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Housing market still struggling for momentum The housing market was soft in May, with sales and prices edging down, but we expect conditions to improve over the rest of the year as the Bank of Canada cuts interest rates further and mortgage rates decline. …
17th June 2024
Emmanuel Macron’s decision to call a snap legislative election has triggered turmoil in French politics that is spilling into its financial markets. But what’s driving market panic? Is France heading for a ‘Liz Truss’-style bond market meltdown? And how …
The household debt-to-income ratio fell again in the first quarter, albeit because incomes continued to rise at a faster pace than debt levels. Although the aggregate situation is slowly improving, many households are still in a precarious situation, …
14th June 2024
Fed split, but better data point to two rate cuts The Fed’s updated projections indicated that a slim majority of officials favour fewer than two interest rate cut this year but, in response to the soft May CPI, PPI and import price data, the markets …
Plummeting sentiment suggests consumers are suffering The further decline in the University of Michigan consumer sentiment index to a seven-month low of 65.6 in June, from 69.1, suggests that households are now struggling more under the weight of higher …
Strong start to the second quarter unlikely to be sustained The increases in manufacturing and wholesale sales in April were marginally lower than first estimated, but not by enough to make us doubt the preliminary estimate that GDP rose by a solid 0.3% …
Higher levels of housebuilding is a prize that both Labour and the Conservatives seek, evidenced by the identical target of building 300,000 new homes a year published in their manifestos this week. (You can see all of our election analysis here , and …
Will the outcome of the UK general election move the dial on the UK economic outlook? How much would a Labour government deviate from Conservative economic policy? What does a change of government mean for the UK’s financial and housing markets? Our UK …
The Bank of Japan disappointed markets today by announcing that it will only present a detailed plan for reducing its bond purchases at its July meeting. We think it will also deliver a final policy rate hike then . Today’s BoJ meeting was a damp squib . …
BoJ pledges to unveil taper plans next month With the Bank of Japan today disappointing financial markets by delaying any announcement on the reduction of its bond purchases to its July meeting, 10-year JGB yields initially dropped by around 5bp and …
Underlying price pressures will abate only slowly When Queensland Treasurer Cameron Dick unveiled the state government’s 2024/25 Budget, he made no pretence about his desire to prime the pump in the run the up to local elections in October. The Budget …
Bank will deliver a final rate hike in July The Bank of Japan announced today that it will present a detailed plan for reducing its bond purchases at the upcoming meeting in July and we think it will also deliver a final policy rate hike then. Around …
BoE watching and waiting for more evidence that inflation will settle at the 2% target But a summer rate cut is more likely than investors expect We think rates will be cut to 3.00% next year, below current market pricing of 4.00% Far more interesting …
13th June 2024
We are retaining our forecast that the 10-year Treasury yield will fall to 4.0% by the end of this year. That reflects our expectation that the Fed will pursue a slightly looser conventional monetary policy than the one discounted in the financial markets …
While what’s in and what’s out of the election manifestos is informative, the bigger issue is whether the next government delivers or deviates from its manifesto. This Update sketches out three plausible scenarios and the possible implications for the …
The SNB is likely to keep rates on hold at 1.5% at its meeting next week as inflation in Q2 so far has been in line with the its forecast in March. Moreover, the latest data on wage growth were much stronger than ahead of the March meeting, which we think …
Soft PPI adds to the better inflation news With the May producer price data also coming in weaker than expected, we now estimate that the core PCE deflator increased by only 0.11% m/m last month, which would take the annual core PCE inflation rate down to …
Faltering demand and rising supply mean prices will slip back The May RICS survey was the weakest so far this year, as new demand faltered and sales slowed. With the quantity of homes coming onto the market increasing at the same time, prices are likely …
This page has been updated with additional analysis since first publication. Although the unemployment rate fell anew in May, leading indicators continued to point to a marked rise in the months ahead. All told, the data suggest that the RBA will remain …
Fed projects one cut this year, but notes inflation progress The median FOMC projection now shows only one 25bp rate cut this year, but it was a relatively close run thing. Four officials expect no cut this year, a further seven anticipate one cut, while …
12th June 2024
Fed forecasts one rate cut this year, but notes inflation progress This publication was resent to correct the error in the headline in an earlier version. The median FOMC projection now shows only one 25bp rate cut this year, but it was a relatively close …
Global Economics Chart Pack (June 2024) …
First month of target-consistent price data this year Core CPI increased by a more modest 0.2%m/m in May and, although we still need to see the PPI data tomorrow, it looks like core PCE, the Fed's preferred inflation metric, increased by significantly …
The current fiscal framework is not perfect and could be reformed to improve investor confidence in the management of the public finances, tilt the composition of spending towards investment and reduce political uncertainty. However, the importance of the …
