoming USMCA renegotiation set to prolong trade uncertainty, both …
14th August 2025
An above-target gain in core PCE deflator, but mainly due to one component Most of the large upside surprise to core PPI in July was due to a head-scratching increase in margins for wholesalers and retailers. While the data still imply that the core PCE …
This page has been updated with additional analysis since first publication. Strength in Q2 won’t last The unexpectedly strong 0.4% m/m rise in GDP in June (consensus and CE forecast 0.1%) and 0.3% q/q gain in Q2 are more likely to be due to a temporary …
Rents will continue to rise faster than house prices The still tight rental market and softening in housing activity recorded by the RICS survey in July implies that rents will continue to rise faster than house prices for another year or so. The fall …
RBA will shrug off the slight fall in the jobless rate The tick down in the unemployment rate in July is likely to keep the RBA on sidelines at its next meeting in September, but we still think the Bank will ultimately loosen policy a bit further than …
Overview – Tariffs have had a limited impact on inflation so far, but we still expect the impact to gradually build. In the US, combined with the crackdown on immigration, tariffs should keep core inflation above 3% well into 2026. In the rest of the …
13th August 2025
Very tight supply, looser lending criteria and our forecast for further falls in mortgage rates provide scope for house prices in the capital to rise by more than elsewhere over the next few years. After a period of outperformance between 2010 and 2016, …
The RBNZ is all but certain to cut rates by 25bp at its meeting ending on August 20 th . Although inflation is set to remain in the upper half of the Bank’s 1-3% target band in the near-term, we suspect the Committee will be more concerned about timely …
Wage growth will moderate towards 3% While wage growth was a touch stronger last quarter than the RBA had expected, we think it will moderate again before long and won’t prevent the Bank from easing policy much further. The 0.8% q/q rise in the wage price …
While the US jobs data captured the spotlight recently, the weakening of labour markets in most advanced economies has received less attention. Softer labour demand should dampen wage and price pressures in Europe and Canada but not in the US, where the …
12th August 2025
Our new CE UK Unemployment Proxy extracts the overall signal from a range of measures of labour market slack and suggests that the labour market has loosened further than the Labour Force Survey (LFS) unemployment rate implies. Given the well-known issues …
Another narrative shift for the Fed There was another narrative shift for the Fed in the July CPI data, with tariff effects once again barely perceptible but a stronger gain in services prices pointing to another above-target gain in the core PCE …
This page has been updated with additional analysis since first publication. Labour demand still cooling, but at a slower pace The further falls in payroll employment and job vacancies suggest that the labour market is still cooling, albeit only …
The RBA endorsed market expectations of further easing when it lowered the cash today and we think the Bank will ultimately slash rates to 2.85%. The Bank’s decision to lower the cash rate from 3.85% to 3.6% was correctly anticipated by all 40 analysts …
RBA will cut rates below 3% by mid-2026 The RBA endorsed market expectations of further easing when it lowered the cash today and we think the Bank will ultimately slash rates to 2.85%. The Bank’s decision to lower the cash rate from 3.85% to 3.6% was …
A simple argument can be made that the US stock market would falter next month if the Fed didn’t cut rates, the logic being that Treasury yields would rise and reduce the present value of firms’ future earnings. But things might not play out that way. …
11th August 2025
Exporting carries on The trade deficit narrowed to $60.2bn in June, from $71.5bn. This was the smallest deficit in almost two years, with a normalisation in pharmaceutical goods imports causing total imports to decline by 3.7% m/m. While total exports …
8th August 2025
The Bank of England’s hawkish tone at its policy meeting on Thursday has inevitably led to questions about whether interest rates will be cut again this year and whether the Bank’s rate-cutting cycle will soon end. (See here .) In some ways, the Bank’s …
Labour market weakness justifies September rate cut The Labour Force Survey has once again made a mockery of the economist consensus, with the surprise 83,000 surge in employment in June followed by a 40,800 slump last month. We are now a bit more …
Strong case for RBNZ to provide more stimulus The Reserve Bank of New Zealand has been bemoaning the weak state of productivity growth for a while now, arguing that it is stifling the speed limit of the economy. Yet, the Bank has quietly been revising up …
Bonus payments coming back to earth The economic data released this week at the margin would support the case for keeping monetary policy unchanged for longer. For one thing, while the Bank of Japan’s consumption activity index rebounded in June, it was …
