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Halifax prices edged lower in July With mortgage rates rising to around 6% in July, it was no surprise that the slide in the Halifax house price index continued. Although there might be a modest fall in mortgage rates in the near term, we think they will …
7th August 2023
More reasons for the Bank to remain on hold The further rise in the unemployment rate in July and signs that the housing market is cooling again are both reasons to doubt that the Bank of Canada will raise interest rates further. Employment weakened in …
4th August 2023
Inflationary pressure dissipating ULC growth slowdown adds to disinflation pressure The news that average hourly earnings growth increased by 0.4% m/m in July, and 4.4% over the past 12 months, might seem like a problem for the Fed. With productivity …
Overview – Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5.5% and 6.0% for the next 12 months. That will price many buyers out of the market, and …
This page has been updated with additional analysis since first publication. Labour market continues to loosen The small fall in employment and rise in the unemployment rate in July show that the labour market continues to loosen, suggesting that the …
Peak does not mean pivot Whether you took this week’s 25 basis point (bps) rise in interest rates, from 5.00% to 5.25%, and the Bank of England’s accompanying communications as hawkish or dovish largely depends on your prior expectations. We thought it …
Labour market conditions easing Non-farm payroll employment increased by 187,000 in July and, while that represented a trivial improvement on the downwardly revised 185,000 gain the month before, those are otherwise the two weakest monthly gains in …
We suspect the boost to “risky” assets from the resilience of the economy may have mostly run its course. Risky assets in the US have stumbled over the past couple of days as Treasury yields have climbed. But that still leaves them having made quite big …
Renewed drop and more weakness ahead Euro-zone retail sales fell in June and we expect them to continue to trend down over the rest of this year as high interest rates take an increasing toll on consumers. The 0.3% m/m drop in retail sales in June was …
On Tuesday, the Reserve Bank of Australia left its cash rate unchanged at 4.10%, upending the consensus forecast for a 25bp rate hike. The Bank’s detailed Monetary Policy Statement , published earlier today, showed that the Board did discuss the option of …
10-year yield continues to rise The Bank of Japan’s defence of Yield Curve Control (YCC) has devolved this week into a rearguard action. Since last Friday’s policy tweak to allow the 10-year Japanese government bond (JGB) yield to rise above 0.5%, the …
Despite capital value falls of 7% and 9% to-date for industrial and apartments respectively, we are forecasting around 15% further value declines as cap rates rise. But the falls in appraisal-based indices appear to be lagging those in the market, where …
3rd August 2023
We think the Fed’s done with raising rates and won’t hike again at its September meeting – but much will depend on the next couple of inflation reports, including July’s. Chief US Economist Paul Ashworth and Deputy Chief US Economist Andrew Hunter held a …
Surveys point to muted activity growth and lower core inflation The fall in the ISM services index in July illustrates that even though the risks of a recession may be easing, that doesn’t mean the economy is set to enjoy a strong performance over the …
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm BST today. (Register here .) Today’s 25 basis point (bps) rise in interest rates from 5.00% …
Closing in on the summit, but BoE suggests rates will stay at the top for a long time Today’s 25bps rise in interest rates, from 5.00% to 5.25% (CE 5.25%, 2/3 of consensus 5.25%, 1/3 of consensus 5.50%), may be followed by another hike in September to our …
Recession likely in H2 The final euro-zone PMIs confirmed that economic conditions deteriorated in July, with the Composite index consistent with GDP declining slightly. We continue to expect the euro-zone economy to fall into recession in the second half …
Net trade buoyed GDP growth in Q2 The rise in the trade surplus to $11.3bn in June, from $10.5bn in May, was broadly in line with what most had expected (Refinitiv Consensus: $11bn, CE: $11.5bn). Although exports of goods and services fell by 1.7% in …
Despite some recent high-profile labour strikes, it still seems likely that overall wage growth will slow sharply during the next 12 months, as labour demand cools and elevated immigration boosts supply. Some commentators have argued that the recent …
2nd August 2023
Office-based jobs suffering in western tech-led markets Seasonally-adjusted total employment growth rose by 0.6% 3m/3m on average across the 30 metros we track for the third consecutive month. But there has been clear weakness in the information sector in …
Applications dipped back down toward 30-year lows June’s rebound in mortgage applications for home purchase was short-lived as total applications fell by 1.7% in July. This pushed applications back down toward 30-year lows and was probably prompted by …
One key lesson from the bouts of inflation in the 1970s and 1980s is that core inflation faded only once a loosening in the labour market drove down the job vacancy rate to more normal levels. We estimate that a fall in the job vacancy rate from 3.0% in …
Fitch downgrade to have little impact The news that Fitch Ratings is downgrading its US sovereign credit rating one notch from AAA to AA+ has predictably had little to no immediate impact on the Treasury market – yields are up on the day, but down since …
This page has been updated with additional analysis since first publication . Labour market will slacken in earnest before long Although New Zealand’s unemployment rate rose slightly last quarter, the labour market remains very tight by historical …
Falling vacancies in sectors where wage growth has been particularly strong will provide some comfort to the Fed, however the JOLTS survey showed that the broader labour market remained resilient in June. The job openings rate remained unchanged at in …
