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July’s flash PMIs suggest that activity slowed further at the start of Q3. Industry remains the weak spot, but the outlook for the services sector has also deteriorated noticeably. And while this seems to be weighing somewhat on employment growth and …
24th July 2023
Strong immigration and the turnaround in the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada back in hiking mode, we still judge that GDP will contract later this year. Even if recession is avoided, a …
New home construction has been surprisingly resilient to weaker demand so far this year. But that partly reflects activity being brought forward before building standards were tightened in June. With that boost now over and survey data indicating a …
This page has been updated with additional analysis since first publication. Note: Join our special online briefing after the Fed and ECB’s July decisions, and previewing the BoE’s August meeting, at 10:00 EDT/15:00 BST on Thursday 27 th July . Register …
Japan bulls have proposed a range of explanations to justify the outperformance of the TOPIX relative to other equity indices over recent months. While there are some signs that firms are enjoying stronger pricing power, we aren’t convinced that a …
Note: Join our Asia Drop-In on whether China is in a balance sheet recession, the July BOJ meeting and more at 09:00 BST/16:00 SGT on Thursday, 27 th July . Register here . This article has been updated with additional analysis and charts since it was …
The US dollar has rebounded over the past two days and looks set to unwind much of last week’s fall. (See Chart 1.) With US data somewhat mixed, much of this rebound in the greenback seems to have been driven by a reassessment of the outlook for other …
21st July 2023
Headline inflation fell to 2.8% in June and, excluding mortgage interest costs, was in line with the 2.0% target. While the Bank’s preferred core measures are still higher, the weakness of retail sales in May and June suggests demand is easing and is …
The Fed is almost certain to hike its policy rate by 25bp to between 5.25% and 5.50% at next week’s FOMC meeting, but we increasingly believe that will prove to be the peak. Despite the ‘higher for longer’ rhetoric from officials, a more marked decline …
Despite the fall in CPI inflation from 8.7% in May to 7.9% in June (see here ), the UK is still lumbered with an inflation rate that is 1.4 percentage points (ppts) higher than in the euro-zone. And at 4.8ppt, the gap between UK and US CPI inflation …
Demand not looking so excessive after all Retail sales volumes were little changed in May and the preliminary estimate implies that they dropped back in June. That calls into question the Bank of Canada’s recent claim about “persistent excess demand” and …
The Treasury yield curve has been inverted for a long time by past standards, but we think it could remain so until next year even if there’s a recession in the interim. At the start of this month, it briefly looked as though the beginning of the end of …
This page has been updated with additional analysis since first publication. Unexpected borrowing undershoot as receipts rise sharply Note: Join our special online briefing after the Fed and ECB’s July decisions, and previewing the BoE’s August meeting, …
New Zealand inflation looks sticky CPI data published on Wednesday revealed that New Zealand’s consumer prices rose by 1.1% q/q in Q2, only slightly below the 1.2% quarterly rise in Q1. Nonetheless, favourable base effects meant that annual inflation fell …
Note: Join our Asia Drop-In on whether China is in a balance sheet recession, the July BOJ meeting and more at 09:00 BST/16:00 SGT on Thursday, 27 th July . Register here . Tax revenue disappoints According to the Bank of Japan’s flow of funds accounts, …
Bank will revise up 2023 inflation forecast Early signs that virtuous cycle between wages and prices has finally arrived However, widening of tolerance band would risk renewed bond market sell-off At the upcoming meeting, the Bank of Japan will revise …
This article has been updated with additional charts and analysis since it was first published Inflation should fall back towards target through year-end Electricity tariff hikes that went into effect last month led to a rise in headline inflation. …
As the second quarter US reporting season gets into full swing, it’s easy to lose sight of the big picture: the peak-to-trough drawdown in earnings per share (EPS) from last year has not only been smaller than typically seen in an economic downturn, but …
20th July 2023
Sales fall back toward January lows Existing home sales edged lower, dropping by 3.3% m/m to 4,160,000 annualised in June. That decline takes sales back towards the low of 4.0m recorded in January. And despite a marginal pickup in mortgage applications …
This page has been updated with additional analysis since first publication . Labour market continues full steam ahead With the labour market still running red hot, we think the Reserve Bank of Australia has more work to do. Accordingly, we’re sticking …
This article has been updated with additional charts and analysis since it was first published Exports picking up but downturn still on the cards The trade deficit narrowed in June as export values rose faster than import values, largely reflecting the …
Despite today’s big reaction in markets in the UK to better-than-expected inflation news , we still think investors are overestimating the peak in interest rates there and underestimating how much monetary policy will be eased in 2024 and beyond. Indeed, …
19th July 2023