Miran a good pick for the Fed President Donald Trump’s decision to nominate Stephen Miran to replace Adriana Kugler as Fed Governor, albeit only on a temporary basis to begin with, is a welcome surprise. Miran is currently the Chair of Trump’s Council of …
7th August 2025
Investment in both computer hardware and software surged in the first half of this year, which could be a sign that the AI boom is now boosting economic growth. Most of that hardware is imported, however, and that capital investment has not translated …
Although the Bank of England cut interest rates today by 25 basis points (bps), from 4.25% to 4.00%, it showed some signs that it may cut rates slower and/or not as far as our forecast of a decline to 3.00% in 2026. We are sticking to our view that …
For an updated and more detailed version of this analysis, click here . Rates cut to 4.00%, but BoE appears in no rush to cut again soon Although the Bank of England cut interest rates today by 25 basis points (bps), from 4.25% to 4.00%, it showed some …
The reciprocal tariffs that have taken effect overnight have resulted in a broad range of US tariffs on different countries. At one end sits China (effective tariff rate of 42%), and Brazil (35%), Switzerland (25%). At the other sits Mexico, Canada, and …
This page has been updated with additional analysis since first publication. House prices recovering, but the rebound won’t meet consensus expectations The rise in Halifax house prices in July provides another indication that the housing market is …
The high-beta Antipodean currencies had been the worst victims of global trade tensions but have fared better since early April, relative to their G10 peers, as global risk appetite steadily improved. Nevertheless, we think the best days for the Aussie …
Ahead of any possible introduction of US tariffs on imports of pharmaceuticals and semiconductors, this Update brings together key facts and figures on the scale of such tariffs and economies’ exposure to them. It seems likely that the US will soon impose …
6th August 2025
President Trump’s firing of the Bureau of Labor Statistics (BLS) commissioner marks another troubling step in his administration’s pressure campaign against Federal institutions. Still, we think a scenario in which the White House manipulates key data …
Although there are growing concerns in some quarters about the health of the US economy, neither equity analysts nor investors seem worried. Admittedly, when it comes to equity analysts’ forward-twelve-month (FTM) projections for earnings per share (EPS), …
The Labour Force Survey (LFS) is overstating population growth and therefore almost certainly overestimating employment growth. The alternative Survey of Employment, Payrolls and Hours (SEPH) points to much weaker jobs growth, while the unemployment …
There are several headwinds to healthcare & social assistance employment that suggest it is unlikely to continue growing at its recent rapid pace, although we doubt payroll gains in the sector will collapse. The strength of non-farm payrolls in recent …
Despite the unexpected rise in CPI inflation in June, we still think the weakness in the labour market means it’s only a matter of time before wage growth and inflation slow to rates consistent with the 2% inflation target. We think the Bank of England …
Subdued wage pressures need not delay BoJ tightening Although regular earnings growth has been struggling to gain momentum, we think it will do so before long. Accordingly, the data shouldn’t stand in the way of the Bank of Japan resume its tightening …
Weak labour market bolsters the case for further easing With New Zealand’s labour market continuing to slacken in Q2, the RBNZ is all but certain push ahead with a 25bp cut at its meeting later this month. The 0.1% q/q fall in employment last quarter was …
The July Employment Report was a taste of what is to come, with payroll gains set to be much weaker in the coming quarters than has been the case in recent years. This is the new normal amid the crackdown on immigration, and there is little evidence from …
5th August 2025
We don’t expect the relentless march of ‘growth’ over ‘value’ in the S&P 500 to end soon, regardless of what happens to ‘risk-free’ real Treasuries. The past few months have seen growth outperform value in the S&P 500 as the 10-year TIPs yield has dropped …
Survey implies employment weakening, prices rising The ISM services survey highlights the challenges for the Fed in the coming months, with the activity and employment indicators weakening even as the prices paid index rose to a new cyclical high. The …
The fall in world trade in Q2 was just a reversal of tariff front-running in Q1. But export orders are continuing to weaken, and with US tariff rates now about 15-25% in most economies, we expect global goods trade to slow significantly over the next two …
Trade deficit edges higher amid continued export weakness The small deterioration in Canada’s goods trade balance in June was driven by a large one-off import of a module for an offshore oil project in Newfoundland. The deterioration may have reversed in …
