Filtered by Region: G10 Use setting G10
Bank resumes rate hikes and probably another to come in July The Bank of Canada’s 25bp interest rate hike today is unlikely to be the last, with the rapid turnaround in the housing market and concerning underlying inflation dynamics raising the case for …
7th June 2023
Exports still benefitting from easing support shortages Easing supply shortages supported strong export growth in April but, with the surveys of export orders still very weak, that strength is likely to fade soon. Canada’s goods trade surplus widened from …
What will major advanced economy central banks decide at their June meetings, and how will those decisions be messaged? In this special briefing, Paul Ashworth , Andrew Kenningham and Paul Dales , our Chief Economists for the US, Europe and UK, …
Exports still benefitting from easing supply shortages Easing supply shortages continued to support export growth in April but, with export orders still very weak, that resilience is likely to fade soon. Canada’s goods trade surplus widened from a …
Slump in exports to weigh on Q2 GDP growth The widening in the trade deficit to a six-month high of $74.6bn in April, from $60.6bn, means that net external trade is on track to be a big drag on second-quarter GDP growth, with the latter still tracking …
Demand falls to historic low Mortgage applications for home purchase fell to their lowest level in almost 30 years in May, as a renewed rise in mortgage rates weighed on demand. This points to further near-term weakness for home sales, which we think will …
Weak demand to weigh on industry The disappointingly small rebound in German industrial production in April suggests that the boost from lower energy prices and improved global supply conditions at the beginning of the year has run its course. And …
Pause in May will give way to renewed falls ahead House prices were unchanged in May according to Halifax. Given that lack of momentum, the increase in mortgage rates following the bad inflation data published on the 24th of the month is set to tip house …
In response to the hawkish shift by RBA Governor Lowe and the further acceleration in unit labour cost growth, we now expect the Bank to lift the cash rate to 4.85% by September. That aggressive monetary tightening will push the Australian economy into a …
RBA could be forced to keep hiking into economic downturn Real GDP growth slowed sharply last quarter as household spending ground to a standstill. However, with productivity falling for a fourth consecutive quarter, unit labour costs grew apace. …
Flagging productivity raises risk of higher terminal interest rate Although the economy is clearly slowing, dismal productivity gains raise the risk that the RBA will have to raise interest rates above the 4.35% peak we have pencilled in. The 0.2% q/q …
The resolution of the debt ceiling debate has cleared a cloud that was hanging over the US equity market, but we think a darker one – a growth slowdown – still lingers. That’s why we doubt the rest of the year will be particularly positive for the S&P …
6th June 2023
Many of the factors that explain the UK’s chronically weak GDP growth since the pandemic, such as the shrinking of the UK’s workforce and low export growth, won’t disappear any time soon. This explains why we expect the UK economy’s underperformance to …
The Reserve Bank of Australia lifted the cash rate by 25bp today and the hawkish tone of the statement suggests that the risks to our terminal rate forecast of 4.35% are tilted to the upside. Indeed, we still think that the Bank will cut interest rates …
RBA will deliver another 25bp hike next month The Reserve Bank of Australia lifted the cash rate by 25bp today and the hawkish tone of the statement suggests that the risks to our terminal rate forecast of 4.35% are tilted to the upside. Today’s decision …
Renewed strength in regular pay growth won’t last Wage growth fell in April due to a fall in overtime pay and mostly stagnant bonus payments, while regular pay growth rebounded. But labour market conditions should loosen in the second half on account of a …
Wage growth still set to fall sharply in H2 Labour cash earnings rose by 1.0% y/y in April, marking a slowdown from 1.3% in March. That was due to a 0.3% fall in overtime pay and bonus payments staying virtually flat with just a 0.2% rise. By contrast, …
ISM surveys suggest economy has stalled In contrast to the strength of payroll employment growth last month, the fall in the ISM services index to a five-month low of 50.3 in May, from 51.9, suggests the economy is barrelling towards recession. On past …
5th June 2023
The recent decline in the number of job vacancies suggests that the upward pressure on wage growth from labour shortages is probably past its peak. But it’s still not clear that wage growth will slow fast enough to ease the Bank of England’s concerns over …
Job vacancies haven’t surged in Japan because the participation rate has risen since the start of the pandemic and there hasn’t been a “Great Resignation” amongst Japanese workers. With the labour market set to loosen this year, wage growth will remain …
We think May’s ISM Services Index remained broadly consistent with stagnant US GDP (Mon.) We expect policy rate hikes of 25bp from Australia’s central bank, to 4.10%... (Tue.) … and from the Bank of Canada, to 4.75%(Thu.) Key Market Themes Despite the …
2nd June 2023
The upside surprise to first-quarter GDP growth means there is a rising probability that the Bank of Canada will raise interest rates again. While the commonly held view seems to be that the Bank will wait until July, the passing of the US debt ceiling …
Debt ceiling ends not with a bang but a whimper The debt ceiling standoff ended not with a bang but a whimper – as the bill easily passed the House and Senate with comfortable majorities. In the end, the debt ceiling negotiations played out largely as …
