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Our Japan Chart Pack has been updated with the latest data and our analysis of recent developments. Wage growth is starting to outpace inflation and with real incomes rising, the rebound in consumer spending has further to run. With the Bank of Japan …
12th November 2024
This page has been updated with additional analysis since first publication. BoE will look through rebound in pay growth Even though the rise in pay growth in September will probably be followed by a bigger gain in October, as the new 5-6% public sector …
The sharp decline in the 10-year Treasury yield in Q3 meant marked improvement in our property valuation scores. That left all-property looking “fairly valued” for the first time since the end of 2021. But the expected economic impact of a second Trump …
11th November 2024
Clearer window into policymakers’ minds While the Summary of Deliberations from the Bank of Canada’s October meeting didn’t give much away about the size and pace of further interest rate cuts, we did learn more about policymakers’ aims. The Bank has …
8th November 2024
The market reaction to Donald Trump’s election victory suggests that, with the Republicans closing in on a clean sweep of Congress too, his return to the White House will be a net positive for the economy. We remain highly sceptical that the Republicans …
Confidence buoyed by lower inflation expectations The rise in the University of Michigan consumer sentiment index, despite uncertainty ahead of the US election, shows that economic developments remain the key driver of confidence in the aggregate. While …
After a big couple of weeks for the UK, the US, the world and global financial markets, we have revised some of our economics forecasts. Due to the policies in the UK Budget (bigger and sooner rises in government spending than taxes, see here ), we now …
Muted job gain even worse that it seems The muted rise in employment in October was even weaker than it seems, as, like in September, it was propped up by strong gains in youth employment. While the unchanged unemployment rate will reassure the Bank that …
Tariffs won’t be a big drag We’re now assuming that Donald Trump will impose a 60% tariff on US imports from China and a 10% tariff on imports from all other countries next year. The US is Japan’s largest export destination, with shipments equivalent to a …
RBA need not fret geopolitical risks The RBA’s meeting this week came and went without much ado, with the Bank leaving rates on hold yet again and providing little in terms of new forward guidance. In fact, the RBA’s meeting was quickly overshadowed by …
As expected, after a run of stronger activity and inflation data since it started its rate cutting cycle with a 50bp reduction in mid-September, the Fed opted for a more modest 25bp cut at the conclusion of its two-day FOMC meeting, taking the fed funds …
7th November 2024
Fed slows pace of rate cuts As expected, after a run of stronger activity and inflation data since it started its rate cutting cycle with a 50bp reduction in mid-September, the Fed opted for a more modest 25bp cut at the conclusion of its two-day FOMC …
We have revised some of our key market forecasts in response to Donald Trump’s victory and the news that the Republicans are on course to regain full control of Congress. These include higher projections for the 10-year Treasury yield and the greenback. …
Surge in ULC illustrates upside risks to services inflation The BLS finally incorporated the upward revisions to its labour compensation estimates into the productivity and unit labour costs data, and the results are likely to trigger some inflation …
Watch a recording of our post-MPC online briefing here . While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only gradually. We agree and due to the Budget (and not the US …
Watch a recording of our post-MPC online briefing here . Budget means Bank may not cut rates as fast and far While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only …
This page has been updated with additional analysis since first publication. Retail sales strong in September but unlikely to keep rising rapidly Euro-zone retail sales rose in September rounding off a good quarter for retailers. We suspect that sales …
This page has been updated with additional analysis since first publication. House prices rise to record high and will accelerate next year October’s 0.2% m/m rise in Halifax house prices suggests that the recent momentum in house prices has a bit further …
The recent weakness in productivity growth is only partly due to a cyclical hangover from the pandemic as it also reflects the structural weakness in investment. With investment growth set to remain mediocre, productivity growth will remain lacklustre …
Regular wage growth may already have peaked The strong pay hikes in this year’s spring wage negotiations now seem to be fully reflected in labour cash earnings and we expect wage growth to slow again next year. According to today’s preliminary estimate, …
Rebound in mortgage activity short-lived Rising borrowing costs snuffed out the nascent recovery in mortgage activity in October, with home purchase and refinancing applications both slumping after a promising end to September. This puts to bed any hope …
6th November 2024
This early edition of the Capital Daily provides our first thoughts on the market reaction to the likelihood of a second Trump term. The US election has seen a stark shift to the Republican Party, with Trump claiming victory in the Presidential race and …
Trump appears to be edging ahead The presidential election remains too close to call, but Donald Trump does appear to be edging ahead in some of the key swing states. At close to 11.30pm ET, the NYT gives Trump a 91% chance of victory, expecting him to …
This page has been updated with additional analysis since first publication. Rise in joblessness has further to run The modest rise in the unemployment rate last quarter belies the precarity of the jobs market. We still believe the unemployment rate will …
