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This page has been updated with additional analysis since first publication. Further rebound rules out an early Christmas present from the BoE Coming on the back of the stronger-than-expected rise in wage growth in yesterday’s release, the further …
18th December 2024
The sharp rise in transactions in October and the acceleration in house price growth in November suggest some relief rally or pent-up demand after the Budget is more than offsetting the recent rises in mortgage rates. In any case, if we’re right that Bank …
17th December 2024
Output falls further, as post-strike aerospace manufacturing recovery delayed The fall in industrial production in November, despite the partial reversal of the earlier temporary disruptions caused by the hurricanes and strike at Boeing, highlights that …
Underlying inflation pressures building despite downside headline surprise The surprise fall in headline inflation back below the 2.0% target in November reflected steep price falls in a handful of components related to consumer goods, driven by Black …
This page has been updated with additional analysis since first publication. Rebound in wage growth will add to BoE’s inflation concerns The big rise in regular private sector pay growth in October will increase the Bank of England’s concerns about a …
The Fall Economic Statement (FES) showed a much larger budget deficit for the previous fiscal year than previously estimated, but that was largely due to one-off charges related to indigenous settlements. Compared to Budget 2024, the new net spending …
16th December 2024
The latest batch of PMIs suggests that the US economy is growing strongly while Europe is stagnating or contracting. The US economy is no doubt growing more strongly than its advanced economy peers heading into 2025, but the PMIs are probably overstating …
Housing market heating up The rise in home sales in November builds on the jump in October and is particularly positive considering some buyers may have held off from purchases ahead of the new mortgage rules that took effect this month. Prices are set to …
Immigration has probably added around 0.6%-pts to GDP growth per year on average across advanced economies since the pandemic. But tighter restrictions on immigration will weigh heavily on GDP growth in the US and Canada over the next few years. And the …
This page has been updated with additional analysis since first publication. PMIs raise concerns over the prospect of stagflation Despite the composite PMI staying at 50.5 in December, at face value it’s consistent with the 0.1% q/q rise in real GDP in Q3 …
Fed presented with early Christmas gift Going into this week, it already looked likely that the Fed would cut its policy rate by 25bp at its December meeting (as opposed to leaving it unchanged), and the muted November price data cemented it. Based on the …
13th December 2024
Bank of Canada signals caution The Bank continued its easing cycle this week with another 50bp cut, taking the policy rate down to 3.25%. While that was widely expected, the hawkish tone of the policy statement prompted investors to pare back expectations …
We’ll be discussing the outlook for Bank of England, ECB and Fed policy in a 20-minute online briefing at 3pm GMT on Thursday 19th December. (Register here .) At the start of this year we thought that GDP growth would gather momentum throughout the year. …
GDP growth picking up again The upside surprises to both manufacturing and wholesale sales in October supports our view that the near-term economic outlook is now better than the Bank of Canada seems to think. It looks likely that the preliminary estimate …
The recent breakdown in the relationship between yen/dollar and the relative performance of stock markets in Japan and the US in local-currency (LC) terms makes it hard to predict how these stock markets will fare against one another if, as we envisage, …
Tight labour market will muddy the waters Although the Reserve Bank of Australia predictably left rates on hold at its meeting on Tuesday, the Board didn’t exactly try to hide the fact that it was in a more dovish mood. Indeed, the Bank stated that it was …
This page has been updated with additional analysis since first publication. Economy at risk of contracting, partly due to the Budget The 0.1% m/m fall in GDP in October is the second such decline in a row and means there is every chance that the economy …
This page has been updated with additional analysis since first publication. Tankan points to sluggish growth The mediocre increase in business conditions across all firm sizes in the latest Tankan suggests that the activity is unlikely to rebound …
Overview – The backdrop to our new real estate forecasts is a small reduction in our GDP forecasts and higher level of interest rates than previously. This weighs on the outlook, and we have trimmed our total returns expectations to 5.5-6.0% p.a. over the …
12th December 2024
Deterioration in global outlook has increased the downside risks to UK GDP growth… …but Trump’s election win and the UK Budget have boosted the upside risks to UK inflation MPC to keep rates at 4.75% in December and to continue to cut by 25 basis points …
The latest data have shown that China is benefitting from a pick-up in government spending, the US economy continues to grow at a decent pace, and other advanced economies had a soft start to Q4. Outside China, forward-looking indictors point to weaker …
PPI gives Fed green light to keep cutting rates Ignore the fact that PPI final demand prices increased by a slightly bigger than expected 0.4% m/m in November. The components that feed into the Fed’s preferred PCE index were universally weak and, together …
Overview – Although their recent performance leaves much to be desired, we believe that both Antipodean economies are on the cusp of a cyclical upswing. But while the RBNZ has ample room to support the recovery without stoking inflation risks, the same …
Housing market resilient to higher mortgage rates November’s RICS survey provides further evidence that housing activity and prices remained resilient to the rise in mortgage rates in November. And our view that mortgage rates will start to fall again …
