Filtered by Region: G10 Use setting G10
Tariff front-running supports retail sales The jump in motor vehicle sales in March suggests that tariff front-running has supported consumption, although the big picture is that retail sales were strong in most of the key sectors. Likewise, the …
23rd May 2025
The headline news this week was the bigger-than-expected leap in CPI inflation from 2.6% in March to 3.5% in April. (See here .) It would be easy to conclude that most of the increase was due to one-off price rises that will stay in the inflation rate for …
This page has been updated with additional analysis since first publication. The sun won’t shine on the retail sector forever Although for the first time since 2015, excluding the pandemic, retail sales volumes have risen for four months in a row, April’s …
Inflation fight isn't over yet While the RBA’s decision to cut rates by 25bp at its meeting on Tuesday was widely expected, the Board’s overtly dovish messaging still caught most observers off guard. Indeed, Governor Bullock made news in her post-meeting …
Strong inflation will prompt rate hikes later this year Underlying inflation remained strong in April despite the slashing of public high school fees and we still expect the Bank of Japan to tighten policy further this year. Headline inflation was …
The passage of Donald Trump’s ‘one, big beautiful bill’ through the House of Representatives today has done little to calm nerves in the bond market, which had already been frayed by Moody’s recent decision to downgrade the US’ sovereign credit rating and …
22nd May 2025
The latest flash PMIs point to weak activity and a softening of price pressures in advanced economies outside the US. But the surveys suggest that tariffs are already having an inflationary impact in the US. Our estimate of the weighted average of the …
Overview – Inflation has fallen further towards central banks’ targets and we expect it to remain subdued across most of the world. Tariffs will cause a temporary uplift in the US. But elsewhere, their economic drag will add to the disinflationary effects …
This page has been updated with additional analysis since first publication. Weak economy helping to reduce upside inflation risks Despite the modest rebound in the composite activity PMI in May, at face value it is consistent with the bumper 0.7% q/q …
This page has been updated with additional analysis since first publication. Disappointing borrowing figures highlight Chancellor’s lack of wiggle room April’s public finances figures showed that despite the boost from the rise in employers’ National …
With housing affordability still extremely stretched, we expect house price growth to remain muted even as mortgage rates are set to fall further. However, there’s more scope for dwellings prices to rise in the smaller capital cities, while apartment …
PMIs point to a cooling economy The ongoing weakness in activity, coupled with softer price pressures, will keep the Bank of Japan in wait and watch mode in the near term. According to today’s flash estimate, Japan’s composite PMI fell from 51.2 in April …
Output growth slows, inflationary pressures ease The step-down in business activity this month, combined with signs of easing price pressures, supports our view that the RBA’s easing cycle has further to run. According to today’s flash estimate, the …
The near-term outlook for Canada is a little bleak. After a solid first quarter, we expect GDP growth to be muted as the imposition of US tariffs and risk of more to come weighs on exports, consumer spending and investment. Employment is likely to decline …
21st May 2025
This page has been updated with additional analysis since first publication. More than one-off rises The bigger-than-expected jump in CPI inflation in April suggests that the persistence of inflation is a bit stronger and/or businesses are passing on more …
The RBNZ is all but certain to cut its cash rate by 25bp, to 3.25%, at its meeting ending on 28 th May. With the recovery showing signs of faltering, the labour market remaining weak, and underlying inflation continuing to fall, we expect the Bank to …
Exports slump as US auto tariffs kick in With US tariffs weighing on Japanese exports, net trade will continue to act as a drag on activity in the near term. The annual increase in export values slowed from 4% in March to 2% in April. The slowdown in …
The budget reconciliation bill currently working its way through the House of Representatives, which includes a permanent extension of the original Trump tax cuts plus cut-down versions of his campaign pledges, should be mostly offset by the additional …
20th May 2025
Sharp drop in headline rate masks hot underlying inflation The removal of the carbon tax sent energy prices tumbling in April, pushing headline inflation below the 2% target. More concerningly, the Bank’s preferred CPI-trim and CPI-median core measures …
When the Reserve Bank of Australia cut rates by 25bp at its meeting today, it signalled greater confidence that it had brought inflation under control, while sounding increasingly concerned that global developments would bear down the domestic economy. …
RBA cuts by 25bp, leaves the door open for further easing With the Bank growing increasingly concerned about downside risks to the economy, there is a good chance that it will cut rates further than we are currently anticipating this cycle. The RBA’s …
The decision by Moody’s to downgrade the US government’s credit rating highlights that there are several potential storm clouds on the horizon for Treasuries, even if the downgrade itself doesn’t seem so far to have made much of a market splash. …
19th May 2025
The softening housing market has mostly flown under the radar, but that is soon likely to change following April’s data, which showed house prices taking another sharp leg down. Combined with the steep decline in manufacturing sales volumes reported for …
16th May 2025
Tariff man triumphant Following the agreement between the US and China to reverse most of the prohibitive tit-for-tat tariffs imposed a month earlier, stock markets have rallied further this week. The S&P 500 is now closing in on the high reached in …
The implications of the government’s latest policies for the economy bring to mind the quote “what the right hand giveth, the left hand taketh away”. The right hand – EU reset In the right hand is the UK-EU reset, which will begin on Monday to much pomp …
