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We think that it is now time for the curtains to close on the so-called ‘excess savings’ debate. While unusually high savings accumulated by households during the pandemic helped prevent recessions in advanced economies in 2023, they are likely to have …
3rd April 2024
Mortgage rates temporarily drop below 7%, helping demand recover Mortgage rates dipping back below 7% helped mortgage applications for home purchase edge slightly higher in March. But recent increases in the 10-year Treasury yield point to mortgage rates …
The recent easing in price pressures and the Bank of England's new-found dovish slant has convinced investors that interest rates will be cut a bit further over the next two years. But we still think investors are underestimating how far rates will fall. …
We expect the RBNZ to hold rates steady at its meeting next Wednesday. But with the economy in a deep slump and inflation clearly on the way down, the Committee is likely to tone down its tightening bias. As inflation risks continue to recede, we expect …
The economy made a strong start to the year, but that was largely due to temporary factors that will soon fade. With spare capacity emerging, particularly in the labour market, downward progress on inflation is becoming clearer. Changes to immigration …
2nd April 2024
The February JOLTS data suggest that labour market conditions are now easing at a more gradual pace, but that isn’t a surprise when most indicators of slack have already returned to pre-pandemic norms. At 5.3% in February, the job openings rate has been …
March’s manufacturing PMIs provided further evidence that global industry is past the worst. And although higher industrial output has caused price pressures to increase in some advanced economies, it won’t prevent central banks from cutting interest …
This page has been updated with additional analysis since first publication. Drag on activity from high interest rates continues to fade February’s money and credit figures show the dip in mortgage rates at the start of the year boosted mortgage approvals …
Slowdown in house price growth has further to run Australian house prices continued to pare their gains last month. And a further loss of momentum appears likely in the near term, especially given that the RBA is unlikely to come to the housing market’s …
Once the Bank of Japan starts to reduce its huge holdings of Japanese Government Bonds (JGBs) in earnest, we think that commercial banks will once again become major holders of JGBs. Insurance firms may lift their holdings a touch further as well, but we …
RBA abandons tightening bias but rate cuts still a long way off While the RBA no longer considered raising interest rates at its March meeting, we think it will take until November for the Bank to start easing monetary policy. The Bank noted that …
The Bank of Canada’s quarterly business and consumer surveys remain consistent with weak GDP growth and generally show that inflation expectations are normalising, but the latter are still too high and raise the risk that the Bank will wait to see …
1st April 2024
Above 50.0 for the first time since September 2022 The jump in the ISM manufacturing index in March, leaving it above the theoretical 50.0 no-change level for the first time since September 2022, suggests that the sector has finally turned a corner. While …
This page has been updated with additional analysis since first publication. Tankan points to sluggish recovery The slight fall in business conditions across all firm sizes in the latest Tankan suggests that a rapid recovery from the likely slump in Q1 …
Core prices moderate again, but real spending strong The slightly weaker than expected gain in core PCE prices in February will, at the margin, provide Fed officials with a little more confidence that the January surge was an anomaly. Nevertheless, the …
29th March 2024
Q1 GDP to drop sharply as industrial output slumps With industrial output falling yet again in February following the plunge in January, GDP will fall sharply in the first quarter. The 0.1% m/m decline in industrial production in February was weaker than …
Click below to visit our Shipping Disruption Dashboard, which we have updated and extended to include analysis of the Baltimore port closure. Explore the dashboard … Shipping Disruption Dashboard: New Charts on …
28th March 2024
The economy made a strong start to 2024, but that was partly due to the end of strike disruption and the record warm winter. We expect GDP growth to slow sharply next quarter, persuading the Bank of Canada to start its loosening cycle in June. GDP surges …
We expect non-farm payroll growth to ease to 180,000 in March. The jump in the unemployment rate in February is unlikely to be repeated, and is more likely to be partly reversed. We are sceptical that the recent reacceleration in non-farm payroll growth …
Everyone knows that one reason why the recession was so small and short is because higher interest rates had a smaller drag on the economy than in the past. But it’s less appreciated that future interest rate cuts may not boost the economy as much either. …
Before Neil Shearing gets on to discussing the key takeaways from our latest Global Economic Outlook, he talks to David Wilder about the inflationary risks stemming from the collapse of the Francis Scott Key Bridge at Baltimore’s port. The Capital …
Streets of Baltimore The collapse of the Francis Scott Key bridge, which was hit by an out-of-control container ship this week, could result in a lengthy disruption to the Baltimore port. Nevertheless, since that port is the 15 th largest in the country, …
Strong growth reduces urgency for interest rate cuts The broad-based strength of GDP growth in January and February means the economy almost certainly outperformed the Bank of Canada’s expectations in the first quarter and reduces the immediate risk of …
This page has been updated with additional analysis since first publication. Mild recession confirmed, but recovery probably already underway The final Q4 2023 GDP release confirmed that the UK economy was in the mildest of mild technical recessions at …
Inflation risks linger on At first glance, it would appear that much of the data released this week went the way the RBA was hoping. First, we found out that CPI inflation is on track to undershoot the Bank’s expectations this quarter. Second, retail …