1st August 2023
The latest PMIs suggest that the decline in global manufacturing activity has further to run. At least weak activity is weighing on price pressures, which should lead to further falls in core goods inflation globally. The output component of the global …
Some measures of market risk premia have become quite low, suggesting to us that the bar for further big gains in risky assets has risen. If last week’s strong Q2 GDP print emphasised the surprising resilience of the US economy, the past couple of days …
This page has been updated with additional analysis since first publication. Subdued manufacturing activity keeping inflationary pressures muted The modest improvement in the ISM manufacturing index to 46.4 in July, from 46.0, suggests the manufacturing …
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3 rd August . (Register here .) Despite the easing in CPI inflation from 8.7% in …
The Reserve Bank of Australia left rates unchanged at 4.10% for the second consecutive month. And while the Board continued to strike some hawkish notes, there is a good chance that its tightening cycle is already over. The RBA’s decision flew in the face …
Mortgage rate surge starts to take its toll The slight fall in house prices in July is the first sign of the surge in mortgage rates since mid-May taking its toll. As we expect mortgage rates to remain around their current level for the next 12 months, we …
RBA stands pat The RBA’s decision to leave its cash rate unchanged at 4.10% means that its almost certain that our forecast for a terminal rate of 4.60% won’t come to fruition. Ahead of today’s meeting, 20 out of 36 analysts polled by Reuters, including …
Housing rebound continues unabated Australia’s house-price rebound went full steam ahead in July. At the margin, that should strengthen the case for the RBA to lift its cash rate by a further 25bp at its meeting later today. Nonetheless, with resurgent …
The Fed’s latest Senior Loan Officer Opinion Survey shows that, even though the banking crisis has faded, credit conditions remain unusually tight. Although the net percentage of banks tightening lending standards on commercial real estate loans fell back …
31st July 2023
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3 rd …
Climate change is expected to intensify the scale and frequency of flooding over the coming years. Housing markets in the US have yet to fully price in these risks, leaving many properties significantly overvalued. But as these risks begin to manifest, …
This article has been updated with additional charts and analysis since it was first published. Firms downbeat about output in Q3 June’s activity data were broadly positive for Q2, with both the industrial production and capital goods shipments data …
The Bank of Canada’s Summary of Deliberations highlighted the Bank’s concern that inflation could become stuck above the 2% target. Although headline inflation faces a bumpy downward path over the coming months, we think a faster easing in core inflation …
28th July 2023
This week’s FOMC meeting brought hints that Fed officials are no longer wedded to previous plans for further policy tightening. Even if activity growth continues to hold up a bit better than expected, we think a run of weaker inflation readings will …
This page has been updated with additional analysis since first publication. Sharp slowdown in second quarter growth Despite the rebound in GDP in May, growth in the second quarter looks set to be weaker than expected. With some of the factors supporting …
Slowdown in wage & price inflation despite resilience in activity The slowdown in both the employment cost index of wage growth and core PCE inflation to their lowest levels in nearly two years suggests that resilient activity growth won’t be enough to …
GDP data released this week suggest that the euro-zone economy held up better than we expected in Q2. Output rose in France and Spain and stagnated in Germany . Together, the national data point to euro-zone GDP rising by 0.4% in Q2 rather than falling …
One consequence of higher interest rates is an increase in the losses that the Bank of England will make via the bonds it bought during its quantitative easing (QE) programme. This week, the Bank published an estimate that it could make a huge £150bn …
Global goods trade rose slightly in May, but timelier data point to a renewed fall in June. And as spending patterns continue to normalise away from goods towards services at the same time as higher interest rates start to bite, it will probably be …
The Bank of Japan announced today that it will allow 10-year yields to rise above the 0.5% ceiling – which it says it is retaining – to a new “just-in-case” cap of 1.0%. With signs mounting of a virtuous cycle between inflation and wages, the chances of …
Real household incomes falling at rapid pace Data released last week underline that Japanese households are struggling to cope with rising living costs. While labour income rose at a robust pace, a slump in government transfer payments resulted in a 1.6% …
The Bank of Japan announced today that it will allow 10-year yields to rise to 1.0% instead of the current ceiling of 0.5%. We still think that a slowdown in inflation will convince the Bank to keep its short-term policy rate unchanged over the coming …
The big news out of Australia this week was that both headline and trimmed-mean inflation in Q2 were lower than most had anticipated. However, we still think it’s too soon for the RBA to declare victory in the war on inflation. After all, services …
This page has been updated with additional analysis since first publication. Retail sales soften anew The sharp decline in retail sales in June suggests that sales volumes fell for a third consecutive quarter in Q2. With the RBA sounding increasingly …
This article has been updated with additional charts and analysis since it was first published. Upside risks to our services inflation forecasts Headline inflation was unchanged in Tokyo this month, but a jump in services inflation helped power a renewed …
