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In the latest episode of The Weekly Briefing from Capital Economics, Chief Global Economist Jennifer McKeown speaks about the macroeconomic implications of the global IT outage before going on to explain what’s happening to the world inflation and …
19th July 2024
Despite some measures of monthly core price growth remaining above the rates consistent with 2% inflation, the June CPI release on the whole supported the case for another interest rate cut from the Bank of Canada next week. Downward trend in inflation …
Shelter disinflation adds to case for September rate cut Fed officials back September rate cut In comments ahead of the pre-July FOMC blackout that begins this weekend, Fed officials appeared open to a September rate cut. On Monday, Chair Jerome Powell …
Cracks in consumption getting larger After a brief rebound in April, the renewed fall in retail sales volumes in May suggests that consumption growth is weakening again. We estimate that sales volumes fell by around 1% annualised in the second quarter, …
This page has been updated with additional analysis since first publication. Limited wiggle room for the new Chancellor June’s disappointing public finances figures suggest that public borrowing is on track to come in a little higher than the OBR’s …
Mof intervenes again All signs are that Japan’s government sold US dollars to support the yen on Thursday and Friday last week. Bank of Japan data suggest that the intervention was a bit smaller than previous ones, perhaps because the yen was already …
A policy pivot is imminent If the RBNZ had any doubts that it had broken the back of inflation, they will have been quashed by the slew of weaker-than-expected data releases this week. Accordingly, we’re bringing forward our forecast for the Bank’s first …
This website has been updated with additional analysis since first publication. Inflation will remain above target until early-2025 While the Bank of Japan will still see the July Tokyo CPI before its meeting later this month, the June nationwide figures …
With the share of non-performing CMBS loans on the rise, and plenty of loans set to refinance onto a higher rate this year, recent data provide further evidence that distress will rise both this year and next as we expected. However, while there is still …
18th July 2024
DM central banks may not be done raising rates – a too-hot Australian Q2 inflation report on 31 st July could push the RBA to hike at its meeting the following week. Our ANZ and Markets teams still think there’s a case for the Bank to hold, and they …
This page has been updated with additional analysis since first publication. Encouraging, but interest rates may not be cut in August While the easing in wage growth in May was broadly in line with what the consensus and the Bank of England expected, it …
This page has been updated with additional analysis since first publication. A loosening labour market should forestall further rate hikes Although job growth remained healthy last month, it didn’t prevent the unemployment rate from rising anew. And we …
Drag from net trade will moderate Q2 GDP rebound While the widening of the trade deficit in June points to a sizeable drag from net exports on Q2 GDP growth, activity should still have rebounded last quarter. The 5.4% y/y rise in export values was weaker …
Totality of the data supports another cut Downside risks to activity rising, upside risks to inflation falling Bank to cut interest rates by 25bp at each meeting until 2.50% Despite stronger core price pressures in May and June, the totality of the data …
17th July 2024
A recent surge in the Russell 2000 after the US CPI report for June was published last week has prompted claims that we are entering the initial stage of a secular rotation into US small-cap stocks. We are not convinced, for four reasons. First, what has …
Manufacturing sector bucking negative tone of the surveys The rise in manufacturing output in June was better than we expected based on the small fall in hours worked, but it owed a lot to a rebound in motor vehicle production, which seems unlikely to be …
Multi-family driven increase in housing starts The rise in housing starts and building permits in June is not as good as it seems at first glance, as it was driven by gains in the volatile multi-family sector, which we think will prove temporary. …
This page has been updated with additional analysis since first publication. We’re holding a 20-minute online briefing at 9.30am BST on Thursday 18 th July to discuss how today’s CPI and tomorrow’s labour market releases influence the chances of a rate …
In the latest episode of The Weekly Briefing from Capital Economics, Chief North America Economist Paul Ashworth reflects on a couple of crucial inflation reports, explaining how they’ve shifted the disinflation narrative and could even lead to even more …
This page has been updated with additional analysis since first publication. With inflation falling rapidly, the RBNZ’s August meeting is now “live” Today’s CPI release confirms that inflation is all but certain to return to the RBNZ’s 1-3% target by Q3. …
Housing market turning a corner Further interest rate cuts from the Bank of Canada should breathe some life into the housing market in the coming months, but the dimmer outlook for rent growth and apartment prices present downside risks to construction. …
16th July 2024
Many households have left western metros in favor of those in the South over the past two years. With remote working looking like a permanent fixture of office-based jobs and affordability significantly stretched in the West, we do not expect to see a …