25bp rate hike next week likely to be the last, with rates peaking at 5.25%-5.50% Run of better inflation data to convince Fed to scrap plans for further hikes Falling inflation and weaker economy will see rates cut to 3.25%-3.50% by end-24 Fed officials …
Single-family starts fell from previous month’s highs, but remain strong Single-family starts fell back from their 11-month high in June, but remained substantially above the average seen in 2023 thus far as homebuilders remained optimistic. However with …
We still think the economy is more likely than not to fall into a mild recession later this year, as higher interest rates remain a drag and credit conditions continue to tighten. With the labour market proving resilient and core inflation still much too …
The lower-than-expected CPI inflation data for June probably signals the end of the upward march in mortgage rates. But mortgage rates are likely to plateau rather than fall as the Bank of England keeps interest rates high until next summer and lenders …
Despite the softer tone of the CPI inflation data for June released earlier today, we have raised our forecast for the peak in Bank Rate. Rather than rise from 5.00% currently to a peak of 5.25%, we now think Bank Rate will peak at 5.50%. That’s a bit …
Rate hikes from the Federal Reserve and European Central Bank at their July meetings look like done deals – it’s the messaging accompanying those decisions that may prove key to what the banks decide to do in September and beyond. Another increase also …
Mortgage rates have risen to a level that could cause costs on a fifth of rental homes to exceed the rent. That is likely to lead to a significant number of forced rental property sales, which will undermine the tight supply conditions that have limited …
Provisional data from the Australian Bureau of Statistics suggest that consumer spending slumped in Q2, as households sharply pared back discretionary expenditure. Faced with falling real incomes and depleted savings buffers, we think households will only …
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the UK inflation, growth and policy outlook in 20-minute online briefing at 9am BST today. Register here . Some good news, but we’re still raising our …
This page has been updated with additional analysis since first publication. Headline inflation moderates, but underlying inflation remains elevated Although price pressures are dissipating, they could prove stickier on the way down than we anticipate. As …
Rebound in sales spreads to pre-construction sector The pick-up in existing home sales this year has spread to the pre-construction market, with new home sales in Toronto rebounding strongly. Together with the surge in housing starts in June, that …
18th July 2023
Manufacturing malaise set to continue The further slump in industrial production in June illustrates that some parts of the economy are already struggling and, as global manufacturing demand continues to soften, we expect further weakness in the second …
Here are answers to some of the key questions that kept coming up during meetings with clients last week in New York and Chicago, and around my presentation to the NCREIF summer conference in Chicago . How bad will it get for offices? Our forecast for …
Not as good as it looks This page has been updated with additional analysis since first publication. On the face of it, the sharper-than-expected fall in headline inflation to 2.8% in June and the only modest 0.1% m/m seasonally adjusted rise in the CPI …
Underlying sales better than muted headline gain suggests Despite the modest 0.2% m/m rise in headline retail sales in June, the bigger 0.6% m/m gain in underlying control group sales is a bit more encouraging, although second-quarter consumption growth …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19 th July. Register here to join that 20-minute online briefing. Splitting real GDP growth into the sectors most and least sensitive to …
Swiss inflation has fallen sharply this year to below 2% and we expect it to stay there for the foreseeable future. In contrast to the SNB’s view, we think second-round effects on wages will be quite limited. And as a result, we forecast the SNB to start …
RBA softens tone, but further rate hikes remain likely The minutes of the RBA’s July meeting showed that its decision to hit pause was far from a foregone conclusion. Indeed, the Board did consider the option of a 25bp hike alongside the option of leaving …
Stretched affordability and a weakening economy will weigh on housing market activity this year, causing home sales to remain low. While house prices have recovered in recent months, we expect declines to resume later this year. Even so, affordability …
17th July 2023
The resurgence in female prime-age participation to a record high is helping to support labour force growth, but the recent rapid pace of improvement is likely to fade soon. Although the overall labour force participation rate continues to be held down by …
The following is a presentation that Kiran Raichura gave to the NCREIF Summer Conference in Chicago on 12th July, 2023. … What does the new normal mean for real …
Sharp drop in residential turned total lending negative in June Net lending to commercial real estate (CRE) in June was negative for the first time in over two years, but this was driven by a large drop in residential lending as elevated mortgage rates …
The news that core CPI increased by a muted 0.16% m/m in June, which is less than 2% in annualised terms, has raised hopes that the Fed’s planned rate hike this month will be the last in this cycle, with the policy rate peaking at 5.25% to 5.50%. …
14th July 2023