5th November 2024
Earlier interest rate cuts are yet to have much effect on the Canadian economy, which remains trapped in a period of below-potential growth. Making matters worse, any boost to the economy from lower borrowing costs next year will be countered by a decline …
The net fiscal loosening of £36bn (1.1% of GDP) in 2029/30 relative to previous plans unveiled by the Chancellor in the Budget means we now expect GDP growth of 1.8% and 1.7% in 2025 and 2026 respectively, compared to 1.5% in both years previously. But …
Goods trade balance improves, but for the wrong reasons The improvement in the goods trade position in September was for all the wrong reasons, with a fall in imports outpacing a decline in exports. While this suggests that net trade provided a small …
Surge in imports to prove short-lived The trade deficit widened to $84.4bn in September, from an upwardly revised $70.8bn in August, as imports surged ahead of the short-lived port strike in October. Goods exports declined 1% m/m from $179.2bn to …
Although the Reserve Bank of Australia maintained a broadly neutral stance at its meeting today, we still think it will start to lower interest rates as soon as February next year. However, with the labour market remaining resilient and productivity …
RBA will cut rates early next year Although the Reserve Bank of Australia maintained a broadly neutral tone at its meeting today, we still think it start to lower interest rates as soon as February next year. The Bank’s decision to leave rates unchanged …
While the latest PMIs suggest that global industry started Q4 on a slightly better footing, the outlook for the manufacturing sector remains poor, especially in advanced economies. Meanwhile, although the big fall in DM goods inflation is now behind us, …
4th November 2024
Ahead of the year’s big political event, The Weekly Briefing from Capital Economics includes an exclusive clip from our client briefing all about what to expect from the US election. Chief Asia Economist Mark Williams and the team tackle everything from …
1st November 2024
While there were some positives to take from this week’s GDP data release, it still points to an economy stuck in a period of below potential growth. This reinforces our view that the Bank of Canada will cut by 50bp again in December. Third-quarter GDP …
Race going down to the wire Although the betting markets are still convinced that Donald Trump will win next week’s presidential election, the polls remain much closer – and within the margin of error. Many of those polls have tweaked their methodologies …
Manufacturing hampered by temporary disruptions The decline in the ISM manufacturing index to a 15-month low in October suggests that the sector continued to struggle as hurricanes and the ongoing strike at Boeing disrupted manufacturing activity further …
While the market fallout from Wednesday’s Budget is still a long way from the 2022 mini-budget episode, investors are clearly nervous about the fiscal outlook. Gilt yields have risen sharply since Wednesday’s Budget. The 10-year yield is up about 21 basis …
This page has been updated with additional analysis since first publication. Mortgage rates will still fall next year and support house prices October’s 0.1% m/m rise in Nationwide house prices was a bit weaker than expected (consensus forecast +0.3% m/m, …
LDP loses majority for first time since 2009 We already indicated last week that the LDP might lose its majority in last Sunday’s House of Representatives election, but the fact that it failed to achieve a majority even once we include the seats of …
Rate cuts likely to cushion house price slowdown Australia’s housing rally continued to lose steam in October. However, with the RBA set to cut interest rates from early-2025, there are good reasons not to be too bearish on the outlook for house price …
31st October 2024
The policies announced in yesterday’s Budget won’t have a significant bearing on the housing market. But the prospect that interest rates are a bit higher may soften demand and creates some downside risk to our forecast for house price growth of 5.0% next …
Stronger data point to a more gradual pace of loosening Fed will not surprise financial markets amid election uncertainty We see the terminal rate higher under Trump than Harris With the economy on strong ground, we expect the Fed to shift to a more …
Residential’s growing share of investor portfolios speaks to the buzz around its potential to keep providing outsized returns. But will the sector continue to deliver? Join our Commercial Real Estate team for a special online briefing all about the …
An interest rate cut from 5.00% to 4.75% seems nailed on for November It’s less clear whether BoE will quicken the pace and cut rates in December too We think cuts will remain gradual until mid-2025, with rates eventually falling to 3.00% The Bank of …
The government’s plan to trim the population will hit potential GDP growth and, given the headwinds for residential investment, reduce the chance of GDP reaching that lower potential level. Rents on new leases are set to fall, which presents downside …
Heading for a weak third-quarter The unchanged level of GDP in August and downgrade to July puts third-quarter growth on track to sharply undershoot the Bank of Canada’s estimate of 1.5%. That provides some support to our view that the Bank will cut …
Inflation news mixed; real economy still looks good for Q4 The news on prices was mixed, with the September data showing that the core PCE deflator increased at a slightly faster 0.25% m/m (or 3.0% in 1m annualised terms) and, in part due to some modest …
BoJ Governor Ueda sounded more optimistic today and we’re sticking to our forecast of another rate hike at the Bank’s next meeting in December, though we don’t expect further tightening in 2025 . It came as no surprise that the Bank left its policy rate …
