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Faced with much higher interest costs, Finance Minister Chrystia Freeland outlined very little in the way of new spending measures in the Fall Economic Statement today. Most of the focus was on non-monetary housing-related policies that will have little …
21st November 2023
Fed offers something for everyone There is something for everyone in the minutes of the Fed’s early November policy meeting. The FOMC still just about maintained a tightening bias, but the overwhelming impression is that officials thought rates had …
Overview – Housing market activity is likely to recover from here, driven by falling mortgage rates. That said, they are set to remain high relative to recent history. Our view is that mortgage rates won’t drop below 6.0% before the end of the forecast, …
Overview – Surprisingly resilient demand, high inflation, and limited supply mean a severe drop in house prices will be avoided. With the peak in mortgage rates now behind us and the labour market in good shape, there is no clear trigger for another …
The economy’s third-quarter strength was not the start of a renewed acceleration and we continue to expect GDP growth to weaken. Regardless, resilient economic growth has not prevented a continued easing in wage and price inflation, and we still think the …
Spike in rates takes sales to fresh 13-year low Existing home sales fell sharply to a fresh 13-year low in October as the 8% peak in mortgage rates in the same month caused buyers and sellers to withdraw from the market. Mortgage applications for home …
This page has been updated with additional analysis since first publication. Core inflation pressures muted There was good news all round in the October CPI report, with the overall CPI falling in month-on-month seasonally adjusted terms for the first …
Note: We’ll be discussing the UK macro and market consequences of the Chancellor’s Autumn statement at 10:00 EST/15:00 GMT on 22nd November. Register here for this 20-minute online briefing. This page has been updated with additional analysis since first …
Since early 2020 there has been a clear divergence in performance between data centers and the traditional commercial real estate sectors. Looking forward, we expect the hyperscale sub-sector will continue to outperform off the back of growing cloud …
20th November 2023
We are doubtful that the recent strength of consumption is because real incomes are being understated, as some have suggested. It is more likely that so-called “excess savings” were previously underestimated, but even the latest estimates imply those …
This is an updated checklist which takes into account our latest expectations for the Autumn Statement. The checklist helps clients keep track of the key policies and forecasts announced during the Chancellor’s Autumn Statement at 12.30pm (GMT) on …
Falling inflation prompts rate cut speculation Better inflation news prompts big market moves The release of the slightly-better-than-expected October CPI data earlier this week triggered a massive reaction in markets, with the two-year Treasury yield …
17th November 2023
For the first time since the pandemic, the government will find itself with less fiscal room than expected when it provides an update of its plans next week. Accordingly, we doubt that the Fall Economic Statement will contain any major giveaways. Gloomy …
We’ll be discussing the UK macro and market consequences of the Chancellor’s Autumn statement at 10:00 EST/15:00 GMT on 22nd November. Register here for this 20-minute online briefing. The Chancellor, Jeremy Hunt, will want to use next Wednesday’s Autumn …
Recent export resilience unlikely to last While the Q3 GDP release disappointed this week, there was some (qualified) good news in the October trade data. Although headline export growth slowed to 1.6% y/y, from 4.3% in September, a deceleration had been …
Starts continue to bounce back With homebuilders encouraged by the recent surge in buyers entering the new homes market due to a lack of existing inventory, housing starts and permits edged slightly higher in October. Total housing starts rose 1.9% m/m …
While the US economy considerably outperformed its DM peers in Q3, we think that all advanced economies will suffer a weak Q4. High interest rates are weighing on credit growth, and a further rise in debt servicing costs in the coming quarters is likely …
This page has been updated with additional analysis since first publication. Retail woes continued at the start of Q4, and further weakness to come The 0.3% m/m fall in retail sales volumes in October means that after contracting by 1.0% q/q (which was …
We believe that central banks in both Australia and New Zealand are done tightening policy. However, given that inflation is far from tamed in either country, policymakers are unlikely to drop their hawkish bias just yet. Although activity has proven …
Spare capacity is opening up The ABS published a flurry of data this week, which prima facie suggest the labour market is still running red hot. Nevertheless, we remain confident in our decision to call time on the RBA’s tightening cycle . That’s largely …
With a lot of pessimism seemingly already priced in to China’s “risky” assets, we suspect a thawing in US/China relations could give them a boost. But we think their longer-term outlook is less rosy. Meanwhile, we don’t think US/China tensions will have …
House price declines likely to worsen The fall in new listings in October may ease some concerns about forced home sales but, with the sales-to-new listing ratio declining again, it is still likely that the pace of house price declines will accelerate. …
16th November 2023
Output temporarily depressed by UAW strike The 0.7% m/m decline in manufacturing output in October was entirely due to the now-resolved UAW strike, which translated into a temporary 10.0% m/m fall in motor vehicle output. With the UAW securing lucrative …