BoJ won’t provide much help in supporting yen With the yen hitting a 34-year low of just under 152 against the dollar on Wednesday, the Ministry of Finance’s Masato Kanda noted that the government will respond resolutely to “excessive” yen weakness and …
This page has been updated with additional analysis since first publication. Private consumption set to trudge along The modest uptick in retail sales in February was as we had anticipated. The data confirm our view that consumer spending is likely to …
This page has been updated with additional analysis since first publication. EC Survey points to stagnant economy and still-high price pressures The EC business and consumer survey for March reinforces the message that the economy is close to recession …
27th March 2024
Overview – Australia’s GDP growth will remain soft throughout the first half of the year so the recent stalling in inflation should be followed by a renewed moderation. However, as the labour market remains very tight, we’re pushing back our forecast for …
This page has been updated with additional analysis since first publication. Inflationary pressures are letting up, but risks linger Headline Inflation in February once again came in below the expectations of both the analyst consensus and the RBA. But …
Software increasingly driving productivity gains We still believe that the current productivity boom is mainly a cyclical phenomenon, as tight labour market conditions have forced firms to expand output by boosting the efficiency of their existing …
26th March 2024
Overview – We expect weak GDP growth of 0.8% this year, and a fall in inflation to less than 2% next year, to persuade the Bank of Canada to cut its policy rate back to 2.5% by mid-2025. A recovery in productivity and looser policy should drive a rebound …
A pause in the fall in mortgage rates and a rise in the number of homes coming onto the market mean house price growth will stall in the near term. But our forecast that Bank Rate will be cut further than expected suggests that further reductions in …
House price growth reaccelerates in January The fairly large gain in house prices in January points to a rebound in price growth driven by the fall in mortgage rates towards the end of last year. Although its early in the year, today’s data fit with our …
Earlier weakness in equipment investment fading The solid rebound in durable goods orders in February suggests that the recent decline in corporate borrowing costs is feeding through to a tentative recovery in business equipment investment. The 1.4% m/m …
While the Bank of Japan’s JGB holdings have started to shrink and will continue to do so now that Yield Curve Control is over, we think that the normalisation of the Bank’s balance sheet could take up to a decade. While shrinking central bank demand for …
The government’s plan to cut temporary resident numbers over 2025 to 2027 will result in the weakest three years for population growth in Canada’s 157-year history. While it might not be enough to persuade the Bank of Canada to start its loosening cycle …
25th March 2024
Note: We’ll be covering our views on residential market winners and losers in both the for-sale and rental markets in a Drop-In Tuesday 16th April 1100 EST/1600 BST . Register here for the 20-minute session. As mortgage rates fall, we think the …
Faltering consumer spending reinforces our view that GDP growth will slow this year, although that slowdown is likely to be modest. After a disappointing couple of months for inflation, easing demand growth should help to drive a more marked decline later …
New home sales disappoint in February February’s tiny drop in new home sales cut short what appeared to be the beginning of a recovery in recent months. Even though the drop was extremely small, it still potentially casts some doubt over our upbeat new …
Overview – After having been too high for the past three years, inflation in the UK will be too low for the next three years, and much lower than in the US and the euro-zone. Not only do we think that CPI inflation will fall from 3.4% in February to below …
Germany's economy is in “troubled waters” and doing “dramatically badly” – and those are just the assessments of its economy minister. But are the recessionary conditions in the euro-zone’s biggest economy merely a cyclical blip or signs of deeper …
14th March 2024
Note: We will be discussing the outlook for residential markets across the US in a 20-minute online briefing on Tuesday April 16th. Find out more here . Overview – This year is being flagged by many as the year the recovery starts, but there is still a …
22nd March 2024
The Fed wasn’t as hawkish as we had expected this week and, assuming the recent upturn in core inflation proves temporary, there is still a good chance that interest rate cuts will begin in June. Fed content with more gradual inflation fall Despite recent …
The surprise fall in February leaves CPI inflation on track to average 2.8% this quarter, well below the Bank of Canada’s forecast of 3.2%. As the decline in inflation pressures was broad-based, there is a growing likelihood that the Bank of Canada will …
The Bank of England was never going to do anything except keep interest rates at 5.25% this week, but we and the financial markets were surprised that it took further steps in preparing the ground for the first interest rate cut. (See here .) As a result, …
Heading for another decent quarter Despite only modest rises in retail sales volumes in January and February, the earlier strength in December means that growth should remain strong this quarter. The 0.3% m/m fall in retail sales was a little smaller than …
This page has been updated with additional analysis since first publication. Shoppers largely shrug off wet weather as retail rebound only paused Unchanged retail sales volumes in February (CE forecast 0.0% m/m, consensus -0.4% m/m), as shoppers largely …
Rate cut in August remains plausible At its meeting earlier this week, the RBA dialled down its hawkish bias, with Governor Bullock noting that “the risks to the outlook are finely balanced”. However, her statement may well have been a little premature. …
Run-off in bond holdings will accelerate The Bank of Japan didn’t disappoint at this week’s meeting as the Bank ended negative interest rates, Yield Curve Control and its ETF purchases. Even so, 10-year JGB yields declined and the yen weakened to as low …
