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Our ANZ Chart Pack has been updated with the latest data and our analysis of recent developments. The Antipodean central banks will tread different paths on policy over the forecast horizon. With the New Zealand economy in dire straits and with inflation …
16th January 2025
The Bank of Japan has signalled that it will raise rates at its January meeting. And with inflation set to remain above the Bank’s 2% target for a while yet, we’re sticking to our forecast that the policy rate will reach an above-consensus 1.25% by the …
This page has been updated with additional analysis since first publication. Tight labour market bolsters case for RBA to stay put Although we expect the labour market to cool in earnest over the course of this year, risks to our forecast that the …
The ceasefire reportedly agreed between Israel and Hamas is likely to have significant consequences for some countries in the region, notably Israel itself as well as Jordan and Egypt. But the possible disinflationary impact for the rest of the world via …
15th January 2025
If sustained, rising bond yields add to downside risks to economic growth. The potential direct effects on real activity are greatest in the US. But higher yields in other DMs could limit how far borrowing costs in the private sector fall and force the …
Core CPI consistent with soft gain in core PCE The 0.23% m/m increase in core CPI in December appears consistent with a below-target 0.14% m/m increase in the Fed’s preferred core PCE deflator measure. Although that would leave core PCE inflation …
Manufacturing recovery stalls The rise in manufacturing sales in November was entirely due to higher prices, with sales volumes unchanged. While the recovery in activity took a breather, the 1.8% m/m rise in new orders and increase in the S&P Global …
Slowing economic growth and rising availability will hold back French industrial rental growth this year, with affordability concerns likely to be an additional drag in Paris. This will leave the region underperforming other euro-zone markets, with …
This page has been updated with additional analysis since first publication. Soft surprise boosts February rate cut odds While a lot of the surprisingly large fall in services inflation from 5.0% in November to 4.4% in December (CE forecast 4.8%, BoE …
It’s possible that prolonged weakness in economic activity and a jump in unemployment force the RBA to cut rates more aggressively than we’re anticipating. However, a more likely scenario resulting in below-neutral rates is that a sharper-than-expected …
It’s easy to forget the importance of earnings in influencing the S&P 500 when its performance is driven instead, as has been the case recently, by gyrations in the Treasury market. Earnings will be front of mind again tomorrow, though, when reporting …
14th January 2025
Our base case is that a stabilisation and eventual fall back in gilt yields will allow the government to muddle through and wait until the next fiscal event on 26 th March before making any decisions on taxes and spending. However, a significant worsening …
Jump in airfare prices bad news for core PCE On the surface, the weaker than expected 0.2% m/m increase in final demand PPI and unchanged level of core final demand PPI in December seems encouraging, but they mask some price jumps in a few of the key …
UK commercial property finally turned a corner in 2024 after a few painful years. But 2025 has started with a bruising sell-off in gilt markets that has seen yields surging to multi-year highs. Will this imperil the market’s recovery? Where will the …
13th January 2025
While commercial real estate insurance premiums remain elevated, their growth dropped back substantially last year. But as the West and Gulf coasts still face the greatest threat from climate risks, we expect continued rapid premium growth in those …
Raising the federal debt ceiling this year will likely come as part of a budget reconciliation package alongside concessionary spending cuts given the razor-thin Republican majority in the House. As ever, a deal likely won’t be reached until the eleventh …
This interactive dashboard combines the key takeaways and most insightful charts from our extensive research into demographic trends and their economic and fiscal consequences. The central theme is that ageing populations are an acute challenge for many …
While the economy lost all momentum at the end of last year, we still expect GDP growth to accelerate from 0.8% in 2024 to an above-consensus 1.3% in 2025. Admittedly, activity could be restrained if the increase in the government’s borrowing costs due to …
After the market bottomed last year, where will the opportunities and risks lie in US commercial real estate in 2025? What influence will the US macro (and political) backdrop have on returns? Will distress remain a market theme? Our US real estate and …
The power vacuum created by Prime Minister Justin Trudeau’s resignation comes at a bad time, with President-elect Donald Trump ratcheting up his threats against Canada, raising the risk that the next government will be parachuted onto the front lines of a …
10th January 2025
Still waiting for clarity on the Trump agenda More than two months after Donald Trump and the Republicans completed a narrow clean sweep in last November’s election, and with only 10 days until the inauguration, there is still massive uncertainty about …
This week’s leap in gilt yields creates more problems for the Chancellor and is an extra headwind for the economy. But it is not a crisis. Admittedly, it is always worrying when UK bond yields rise by more than yields elsewhere and the pound weakens. …
Even Republicans growing concerned about Trump’s policy plans The drop in the expectations index of the University of Michigan Consumer Sentiment Survey in January and the accompanying jump in inflation expectations suggest that consumers are becoming …
Strong across the board The larger-than-expected 256,000 gain in non-farm payrolls in December and drop back in the unemployment rate to 4.1% supports the Fed’s decision to slow the pace of rate cuts and has heightened speculation that the loosening cycle …
