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Overview – The economy faces a period of weak growth as US tariffs and uncertainty over the future of the USMCA weigh on exports and investment. We forecast quarterly GDP growth of less than 1% annualised on average for the rest of 2025. Tariff effects …
2nd July 2025
With activity having rebounded strongly in Q1 and headline inflation firming up, the RBNZ is likely to leave rates unchanged at 3.25% next week. However, we’re not convinced that the economy has turned the corner. And with the output gap set to remain …
RBA to cut by 25bp next week, as recovery stumbles and price pressures ease Although labour market remains tight, it is not standing in the way of disinflation Bank will cut rates further than most analysts are anticipating We expect the RBA to cut rates …
Weak retail sales print locks in July cut for RBA With consumer spending remaining in the doldrums, there is a strong case for the RBA to cut rates faster and further than most are predicting. The 0.2% m/m rise in retail sales in May was markedly weaker …
The JOLTS data suggest the labour market remained healthy in May, with job openings and private sector hiring rising, and layoffs low. However, the sharp rise in accommodation and food services job openings, despite a fall in tourism, is a little …
1st July 2025
The latest PMIs suggest that while global industrial activity gained some momentum at the end of Q2, this will probably prove short lived. Meanwhile, the surveys continue to suggest that tariffs are contributing to strong price pressures in the US, while …
The weakness in the dollar in June was easier to explain than its slide in April and May since – unlike in those months – it was accompanied by a shift in bond yields that might have been expected to weigh on the greenback. Even so, there is still a lot …
Tariff cost pressures are still working their way through supply chains The modest rebound in the ISM headline index to 49.0 in June, from 48.5, should temper concerns of a factory sector collapse driven by tariffs and lingering trade uncertainty. While …
We’ll be discussing how the government has influenced the UK economy in its first year in office in a 20-minute online Drop-In on at 3pm BST Thursday 3 rd July. (Register here . ) This page has been updated with additional analysis since first …
House prices rose the most since last year in June and with the RBA set to cut interest rates much further, the housing market will continue to gain momentum. However, affordability will remain quite stretched by historical standards so we doubt that …
Firms are shrugging off trade tensions The Q2 Tankan survey showed that the economy is holding up well despite trade tensions, which supports our view that the Bank of Japan will resume its tightening cycle before the end of the year. The Tankan’s …
Housing is struggling under the weight of high borrowing costs – a problem unlikely to ease if, as we expect, the Fed holds rates steady this year due to tariff-driven inflation, followed by only a modest 50bp of loosening in 2026. We expect existing home …
30th June 2025
Recent house price declines suggest a shift toward a more buyer-friendly market, as rising home listings increase choice and temper seller expectations. Nonetheless, leading indicators and solid market fundamentals indicate that any decline in prices will …
This page has been updated with additional analysis since first publication. We’ll be discussing how the government has influenced the UK economy in its first year in office. Register for in-person Roundtables at our London office on Tuesday 1 st July …
Japanese firms not benefitting from trade war after all The subdued rise in industrial production in May means that firms were not benefitting from sky-high US tariffs on Chinese imports and their production forecasts point to continued weakness. The 0.5% …
The CPI data showed the Bank of Canada’s preferred CPI-trim and CPI-median core measures rose by an average of 0.2% m/m in May, which was lower than in the previous month but still a bit too strong for comfort. Several goods prices rose strongly, as was …
27th June 2025
With the Fed divided between doves calling for a rate cut as early as July and hawks expecting no further easing this year, Fed Chair Jerome Powell struck a careful balance in his semi-annual testimony to Congress this week. He offered no signal that a …
There were two key developments for the inflation outlook this week. First, some of the upside risk to CPI inflation posed by the conflict in the Middle East and higher energy prices has subsided. After the price of Brent oil ended the UK business day on …
Manufacturing slump points to weak second quarter The worse-than-expected 0.1% m/m contraction in GDP in April and equivalent sized estimated fall in May suggests that growth was flat at best in the second quarter, with a clear risk of a contraction. This …
Tokyo election defeat is a red herring The poor showing of the LDP in Sunday’s metropolitan election in Tokyo is probably a red herring. While the number of seats the LDP won in Tokyo fell to a record low, the share of people that intend to vote for the …
The flow of funds data suggest that Japan’s budget deficit has continued to narrow after reaching a 30-year low in 2023. And while the recent plunge in the ratio of government debt to GDP partly reflects valuation changes caused by soaring bond yields, we …
Inflation overshoot points to year-end rate hike The slowdown in headline inflation in Tokyo in June partly reflects the resumption of energy subsidies. With underlying inflation still running well ahead of the Bank of Japan’s forecasts, we still expect …
Qatar Airways-Boeing deal steals headlines but underlying data positive The surge in durable goods orders in May was mostly driven by the Qatar Airways-Boeing deal announced during President Trump’s visit, but the small rise in core orders shows there …
26th June 2025
Overview – Australia’s economy is struggling to gain momentum, while the recent rebound in activity in New Zealand isn’t likely to be sustained. As the lull in activity lifts spare capacity, underlying price pressures should continue to ease in both …