Muddied communication from BoJ makes December meeting a close call On balance, we’re sticking to our forecast of a 25bp rate hike next week With inflation overshooting BoJ’s forecasts, further tightening next year likely The outcome of the Bank’s upcoming …
This page has been updated with additional analysis since first publication. RBA to stay its hand as labour market tightens With the labour market still firing on all cylinders, there’s little need for the RBA to rush to loosen policy. Accordingly, we …
With pressures on public spending continuing to grow, this has raised the chances that the Chancellor, Rachel Reeves, raises spending further in her 2025 Spending Review. If she raises spending and funds it with higher taxes, that would probably add to …
11th December 2024
Although the Bank of Canada cut interest rates by another 50bp today, its communications were more hawkish than might have been expected, with the Bank no longer indicating that further cuts are guaranteed and instead saying it “will be evaluating the …
The Treasury market has been quite subdued since the US election, including today d espite a slightly disconcerting CPI report . We don’t expect it to become a whole lot more volatile in 2025 either, even allowing for concerns about the fiscal outlook. We …
50bp cut will not be repeated Although the Bank of Canada cut interest rates by another 50bp today, the accompanying communications were more hawkish than might have been expected, with the Bank no longer indicating that further cuts are guaranteed and …
Fed to continue with gradual policy normalisation Another 25bp rate cut incoming next week Fed’s projections will ignore potential impact of tariffs and immigration curbs Fed’s independence probably safe Fed to continue steady policy easing We expect …
Core price pressures remain slightly elevated, as housing eases The 0.31% m/m increase in core CPI in November, which left the annual core inflation rate unchanged at 3.3% for a fourth month in a row and pushed the three-month annualised rate up to an …
The peak in new apartment supply has passed, with completions set to drop back sharply over the next few years. If demand continues to hold up well as we expect, this should put downward pressure on the vacancy rate and support a modest pick-up in rent …
10th December 2024
While mortgage interest cost (MIC) inflation has historically turned negative during, or after, loosening cycles, we expect it to remain positive this time and rebound from 2026. This is because, in contrast to previous monetary policy cycles, the …
Our new Bank of England Caseometer helps track whether the Bank is becoming more inclined to cut interest rates faster and further or slower and not as far. Our forecast is that rates will continue to be cut gradually, but that they will fall to 3.50% in …
This publication has been updated to reflect changes to our forecasts after the October GDP release on 13th December 2024. Overview – Despite the deterioration in the outlook for the UK's key trading partners, we remain optimistic that UK GDP growth will …
The RBA sounded more dovish today and it’s looking increasingly likely that it will lower interest rates sooner rather than later. While a downside surprise in Q4 inflation could trigger a February rate cut, we think the continued tightness of the labour …
RBA will only ease policy in Q2 next year The Reserve Bank of Australia today signaled greater confidence that inflation will return towards target over the next couple of years, but we still expect the first rate cut to happen only in Q2 next year. As …
A vast share of our clients highlighted geopolitics and/or Trump as their biggest blind spots going into 2025 when polled at our recent London roundtables. Meanwhile, a large majority thought that interest rates will be the key driver of returns next …
9th December 2024
Pick-up in the survey indicators Recent Bank of Canada communications have been keenly attuned to the downside risks to inflation and economic activity, concerns which seemed justified after last week’s disappointing GDP report, which showed third-quarter …
6th December 2024
Cut or skip? This week, Governor Christopher Waller signaled support for continuing the loosening cycle, but noted he could favour a pause this month if “our forecasts of slowing inflation and a moderating but still-solid economy are wrong”. While that …
Upward trend in consumer confidence continues While the headline University of Michigan Consumer Sentiment Index remains below its average over the first half of the year, the jump in December suggests that household spending growth is likely to remain …
Strong employment gain more important for the Bank than jump in unemployment rate We disagree with the market reaction to November's Labour Force Survey, implying that the jump in the unemployment rate makes a 50bp cut much more likely. A slowdown in …
Reversal of disruptions lifts payrolls The solid 227,000 gain in non-farm payrolls in November was driven partly by the reversal of the disruptions that weighed on hiring in October, but still implies that underlying employment growth was a touch stronger …
The government’s new “mission” to deliver “higher living standards…through higher real household disposable income (RHDI) per person and GDP per capita by the end of the parliament” is not ambitious. Real GDP per capita has grown by 1.9% a year on average …
This page has been updated with additional analysis since first publication. Post-Budget relief rally more than offsets higher mortgage rates The leap in Halifax house prices in November mirrors the jump in the Nationwide measure and suggests that some …
December still on After a news report on Wednesday poured cold water on the prospect of a rate hike at the Bank of Japan’s upcoming meeting in a couple of weeks, the financial markets now price in only a 40% chance of a hike then, down from 60% last week. …
Bank will remain patient Following the release of disappointing Q3 GDP figures this Wednesday, financial markets have started to bring forward their expectations for rate cuts by the Reserve Bank of Australia. (See Chart 1.) They now see a three in four …