This page has been updated with additional analysis since first publication. Despite stagnating in April, economy will be a tailwind for the next govt The stagnation in GDP in April (consensus 0.0%, CE -0.1%) doesn’t mean the economic recovery has been …
While the official job openings figures have fallen since late-2022, the bulk of the evidence suggests that firms are facing increasingly severe job shortages. One explanation for the fall in job vacancies could be a change in firms’ recruitment …
NB. Our new and improved interactive US Commercial Property dashboard, home to key macro and commercial real estate forecasts, can be found here . Overview – The market remains in the doldrums, with the mood negative and activity weak. We think this …
11th June 2024
The granular data on mortgage lending in Q1 contained some signs of relief following the dip in mortgage rates at the end of last year. But given that decline in rates has since reversed, we don’t think it signals a further improvement in activity to …
RBA to stay put at its June meeting Inflation remains high, but spare capacity is starting to open up in the economy Forthcoming easing cycle will be modest in scope, with rates returning to neutral We expect the Reserve Bank of Australia to leave rates …
This page has been updated with additional analysis since first publication. S ticky wage growth a lingering concern for the BoE The stickiness of wage growth in April will be a lingering concern for the Bank of England. But with employment falling …
O ur Canada Chart Pack has been updated with the latest data and our analysis of recent developments. As the economy is set for a sustained period of below potential growth and core inflation is on track to return to the 2% target by the end of the year, …
10th June 2024
The shock results of Europe’s parliament elections have roiled markets as investors respond harshly to news of President Macron’s surprise decision to dissolve France’s National Assembly and hold early elections. What will Macron’s gamble mean for the …
Rising car prices explain why US import prices from Japan haven’t fallen despite the sharp weakening of the yen. While growth in car prices has slowed as supply shortages have unwound, this hasn’t boosted export volumes so far and we think that the weak …
The Bank of Canada kicked off its loosened cycle this week and the accompanying communications left the door open for another cut in July, although still-strong wage pressures are one reason why the Bank may opt to take a more gradual approach. “Let’s …
7th June 2024
We don’t think that the below-potential GDP growth implied by the recent activity data is a cause for concern yet, particularly while the labour market appears healthy. That will keep the Fed squarely focused on the inflation side of its mandate at its …
This week both the Conservative and Labour Party have been quick to tell us about ‘financial black holes’ in their opponent’s tax and spending plans. But there are two big things neither party is telling us. First, sticking to their fiscal rules means …
Payrolls outperform, but gap with household measure growing The bigger-than-expected 272,000 gain in non-farm payrolls in May will soothe recent fears that the bottom had suddenly dropped out of the economy. With average hourly earnings increasing by 0.4% …
Labour market conditions continue to loosen The further rise in the unemployment rate in May shows that the labour market continues to loosen, but the surprising pick-up in wage growth still provides reason to be cautious about the idea that the Bank of …
Regular earnings growth hits 30-year high At first glance, the jump in regular earnings growth to a 30-year high of 2.3% in April is a clear sign that the strong pay hikes agreed in this year’s spring wage negotiations (Shunto) are filtering through. …
GDP growth set to undershoot RBA’s forecasts Australia last quarter recorded the weakest annual GDP growth since the early-1990s recession, leaving aside the pandemic. If the measly 0.1% q/q rise in output last quarter was repeated this quarter, annual …
Container shipping costs have rebounded in the past month amid a pick-up in demand for goods from China and a possible front-loading of festive orders due to concerns about future shipping disruptions. And shipping costs could yet rise further. Our …
6th June 2024
Just as fixed mortgage rates have shielded homeowners from rising interest rates, they will prevent households’ interest costs from falling rapidly when interest rates are cut. While borrowers on tracker and two-year fixed rate deals will soon see their …
Improvement in trade balance may not point to economic strength Stronger commodity exports boosted the trade figures in April, with the goods deficit narrowing to $1.0bn, from a downwardly revised $2.0bn in March. However, weaker import volumes suggest …
Net trade set to weigh on GDP again this quarter The April trade data suggest that net trade is on track to weigh on GDP growth again this quarter, but that is primarily due to continued strength in imports, which paints a better picture of domestic …
Bank may reduce its bond purchases next week, though we think it will wait until July. Next rate hike should happen in July as BoJ increasingly worried about weaker yen. However, sharp slowdown in underlying inflation will forestall a series of rate …
Today’s interest rate cut from the Bank of Canada will be the first of many, and the dovish tone of the accompanying communications suggests another rate cut in July is nailed on. As Governor Tiff Macklem shrugged off any potential concerns about exchange …
5th June 2024
ISM services index rebounds, but still consistent with lower inflation The rise in the ISM services index to 53.8 in May, from 49.4, meant that the weighted ISM index rebounded last month, despite a decline in the manufacturing index. That still leaves it …