This page has been updated with additional analysis since first publication. The rise in unemployment has further to run Although jobs growth gained momentum in October, a renewed uptick in the unemployment rate should ensure that the RBA doesn’t feel the …
We expect growth to slow and inflation to drop to central bank targets in major DMs in 2024. But the latest business expectations surveys on the face of it suggest that the risks to our forecasts are tilted towards activity and inflation being more …
15th November 2023
Manufacturing and wholesale trade GDP broadly unchanged in September The slightly better-than-expected gains in manufacturing and wholesale sales in September do not change the big picture that GDP in each sector was probably largely unchanged, supporting …
Despite the indefatigable consumer, price pressures fading fast Retail sales values fell by 0.1% m/m in October, but the decline was principally due to a price-related drop back in gasoline station sales and a modest 1.0% m/m decline in motor vehicle …
Our forecasts for commercial real estate values remain well below consensus, even after the latest downgrade. While our sector rankings are consistent with the consensus, we are predicting a more substantial rise in cap rates by end-2025, which will see …
With the government still languishing far behind in the opinion polls and an election required before the end of January 2025, the Chancellor, Jeremy Hunt, is under more pressure than ever to pull something out of the bag at the Autumn Statement on …
This page has been updated with additional analysis since first publication. Slower progress ahead after big plunge The fall in CPI inflation from 6.7% in September to 4.6% in October was a bit bigger than expected (consensus and BoE forecasts 4.8%, CE …
This page has been updated with additional analysis since first publication . Wage growth has likely peaked Notwithstanding the acceleration in wage growth last quarter, we doubt that the Reserve Bank of Australia will tighten policy any further. The 1.3% …
GDP (Q3 2023, Preliminary) Tepid Q3 GDP outturn sets the tone for 2024 GDP growth weakened sharply in the third quarter and we expect it to remain soft next year. The 0.5% q/q contraction in Q3 GDP (-2.1% annualised) was much weaker than the analyst …
While wage growth will continue to slow, the smaller-than-expected fall in September supports our view that the Bank of England will keep rates on hold at their current level of 5.25% until late in 2024. Wage growth eased more slowly than we and most had …
14th November 2023
This page has been updated with additional analysis since first publication. Downward pressure on core inflation resumes The softer 0.2% m/m rise in core consumer prices in October makes it even less likely that the Fed will raise rates any further, and …
This page has been updated with additional analysis since first publication. Wage growth continues to ease, but only slowly With wage growth continuing to ease and signs that a further loosening in the labour market lies ahead, higher interest rates …
Second month of declining loan balances and plenty more to come The second consecutive monthly decline in outstanding commercial real estate loan balances held by US banks in October means the data are starting to reflect the pullback in real estate …
13th November 2023
While the official measure of rental growth is running at record highs, pay has risen even faster. So, at face value rental affordability is good by historic standards. But that doesn’t account for the fact that market rents have jumped by more than the …
Although yesterday’s poorly digested auction of 30Y Treasuries served as a reminder that the outlook for fiscal policy has the potential to undermine US long-dated government bonds, we still think their yields will end 2024 lower than they are now given …
10th November 2023
Energy disinflation; credit conditions still tight Crude oil price slump to bolster disinflation Despite the ongoing war in the Middle East, crude oil prices have slumped – with the WTI benchmark down from a peak of more than $90 per barrel in late …
The Bank of Canada’s latest Summary of Deliberations was more hawkish than most probably expected, with some members of the Governing Council still seemingly arguing for further rate hikes. That said, the weak GDP data released since the Bank’s last …
Renewed inflation concerns The continued rise in consumers’ inflation expectations in November showed that October’s jump was not a one-off and will be of some concern to the Fed. However, the headwind from persistently weak confidence is likely to weigh …
With vacancy set to stay elevated, development finance remaining expensive, and values to continue falling next year, we expect construction starts will be weak in all sectors over the next 12 months. This will weigh on completions into the medium term, …
We may have to wait a bit longer for the start of the mild recession that we have been forecasting. The published quarterly growth rate of real GDP of 0.0% in Q3 implies that the economy stagnated. Although technically real GDP fell by 0.03% q/q (or £163 …
Edging away from ultra-loose policy The “Summary of Opinions” from last week’s Bank of Japan Monetary Policy Meeting released yesterday show a Policy Board increasingly confident that the long-term 2% target is coming into sight. The likelihood of …
One and done for the RBA The main event this week was the RBA delivering a widely-anticipated 25bp rate hike at its meeting on Tuesday. Our assessment is that the increase in the cash rate is essentially something of an insurance policy, aimed at ensuring …
This page has been updated with additional analysis since first publication. Recession or not, economy not weak enough to quash price pressures The Q3 GDP data will spark a big debate about whether or not a recession has just begun (the published growth …