This webpage has been updated with additional analysis since first publication. Elevated mortgage rates flatten recent momentum The large fall in new home sales in May cancels out all of the positivity of the past couple of months and serves as a valuable …
25th June 2025
The One Canadian Economy Act (Bill C-5) is a positive step towards reducing dependency on the US in the long run. But it will do little to offset the blow to trade from tariffs given that even fast-tracked infrastructure projects would still take years to …
Sharp fall in inflation likely to reinforce RBA’s dovish pivot With price pressures easing markedly in May, the RBA may well front-load monetary easing to a greater degree than we’re predicting. According to the monthly CPI indicator, headline inflation …
The latest data suggest that the boost to industry and trade from businesses front-running US tariffs is over. Manufacturing activity softened in April and May, and new orders have weakened. While consumer confidence has partially rebounded from …
24th June 2025
Data from the first two months of US tariffs being in effect suggest that both Canadian and Mexican manufacturers were struggling to make their exports USMCA-compliant, which poses a downward risk to our GDP forecasts for those countries. The US first …
Consecutive house price declines raise risk of deeper correction After falling in March, the further 0.3% m/m decline in house prices in April raises the risk that prices are entering a sustained downturn, as the market finally buckles under the weight of …
Fed’s Powell offers no hint of near-term rate cut Fed Chair Jerome Powell’s prepared semi-annual testimony to the House today offered no hint that a rate cut is coming any time soon. Despite the recent dovish comments from Trump-appointed Governors …
Core inflation easing, but probably still too high for imminent rate cuts The Bank’s preferred CPI-trim and CPI-median core measures rose by a smaller 0.21% m/m on average in May, with the three-month annualised rate declining to 3.0%, but that is …
Overview – The euro-zone’s strong first-quarter growth rate was a result of tariff front-running and will be reversed in Q2 and be followed by weak growth in the second half of the year. Further ahead, we think the euro-zone will grow more slowly than …
23rd June 2025
At our in-person Roundtables in London on Tuesday 1 st July, clients can discuss with our economists and their peers how the government has influenced the UK economy in its first year in office. (Register here .) This page has been updated with additional …
Overview – The Bank of Japan will stay on the sidelines for a few more months as GDP growth softens and trade tensions cloud the outlook. But with the labour market set to remain very tight, wages rising strongly and inflation on track to overshoot the …
PMIs bolster the case for BoJ to resume hiking before long With output expanding at a healthy pace and price pressures set to remain relatively firm, we continue to believe the Bank of Japan will deliver its next rate hike sooner than most anticipate. …
The Summary of Deliberations from the Bank of Canada’s June policy meeting, released on Tuesday, revealed it held rates for three reasons: the economy had slowed but not significantly, uncertainty remained high, and recent inflation data had firmed. …
20th June 2025
Fed remains firmly on the sidelines The Fed’s new interest rate projections still just about show a median of 50bp of cuts to its policy rate for this year, but it was a very close run thing. Back in March, 11 of 19 officials anticipated two 25bp cuts …
Consumers remain resilient to tariffs for now The rise in retail sales in April showed consumer spending remained resilient to tariffs at the start of the second quarter. That said, the grisly flash estimate for May suggests the economy will slow over the …
At our in-person Roundtables in London on Tuesday 1st July, clients can discuss with our economists and their peers how the government has influenced the economy in its first year in office. (Register here .) Upside risk to inflation from Middle East …
We’re hosting in-person Roundtables in London on Tuesday 1st July, where clients can discuss with our economists and their peers how the government has influenced the economy in its first year in office. (Register here .) This page has been updated with …
At our in-person Roundtables in London on Tuesday 1 st July, clients can discuss with our economists and their peers how the government has influenced the economy in its first year in office. (Register here .) This page has been updated with additional …
Downside risks persist in Australia Australian employment unexpectedly fell by 2,500 last month, as a 38,700 rise in full-time employment was more than offset by a 41,200 fall in part-time employment. However, with the unemployment rate holding steady at …
Case for tighter monetary policy remains strong The Bank of Japan tweaked its bond purchases at this week’s meeting but retained the dovish tone adopted at its May meeting. Indeed, the minutes of the May meeting showed that Board members were worried …
Inflation overshoot will prompt October rate hike Inflation is set to overshoot the Bank of Japan’s forecasts by a wide margin and we expect the Bank to resume its tightening cycle before the end of the year. Headline inflation dropped from 3.6% to 3.5% …
We’re discussing the outlook for Bank of England, Fed and ECB policy in a 20-minute online Drop-In at 3pm BST today. (Register here .) And a t our in-person Roundtables in London on Tuesday 1 st July, clients can discuss with our economists and their …
19th June 2025
Dovish hold supports our view of August cut and rates falling to 3.50% or below next year The Bank of England sounded a bit more dovish while leaving interest rates at 4.25% today, despite the extra upside risks to inflation from events in the Middle …
There are signs that Japanese carmakers are reducing their prices in the US to retain market share, which seems to vindicate the Bank of Japan’s concerns that US tariffs will weigh on corporate profits. Even so, we still expect firms to grant another …
RBA’s easing cycle has further to run Labour market and population data published today are sending mixed signals about capacity pressures in the Australian economy. Either way, they probably won’t prevent the RBA from cutting rates further in the months …
