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This page has been updated with additional analysis since first publication. House price growth slows as stamp duty relief ends April’s bigger-than-expected 0.6% m/m fall in Nationwide house prices (consensus forecast 0.0% m/m, Capital Economics -0.1% …
30th April 2025
CPI data don’t support the case for below-neutral rates Although trimmed mean CPI gained a bit of momentum in q/q terms last quarter, it probably won’t keep the RBA from cutting rates by another 25bp at its May meeting. However, given lingering price …
Japanese banks are the one sector benefitting from the BoJ’s tightening cycle as higher interest rates lift their income by more than their expenses. And although they’ve struggled more recently amid the “Liberation Day” fallout, we think their …
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 …
The US stock market and the dollar have fared worse over the last hundred days than they fared during the first hundred days of all other presidential terms since 1980. What’s more, there has been an intervening rout in the Treasury market. It is hard to …
Pre-tariff import boom points to sizeable Q1 GDP contraction The advance economic indicators revealed a massive surge in consumer goods imports in March, as firms raced to beat the imposition of reciprocal tariffs in early April. As a result, we now …
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 …
Parts of South East Asia, notably Vietnam, as well as India are well placed to immediately gain market share in response to penal US tariffs on Chinese imports. But uncertainty over the future tariff landscape will deter investment in additional capacity …
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 …
Both major political parties unveiled their election platforms over the past week, featuring their fiscal projections for the next four years. As expected, the Liberals have made little attempt to balance the budget. Incumbent Prime Minister Mark Carney …
25th April 2025
The negative reaction in financial markets undoubtedly played a key role in making President Trump reconsider his eye-wateringly high tariffs on China and his ill-advised plans to fire Fed Chair Jerome Powell. But we suspect the dawning reality of what …
Slump in sentiment not yet weighing heavily on spending The moderate decline in retail sales volumes in February was probably due to the unseasonably severe winter weather rather than the recent slump in sentiment, with the latest flash estimate implying …
The fall in market interest rate expectations since ‘Liberation Day’ is striking. On 31 st March, investors were pricing in just two more 25 basis points (bps) interest rate cuts this year from 4.50% now to 4.00%. Now they are fully pricing in three more …
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 …
This page has been updated with additional analysis since first publication. March may be as bright as it gets as confidence slides March’s rise in retail sales volumes meant sales rebounded by an impressive 1.6% q/q in Q1, rounding off a …
Case for aggressive easing remains weak Flash PMI data released this Wednesday suggest that ongoing global tensions are doing little to dent business confidence in Australia. Although firms reported a second successive decline in new export business as a …
Underlying inflation set to surpass 3% Inflation excluding fresh food and energy picked up from 2.6% to 2.9% in March. And the big jump in inflation in Tokyo in April at first glance would suggest that the Bank of Japan is starting to fall behind the …
You can’t buy what you can’t afford The fall in existing home sales in March serves as a good reminder that more home listings alone are not enough to revive the market. Affordability also has to meaningfully improve which, based on our view that …
24th April 2025
The latest data suggest that the world economy got off to a weak start in 2025 even before most tariffs were implemented. While tariff front-running provided a boost to global industrial activity and exports to the US in Q1, this should soon fade. …
We forecast a healthy 150,000 gain in non-farm payrolls in April given that the drag from cuts to the federal workforce still appears minimal. Otherwise, we think the unemployment rate ticked back down to 4.1%, while average hourly earnings growth was …
Boeing demand boosts orders The jump in durable goods orders in March was driven entirely by a large rise in orders received by Boeing. Excluding transport, core goods orders flatlined. With the post-strike boost from the restart in production at Boeing …
At first glance, Australia and New Zealand should be fairly insulated from the brunt of the US’s ongoing trade war. Both countries have small manufacturing sectors, export little to the US and haven’t been hit with high US tariffs. That said, second-round …
Board will revise down forecasts for GDP growth due to trade tensions But Bank will signal continued confidence in meeting its 2% inflation target We expect another hike in July, with the policy rate climbing to 1.5% by 2027 The Bank of Japan will …