Inflationary pressures linger on In case you missed it, our RBA Watch explains why we expect the Bank to cut rates by 25bp, to 3.85%, at its meeting next week. However, we suspect that the cut will be a somewhat hawkish one, with the Board reluctant to …
Lower energy prices will weigh on inflation The truce reached between China and the US over the weekend is a clear positive for Japan’s economy. Even so, we suspect that weak economic activity coupled with an impending plunge in inflation will delay …
GDP growth set to remain sluggish this year With the economy already shrinking on the eve of the trade war, the Bank of Japan will probably wait even longer before resuming its tightening cycle than we had anticipated. The 0.2% q/q fall in Q1 GDP was …
Retail sales and PPI show few signs of adverse tariff impact Despite fears raised by the slump in sentiment, retail sales edged up by 0.1% m/m in April, following a massive 1.7% m/m gain the month before. Admittedly, control group sales fell by 0.2% m/m …
15th May 2025
Sharp drop in manufacturing sales volumes The sharp decline in manufacturing sales volumes in March suggests the earlier boost from US tariff front-running is now reversing. A modest rise in new orders supports our view that the watered-down tariffs that …
This page has been updated with additional analysis since first publication. A temporary burst rather than a sign of a fundamentally stronger economy The bumper 0.7% q/q rise in GDP in Q1 is unlikely to be repeated as a lot of it was due to a leap in …
Labour market continues to fire on all cylinders With the labour market going from strength to strength, we’re more convinced than ever that the RBA will be reluctant to cut rates aggressively. Accordingly, we’re sticking to our forecast for a terminal …
With trimmed mean inflation entering the RBA’s target band for the first time since 2021, the Bank will almost certainly lower interest rates by another 25bp at next week’s meeting. However, amidst early signs that price pressures are strengthening again, …
14th May 2025
Japan’s economy won’t be affected much by global trade tensions. While the Bank of Japan has signaled a pause in its tightening cycle, we think the Board is underestimating the strength of inflationary pressures. We still expect another rate hike in July …
Wage growth should moderate again before long The pick-up in wage growth in Q1 won’t prevent the RBA from cutting interest rates next week but it will limit the scope of additional easing thereafter. The 0.9% q/q rise in the wage price index last quarter …
Little sign of tariff effects yet The CPI data suggest that core PCE prices rose at a target-consistent rate in April for the second month running, although it is likely to be a different story this month as tariff effects start to feed through. The 0.24% …
13th May 2025
This page has been updated with additional analysis since first publication. Sticky wage growth will mean the Bank of England remains cautious The jobs market weakened further in the face of April’s rise in payroll taxes and the national minimum wage. But …
The cracks in the geopolitical landscape created since Trump was re-elected US President are pushing the UK back towards the EU when it comes to defence. The “EU reset” may also bring the UK closer to the EU in some economic areas, although this will …
12th May 2025
Just over a month ago, we ditched our long-held forecast that the S&P 500 would end this year at 7,000 , and revised it all the way down to 5,500. While that looks like it might have been a mistake, we aren’t inclined to re-adopt such a positive view. We …
Fears that single-family housing starts are on the verge of collapse because of the large buildup of new homes for sale are overblown. The accumulation largely reflects smaller private builders struggling to shift inventory, unlike their publicly-listed …
Commercial real estate investment climbed on a y/y basis in Q1, but recent surveys revealed that the unpredictability of policy changes and tariffs have dampened investor confidence. We expect this to weigh on Q2 activity, before continued improvement …
Diversifying away from the US? This week’s data releases showed a sharp fall in trade flows between Canada and the US in March, following the imposition of some tariffs by the US and retaliatory tariffs by Canada. Canada’s exports to the US fell by 6.6% …
9th May 2025
UK-US trade announcement is no big deal The “full and comprehensive” trade deal between the US and the UK announced this week by President Donald Trump was none of those things. This rush to demonstrate progress on “deals” reveals a rising desperation …
Five months ago, we incorporated a 10% tariff on all UK goods exports to the US in our forecast. That has turned out to be a good call. Despite this week’s UK-US trade deal, the 10% “baseline” tariff remains. (See here for our response to the US-UK trade …
Tariffs weigh hard on manufacturing employment Employment would have fallen again in April were it not for the boost from the federal election, which supports our view that the Bank of Canada will resume its loosening cycle next month and ultimately cut …
No signs of progress in US-Japan trade talks Preliminary data for the first twenty days of April point to export values rising by 0.7% m/m, according to our seasonal adjustment. However, that follows big swings across the first quarter, including a 5.7% …
Data flashing mixed signals On the face of it, developments this week strengthen the case for the RBA to err on the side of looser policy, rather than simply withdraw monetary restraint. For starters, the ABS’ Household Spending Indicator suggests that …
Weakness in regular earnings very difficult to explain We still believe that the labour cash earnings figures are understating the strength of wage growth but taken at face value they reduce chances of further tightening by the Bank of Japan. According to …
The UK-US trade deal announced by President Trump and Prime Minister Starmer today won’t make a big difference to the UK economy as a whole, although it is more significant for certain sectors such as cars and steel. The upcoming UK-EU reset won’t be a …
8th May 2025
The “full and comprehensive” trade deal between the US and the UK announced in a rush today by President Donald Trump and PM Keir Starmer is no such thing. As Trump admitted in his press conference, the “final details” still need to be “written up in the …