This page has been updated with additional analysis since first publication. Jump in employment raises chance of Bank pause The huge gain in employment in December supports our view that labour market conditions are strengthening, despite the recent …
Tight labour market muddies the waters Financial markets are becoming increasingly optimistic that the RBA’s next easing cycle is right around the corner. They are now pricing in a 70% chance that the Bank will hand down a 25bp cut at its meeting in …
Bank will probably wait until March While the Bank of Japan refrained from hiking interest rates at its December meeting, the case for further policy tightening remains intact. For a start, the “Summary of Opinions” of that meeting showed that at least …
With long-dated gilt yields hitting multi-decade highs, we held an online Drop-In session on Wednesday to discuss the outlook for the gilt market and the implications for government policy and the UK macro and housing market outlook. (See a recording here …
9th January 2025
We originally published an Update ahead of the general election on 4 th July on what taxes the next government could raise. In light of the recent rise in gilt yields putting the Chancellor on course to break her fiscal rule, we have refreshed this …
As the president-elect again prepares to take office, our US team held a special briefing to walk clients through what to expect in the opening phase of the second Trump administration. … US Drop-In: Inauguration Day special – Knowns and unknowns around …
US President-elect Donald Trump’s increasingly aggressive rhetoric against Canada suggests we should take his tariff threats seriously. We already assume that Trump includes Canada in a likely 10% universal import tariff, but we remain relatively sanguine …
The troubling start to 2025 is casting doubt over our key non-consensus forecasts for 2025. But we still think other forecasters are underestimating how fast the economy will grow, how far inflation will fall and how many times the Bank of England will …
Our Japan Chart Pack has been updated with the latest data and our analysis of recent developments. With real household incomes set to fall again this year, the rebound in consumer spending will start to lose momentum in 2025. Even so, with the yen set …
This page has been updated with additional analysis since first publication. Consumer spending showing tentative signs of life Although the boost from November Black Friday sales disappointed expectations a bit, consumer spending does appear to have been …
Regular earnings growth will hold strong at just under 3% this year Growth in base pay rose to its highest figure since 1992 in November, and we think that it will continue to hold strong through to this year. According to today’s preliminary estimate, …
8th January 2025
Fed worried by potential impact of Trump policy agenda After Chair Jerome Powell made a big fuss about claiming in last November’s press conference that the Fed wouldn’t speculate about what policies the incoming Trump administration will adopt, the …
Overview – The potentially inflationary policy mix of the incoming Trump administration will limit the decline in mortgage rates this year, squashing hopes for a major recovery in home sales. We expect transactions to remain depressed, reaching just 4.3m …
Weak mortgage demand supports our gloomy home sales forecast The small decline in purchase mortgage applications in December is worse than it looks, as it masks a collapse in demand in the final few weeks of the month, driven by mortgage rates climbing …
Against a backdrop of lower interest rates and weak economic growth in much of Europe, we think the recovery in property values will continue at a gradual pace in 2025. Our forecast for euro-zone total returns of almost 9% is a notable improvement on the …
Rachel Reeves’ room for manoeuvre is rapidly shrinking as long-end gilt yields rise. Amid a worldwide bond sell-off, should the government brace for its borrowing costs to keep increasing – and what are the implications for fiscal policy if they do? Our …
We now expect underlying inflation to remain above the Bank of Japan’s 2% target for most of 2025 and the Bank to hike rates to 1.25%. However, we believe that it’s too early for the Bank to declare victory in its quest to lift inflation sustainably to …
This page has been updated with additional analysis since first publication. Disinflation gathering momentum The RBA is unlikely to pay much heed to the slight pickup in headline inflation in November. In fact, with underlying price pressures showing …
Though we think the market has bottomed, we expect a very weak recovery this year, unlike in other cycles. In fact, we think valuation falls still have further to go, leaving our forecasts generally below consensus, particularly for the industrial sector. …
7th January 2025
The rise in corporate bankruptcies last year is not a huge concern, but it does add to the sense that firms are struggling more than the headline GDP and labour market data suggest. That in turn supports our view that GDP growth was set to slow even …
The November JOLTS data, when paired with recent employment reports, show a labour market returning to pre-pandemic norms. Meanwhile, the fall in the private quits rate to its lowest since the height of the pandemic will reassure the Fed that core …
There is a significant chance that the Office for Budget Responsibility (OBR) will judge that the Chancellor, Rachel Reeves, is on course to miss her main fiscal rule when it revises its forecasts on 26 th March. To maintain fiscal credibility, this may …
ISM services index rebounds, but surge in prices paid a worry The rebound in the ISM services index in December will soothe concerns that the services sector is starting to run out of steam. Less positively, the surge in the prices paid index to a nearly …
There are increasing signs that interest rate cuts are feeding through to the real economy. Household consumption grew strongly in the third quarter and activity in the housing market has picked up. We expect consumer spending to continue to support the …
Export volumes continue to recover The third consecutive rise in export volumes in November provides further evidence that the economy was gaining momentum at the end of last year. US tariffs could cause the recovery to go into reverse this year, but that …