In a recent Global Markets Update , we analysed the remarkably narrow rally in the S&P 500 so far in 2023. We concluded that recent history supported our forecast that the rally will run out of steam before long, albeit with the largest firms potentially …
Core inflation on its way down? Data published this week showed that euro-zone core inflation fell for the second consecutive month in May. (You can read our response to the data here or watch our Drop-in on the outlook for inflation, ECB policy and …
Despite employment strength, unemployment up and wage growth down The bigger-than-expected 339,000 increase in non-farm payroll employment in May will dominate the headlines, but the employment report was not all positive – with a big drop in the …
Despite strength of employment, unemployment rises and wage growth moderates The bigger-than-expected 339,000 increase in non-farm payroll employment in May will dominate the headlines, but the employment report was not all positive – with a big drop in …
After last week’s surprise rebound in core CPI inflation, this week’s data showed that higher interest rates are starting to percolate more meaningfully throughout the economy. That will have given the Bank of England more encouragement on its mission to …
It comes as no surprise to see a sharp downgrade to consensus forecasts given the combined impact of the regional banking crisis and growing office sector distress. But despite those downgrades, our own forecasts are considerably more downbeat, …
Largest minimum wage hike in 41 years adds pressure on RBA The 5.75% increase in the minimum wage is the largest on record and adds to the case for the RBA to raise interest rates further. The Fair Work Commission today announced that both the minimum …
Although activity in the manufacturing sector looks to have improved somewhat in May, that was mainly due to stronger growth in some large emerging markets. The outlook for industry remains bleak, with new export orders in particular falling sharply. The …
1st June 2023
Recession risks remain high The slight decline in the ISM manufacturing index to 46.9 in May, from 47.1, reinforces our view that the jump in manufacturing output in April won’t be sustained. But the bigger news was the renewed plunge in the new orders …
Overview – Poor affordability and a weakening economy will weigh on housing market activity this year, causing home sales to remain low over the next few quarters. While house prices increased in February and March, we expect to see further modest …
Although the economy weathered the cost of living crisis much better than most expected, the full force of the cost of borrowing crunch has yet to be felt. And with it looking as though interest rates need to rise further to quash inflation, we think the …
ISM survey suggest recession risks remain high The slight decline in the ISM manufacturing index to 46.9 in May, from 47.1, reinforces our view that the jump in manufacturing output in April won’t be sustained. But the bigger news was the renewed plunge …
The debt ceiling deal constitutes a modest fiscal tightening, principally because it will guarantee the resumption of student loan repayments this summer, but we aren’t worried that the post-deal surge in Treasury debt issuance will push up borrowing …
Growing evidence that UK price pressures are becoming increasingly domestically generated has driven up market interest rate expectations and at one point pushed the 10-year gilt yield up to 4.38% in late May, close to its peak seen after the …
Higher interest rates start to weigh more heavily on bank lending While the £7.3bn rebound in total UK bank deposits in April followed the £16.1bn decline in March and suggests that concerns over the stability of UK banks have faded, the more interesting …
The renewed decline in mortgage approvals in April will have dashed hopes that the jump in March marked the start of a recovery. Moreover, with mortgage rates now on their way back up, lending is likely to remain weak throughout the second half of the …
CoreLogic data published earlier today showed that house prices continue to make gains in May, heightening risks to our long-held view that the housing downturn has further to run. If house prices do stabilise or rise higher, that in turn raises the …
Policymakers warn against selling the yen The yen made headlines this week after breaching 140 against the greenback, hitting 140.93 at one point on Tuesday. That’s the weakest it had been since November last year and prompted Japanese policymakers to …
House prices flattened off in May after a rise in April. But with mortgage rates now on their way back up we suspect that the stabilisation in prices over the last couple of months will soon give way to renewed falls. The -0.1% m/m fall in house prices in …
House prices gain traction With house prices having risen for the third month in a row, there is a growing risk to our view that the housing downturn has further to run. Nonetheless, with rising interest rates set to squeeze affordability even more, we …
Inflation and GDP growth have surprised to the upside since April meeting Housing turnaround an upside risk to inflation and inflation expectations Progress on US debt ceiling deal means little reason to wait until July before hiking As GDP growth and CPI …
31st May 2023
The April JOLTS data suggest that the gradual easing in labour market conditions continues, which is putting downward pressure on wage growth. Although the job openings rate edged back up to 6.1% last month, from 5.9%, the timelier data from Indeed …
Upside surprise further boosts the case for another rate hike The larger-than-expected 3.1% annualised rise in first-quarter GDP and the strong preliminary estimate in April boost the case for another interest rate hike from the Bank of Canada, which …
