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After stagnating in the first half of this year, the Halifax house price index jumped by 0.8% m/m in July in response to the fall in mortgage rates from 4.9% to 4.7% in July. (See here .) What’s more, July’s RICS survey suggests that increasing demand …
9th August 2024
Not as bad as it looks The second consecutive small fall in employment might seem to suggest that the labour market has taken a further turn for the worse, but it mainly reflected soft part-time employment among younger and older people. The jump in …
Recent safe haven flows into the franc may have prompted limited FX interventions by the SNB. But we think that the policy rate will remain its main policy tool, even for dampening the franc’s strength. Indeed, we now expect the SNB to cut its policy rate …
8th August 2024
After an already-tough H1 for information sector jobs, we expect the second half of the year to see further cuts, which will be bad news for tech-heavy metros in the West. But a more diverse occupier base and much more pronounced return to the office in …
No rush to loosen policy Although the Reserve Bank of Australia left rates on hold at its meeting this Tuesday, its messaging was unequivocally hawkish. In her post-meeting press conference Governor Michele Bullock stated that the Board had seriously …
Financial stress should be short-lived The Topix and the yen have reversed some of the large moves seen earlier this week, but BoJ Deputy Governor Uchida still signalled that those developments have reduced the chances of further policy tightening in a …
Increasing demand points to stronger price growth Tentative signs from July’s RICS survey add to the growing evidence that demand and prices are starting to pick up. And as lenders start to cut mortgage rates, further cuts in Bank Rate than financial …
At its last policy meeting, the Bank of England still sounded a long way from being assured that inflation and wage growth will continue to ease. As a result, we doubt the recent moves in global financial markets will be enough to persuade the Bank to cut …
7th August 2024
With the economy now in a position of excess supply, we expect core inflation to continue to fall back to 2% by the middle of next year. With the Bank of Canada putting more emphasis on the downside risks to the economy, we expect the Bank to cut interest …
The news that the economy may now be 2.6% bigger than its Q4 2019 pre-pandemic size, rather than 1.8%, suggests it is in better shape than we previously thought. But with the UK still suffering from balefully low productivity and labour force growth, …
Sharp fall in mortgages rates should soon support activity July was a disappointing month for mortgage activity overall, with earlier high borrowing costs causing home purchase applications to slide by 5.4% m/m. All the attention, however, will be on the …
Market turmoil has not yet led to a tightening of financial conditions in the US and most other advanced economies. That’s because borrowing costs have fallen sharply as investors have grown to expect more rate cuts from the Fed. To recap, our financial …
Even though it’s difficult to identify what could have broken as a result of the recent rapid market moves, a stronger yen is a bigger threat to the health of Japan’s financial institutions than falling stock prices. The Topix has reversed half of the …
This page has been updated with additional analysis since first publication. Falling mortgage rates boost house prices After three months of stagnation, the bigger-than-expected rise in the Halifax house price index in July provides further evidence that …
We are in the minority of forecasters who expect the Reserve Bank of New Zealand to hand down a 25bp rate cut at its meeting next week. Moreover, with excess capacity in the economy rising rapidly, we think the Bank will embark on a more aggressive easing …
This page has been updated with additional analysis since first publication. RBNZ will welcome continued loosening of the labour market Although employment growth in Q2 was stronger than most had anticipated, it didn’t keep the unemployment rate from …
Although the UK has clearly been caught up in the recent turmoil in global financial markets, we do not think a double-dip recession is on the cards. Nonetheless, the disorderly market reaction, if sustained, raises the downside risks to our GDP forecast …
6th August 2024
A pullback in buyer demand paired with rising supply has cooled the market, causing house price inflation to ease. However, the recent sharp decline in mortgage rates will offset some of that softness, by lifting demand from its current slump – providing …
While the UK led the recovery in investment activity in Q4 last year, the latest data suggest the US and euro-zone are now also turning a corner. But given concerns over economic growth in all three markets alongside structurally higher long-term rates, …
Domestic demand remains intact There was little sign of weakening domestic demand in the international trade data for June, with imports rising. Exports rose even more sharply, causing the trade deficit to narrow, although the forward-looking indicators …
Jump in exports an upside risk to GDP growth The strength of oil exports in June suggests that GDP in the second quarter will come in stronger than the 2.1% annualised gain that the flash estimate implied. Coupled with stronger consumer goods imports, …
Although the RBA left rates on hold today, it poured cold water on market expectations that it will loosen policy later this year. With the economy still running above its speed limit, we continue to believe that rate cuts won’t be on the agenda until Q2 …
With RBA retaining its tightening bias, rate cuts will have to wait Although the RBA continued to strike a cautious tone when it left rates on hold today, we still believe that the Bank’s next move will be down. That said, contrary to market pricing, we …
Japan’s government has intervened in the FX markets to weaken the yen far more often than to strengthen it. But FX interventions have become very rare over the past two decades and our sense is that the government is welcoming a stronger exchange rate in …