We are assuming that the 90-day pause on reciprocal tariffs becomes permanent, keeping tariffs at 10% for most countries except China which will face a steeper 60% levy. If Congress quickly redirects the tariff revenue back into the economy, a recession …
23rd 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 …
Sharp rise in sales shows market still has momentum Lower mortgage rates drove a sharp rise in new home sales in March, showing that the market still has solid momentum despite inventory creeping up in the resale segment. However, with mortgage rates …
This page has been updated with additional analysis since first publication. Tariffs dampening activity but not yet inflation The marked fall in the composite PMI in April raises the chances that the uncertainty stemming from the US tariffs chaos will be …
This page has been updated with additional analysis since first publication. Fiscal position worse than OBR predicted even before US tariffs bite March’s public finances figures showed that public borrowing was overshooting the OBR’s forecast even before …
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 …
PMI data bolster the case for a shallow easing cycle Early signs suggest that the economy is holding up well despite heightened uncertainty. With firms also reporting stronger inflationary pressures, we’re sticking to our view that the RBA won’t cut rates …
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
Markets were almost evenly split on what the Bank of Canada would do yesterday, right up until the last minute. In the end, the Bank opted to keep interest rates unchanged at 2.75%, rather than loosen policy by an additional 25bp. In his opening …
17th April 2025
Recession looking even less likely For all the recent anguish about tariff-induced equity selloffs and plunging sentiment, this week served as a valuable reminder that the only true measure of the health of the US economy remains the hard data. On …
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 …
The news on inflation this week was pretty good even before any influence from the US tariffs chaos has been felt. Although average earnings growth stayed close to 6.0% in February, pay growth on the more timely PAYE measure slowed to 5.4%. (See here .) …
RBA will go slow and steady The minutes of the RBA’s April meeting revealed that the Bank’s decision to leave rates unchanged at 4.10% was underpinned by its view that risks to its outlook were two-sided. Granted, that assessment was made prior to Trumps’ …
Tariff impact may not be as big as feared The OIS markets imply that it’s a coin flip whether the Bank of Japan will raise rates again this year. That makes sense because the Bank sent some rather dovish signals this week. Governor Ueda noted in an …
Strong labour market lessens the need for aggressive cuts With the labour market broadly on solid ground, we expect the RBA to deliver only a shallow easing cycle. The 32,00 rise in employment in March was a touch softer than the 40,000 increase that we …
Exports will rebound across Q2 While export values fell in March, we expect them to rebound over the coming months as US consumers rush to place orders before the suspension of reciprocal tariffs ends in July. The annual increase in export values slowed …
RBNZ won’t fret the modest uptick in inflation Although headline inflation in Q1 was stronger than it had anticipated, we suspect the RBNZ will take comfort from the fact that measures of core inflation continued to fall towards the mid-point of its 1-3% …
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
Overview – Our working assumption is that the 90-day pause on the Trump administration’s reciprocal tariffs will be made permanent, with tariffs remaining at 10% for most countries apart from China. Providing Congress soon recycles the tariff revenue into …
Bank holds but further cuts likely amid dovish communications The Bank of Canada’s decision to keep interest rates unchanged at 2.75% today was not a huge surprise given recent above-target gains in core prices, concerns about future price increases and …
Tariff hit yet to come The fall in industrial production in March was not as bad as it looks given that it was driven solely by a large weather-related drop in utilities output. Manufacturing enjoyed a strong first quarter with output rising by 5.1% …
Consumption growth rebounds following weather-related weakness A presumably temporary pre-tariff surge in motor vehicle sales drove the strong 1.4% m/m increase in retail sales in March. But there was also a big 3.3% m/m rebound in building materials …
This page has been updated with additional analysis since first publication. Dip in inflation won’t last, but weak economy will quash inflation eventually The dip in CPI inflation from 2.8% in February to 2.6% in March (CE forecast 2.6%, consensus 2.7%) …
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 …