Overview – We expect mortgage rates to continue falling, but not by enough to fully offset the effects of mortgage rate ‘lock-in’. As a result, although we expect existing home sales to rebound, we forecast that they will still be a muted 4.8 million even …
The downward revisions to global population growth in the UN’s latest projections won’t have a major bearing on our long-term GDP growth forecasts. That’s because a lot of the revision was driven by lower population projections in China, where we had …
Odds still favour a July rate cut The Bank of Canada’s preferred CPI-trim and CPI-median measures of core prices rose at an above-target monthly pace for the second month running in June. Nonetheless, with the Bank’s Business Outlook Survey , released …
Strong control group sales ease fears of consumer slump Although retail sales were unchanged in June, the strong 0.9% m/m rise in control group sales should ease concerns about the plight of the consumer in the wake of the renewed slump in sentiment. …
The Bank of Canada’s business and consumer surveys point to weak GDP growth, show that firms’ wage expectations are now lower than their pre-pandemic peak, and suggest that consumers are increasingly concerned about the health of the labour market. All …
15th July 2024
Stronger momentum in manufacturing The continued rise in manufacturing sales and new orders suggests that the sector gained some momentum in the second quarter. However, we expect that strength to fade this quarter. The 0.4% m/m rise in manufacturing …
Global Economics Chart Pack (July 2024) …
The latest data indicate that capacity pressures have continued to ease, a trend that should continue over the coming quarters. However, it will be a while before policymakers can be confident that they have broken the back of inflation. Accordingly, we …
The latest housing market data paint an almost ideal picture for the Bank of Canada, with activity improving, but little sign of a surge in house prices that could derail the downward trend in core CPI inflation. Home sales finally turning a corner The …
12th July 2024
"More good data" needed There were mixed messages from Fed Chair Jerome Powell this week in his semi-annual testimony to Congress. Powell said in his opening remarks that the “economy continues to expand at a solid pace” and the unemployment rate is …
More evidence of consumers struggling The further decline in the University of Michigan consumer sentiment index in July adds to the evidence that consumers are increasingly struggling with high interest rates. Although the link between confidence and …
Disinflation in the services sector seems to have stalled in several advanced economies this year. That’s partly because the easiest wins related to food and energy effects are behind us and also reflects some temporary factors. Much now depends on the …
PPI a lot better than it looks Ignore the fact that core PPI increased by a slightly bigger-than-expected 0.4% m/m in June and that May was revised to a 0.3% rise from unchanged. The PPI components that feed into the Fed’s preferred PCE deflator inflation …
We presume there isn’t a statistical relationship between economic performance and success on the football pitch (although we haven’t tested it). But perhaps comparing the economic performance of Spain and England (we use the UK as a proxy) over the next …
RBA will be content to play the waiting game Financial markets have increasingly been paring back their interest rate expectations for the RBA. They are now pricing in a roughly 20% chance that the Bank will hike rates by 25bp this year, down sharply from …
Goods inflation set to remain strong Data released this week showed that producer price inflation has jumped from 0.3% in January to 2.9% in June, though the bulk of that increase is due to a rebound in electricity & gas inflation. Producer prices of …
Still elevated wage growth is partly due to earlier large gains in public sector pay, which are unlikely to be repeated. There are tentative signs that private sector wage growth is slowing, and the wider evidence suggests this process should gather pace …
11th July 2024
It is not clear that Donald Trump, if elected, would gain much from trying to force Fed Chair Jerome Powell out of the role only a year before his term expires anyway. Trump might instead focus his efforts on securing Senate approval for future …
CPI qualifies as ‘more good data’ The muted 0.1% m/m increase in core CPI in June strengthens the case for a September rate cut although, while a lot still depends on the PPI data due tomorrow, our initial estimate is that the core PCE deflator increased …
With shifting Japanese inflation dynamics likely to shrink the Bank of Japan’s opportunity to tighten policy in the coming months, we think its July meeting will end with a decision to raise interest rates for the second – and final – time this year. But …
This page has been updated with additional analysis since first publication. Economic recovery continues to strengthen The stronger-than-expected 0.4% m/m rise in GDP in May (consensus forecast 0.2%, CE forecast 0.3%) will be welcomed by the new …
It is not inevitable that the economic malaise of the past 20-30 years will continue over the next decade. Some of the cyclical forces that have lowered the UK’s economic growth rate will fade and new structural ones, such as Artificial Intelligence (AI), …
10th July 2024
Shipping costs have now risen far enough to start adding to global CPI inflation. However, so far, the boost to prices is probably only in the region of 0.1%, on average. What’s more, surging freight rates to some extent reflect a shift in demand towards …
RBNZ strikes some dovish notes Although it left the Official Cash Rate unchanged at 5.50%, the RBNZ sounded rather dovish in its commentary. The Committee’s messaging gives us greater confidence that the Bank will commence its easing cycle in November. …