Despite the weakness of the latest labour market data, we judge that a soft landing is still the most likely outcome for the economy. Nonetheless, the risk of a hard landing has increased, while the disorderly market reaction – if sustained – could prompt …
5th August 2024
Rise in ISM services index should soothe recession fears The rebound in the ISM services index to 51.4 isn’t much to get excited about given it remains weak, but the corresponding increase in the employment index should soothe concerns that the labour …
Fears about US recession are fuelling volatility in financial markets, sending stock prices and bond yields sharply lower. But how justified are these fears? And do moves in asset prices point to a fundamental shift or a temporary blip in the market …
While faster wage growth should eventually result in a significant pick-up in rental inflation, it seems likely that rental growth will trail income growth for the foreseeable future. That means that the Bank of Japan will have to let the economy run …
The data this week suggested that second-quarter GDP growth was a touch stronger than expected at 2.1% annualised. We expect higher oil export capacity and strong immigration to prevent a sharp slowdown this year, but with neither tailwind preventing …
2nd August 2024
Labour market cracks raise risk of hard landing Things went from bad to worse after the Fed’s policy announcement mid-week, with the data on Thursday revealing a further fall in the ISM manufacturing index and a rise in initial jobless claims to a near …
With that grim July payrolls report triggering fresh selling in US stocks and bond buying on Friday, Group Chief Economist Neil Shearing and Deputy Chief Markets Economist Jonas Goltermann join David Wilder to talk about whether there's anything to …
This week was a good example of a “hawkish cut” from the Bank of England. The cut bit; the first 25 basis point (bp) fall in interest rates since March 2020. The hawkish bit; the Bank stated very clearly that it doesn’t expect to cut rates too much or too …
Soft landing in doubt as labour market cracks The sharp slowdown in payrolls in July and sharper rise in the unemployment rate makes a September interest rate cut inevitable and will increase speculation that the Fed will kick off its loosening cycle with …
Near-term outlook for consumption brightening As we had anticipated , the Bank of Japan’s decision to halve its JGB purchases over the next couple of years didn’t deter it from also raising interest rates further at this week’s meeting . Press reports …
RBA will remain data dependent The main event this week was the publication of Australian CPI data , which showed that underlying inflation in Q2 was softer than most had anticipated. To be clear, trimmed mean inflation was only 0.1%-pt lower than the …
The latest manufacturing PMIs suggest that global industrial activity slowed sharply at the start of Q3, and that activity will probably slow further. But weaker activity hasn’t taken the heat out of price pressures in advanced economies, meaning that …
1st August 2024
Manufacturing struggling for momentum The further decline in the ISM manufacturing index in July raises the risk that GDP growth will lose momentum in the third quarter, and the plunge in the employment index will add to concerns that the Fed has left it …
The Bank of England kick-started a loosening cycle today by cutting interest rates from 5.25% to 5.00%, but the accompanying guidance and forecasts suggest it will proceed cautiously. Accordingly, we suspect the Bank will keep rates on hold in September …
Rates cut to 5.00%, but BoE in no rush to cut again The Bank of England kick-started a loosening cycle today, cutting interest rates from 5.25% to 5.00%, but the accompanying guidance and forecasts suggest it will proceed cautiously. Accordingly, we now …
Housing rally will do little to support activity Australian house prices gained a bit of momentum in July. However, leading indicators continue to suggest that the housing market will cool markedly in the months ahead. Even if house price growth proves …
Fed lays the groundwork for September rate cut There was no surprise rate cut from the Fed today, with the fed funds target range left unchanged at between 5.25% and 5.50%, but the changes in the accompanying statement – which included a shift from a …
31st July 2024
Fed lays groundwork for September rate cut There was no surprise rate cut from the Fed today, with the fed funds target range left unchanged at between 5.25% and 5.50%, but the changes in the accompanying statement – which included a shift from a …
If implemented in full on day one, Donald Trump’s trade, immigration and fiscal policies would together be stagflationary. We suspect that he will be forced to water down his plans, however, and it could take some time to implement them. The upshot is …
Business bankruptcies rose further in the first half of 2024, mainly due to higher Chapter 11 filings as firms were forced to restructure their debts. It is typically the change in borrowing costs that matters most for Chapter 11 bankruptcies, however, …
The rise in severe weather events over the last five years has left property insurers scrambling to price-in physical risks, causing premium growth to reach a 20-year high. While we think the worst is over, growth will likely remain above the historic …
Slowdown in wage growth another reason for Fed to cut rates The further slowdown in wage growth evident in the second-quarter employment cost index data won’t be enough to prompt a surprise rate cut from the Fed later today, but it does strengthen the …
Second-quarter growth looks a bit better than expected The larger-than-expected rise in GDP in May suggests that the economy performed a little better than we anticipated last quarter, although the preliminary estimate of only a small rise in June is …
We still think that a fading in services inflation and below-target CPI inflation will prompt the Bank of England to cut interest rates from 5.25% now to 3.00% by the end of 2025, rather than to 4.00% as investors anticipate. That explains why we think …
