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Inflation too hot and spending too cold The third consecutive above-target gain in core PCE prices in February, of 0.37% m/m, reinforces our view that the Fed is unlikely to cut interest rates this year. Admittedly, officials are likely to be concerned by …
28th March 2025
This page has been updated with additional analysis since first publication. Bumper rise in retail sales suggests households may be spending more freely Today’s deluge of data confirmed that the economy was weak even before the full effects of higher …
RBA will cut two more times this year Australian Prime Minister Anthony Albanese confirmed today that the next general election will be held on 3 rd May. The announcement comes closely on the heels of the government’s 2025/26 Budget , which includes an …
Time to act decisively has come The US this week announced a 25% tariff on auto imports and Japan will be among those economies most affected. (See here .) While PM Ishiba has said that “all options are on the table” when it comes to Japan’s response, our …
While US tariffs are a headwind, the continued acceleration in consumer prices will only heighten concerns among Bank of Japan’s Board members about inflation overshooting its 2% target. As the Bank should have a rough sense of the severity of US trade …
Following the series of US tariff announcements in early April, we have revised our forecasts. You can find the updated forecasts here . Overview – We have raised our assumption for the average US tariff rate that Canadian exporters will face, to a level …
27th March 2025
DOGE-led layoffs of approximately 25,000 junior federal employees will be a modest drag on March payrolls, but they should be offset a rebound in weather-sensitive sectors. We forecast a smaller yet still healthy 140,000 employment gain and the …
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
Trump imposes 25% tariff on auto imports Following media reports at the start of this week that product-specific tariffs would be deferred, President Donald Trump has changed tack once again and announced that all finished motor vehicle imports will be …
26th March 2025
Despite saying the “world is changing”, the Chancellor, Rachel Reeves, today just tinkered with fiscal policy. This left the impression that bigger changes lie ahead. Indeed, the pressure to raise both defence and other public spending is only likely to …
For updated and more detailed analysis see here . Markets may be concerned about unfinished fiscal business Despite saying the “world is changing”, the Chancellor, Rachel Reeves, today just tinkered with fiscal policy. This left the impression that bigger …
Tariff effects help lift core orders Stronger orders for primary metals and fabricated metal products in February suggest that tariff effects helped to drive up core durable goods orders last month, while transportation orders also did better than we …
This page has been updated with additional analysis since first publication. Temporary dip in inflation may not help the BoE or Chancellor much The dip in CPI inflation from 3.0% in January to 2.8% in February (CE & consensus 2.9%, BoE 2.8%) is a bit of a …
The Reserve Bank of Australia will leave policy settings unchanged at its upcoming meeting that ends on 1 st April and will probably still sound hawkish. However, with inflation set to soften a touch faster than the Bank had anticipated, we still expect …
Weakness in Australia’s underlying inflation points to May rate cut The weakness in underlying inflation means that the RBA will probably cut rates again 25bp in May and creates some downside risks to our forecast that the Bank will only cut rates to …
We think markets are too optimistic about Fed rate cuts this year, meaning the recent dip in mortgage rates is just a temporary respite. We expect rates to rebound to 7% and hover around that level throughout the rest of the year. There is still room for …
25th March 2025
Environmental, Social and Governance, or ESG, investing has come under renewed pressure due to pushback from the new US president. Despite that, we think that demand for ESG investments is here to stay and that their performance won’t buckle much in the …
Small rebound in sales shows new home market still in good health After a large partly weather-driven fall in January, last month’s small rebound in new home sales was a little underwhelming but still illustrates that the market for new homes is in decent …
House price inflation rises to five-month high The solid 0.5% m/m rise in house prices in January and accompanying pick-up in house price inflation to 4.7%, from 4.6%, confirms that the market has stopped cooling for now. While we still expect house price …
As expected, Australian Treasurer Jim Chalmers unveiled a slew of new spending measures in today’s pre-election Budget. However, we don’t believe the scope of fiscal expansion is large enough to keep the RBA from cutting rates a bit further this year. In …
Because the concept of ‘reciprocal tariffs’ is merely a cover for the White House to impose whatever tariffs it likes, they pose a potentially considerable threat to world trade. This Update provides answers to ten questions regarding what we know, as …
Overview – Both Antipodean economies seem to have turned a corner at the end of last year, and we expect the recoveries to gather momentum in the coming quarters. Given the tight labour market and elevated public demand, we believe the RBA will only …
Over the past month or so, economic data have generally surprised to the downside in the US, whereas they have done the opposite in the euro-zone. This may be one reason for the intervening shift in the performance of their stock markets. Admittedly, much …
24th March 2025
The latest flash PMIs suggest that while economic activity may have picked up a bit in advanced economies towards the end of Q1, the outlook remains fairly bleak. And while inflation seems to finally be receding in the euro-zone, price pressures remain …
This page has been updated with additional analysis since first publication. Stubbornly high UK price pressures will add to BoE’s worries With the downside risks on activity shrinking and high price pressures being sustained, the Bank of England is …
The prospect of looser fiscal policy in Germany isn’t the only significant reason MSCI’s Europe Index has outperformed its USA Index since Donald Trump returned to the White House. The ‘big-tech’ sectors’ fall from grace in the US has also been very …
21st March 2025
Inflation at risk of takeoff On Tuesday we learned that headline inflation jumped to 2.6% in February, from 1.9%. While a rise had been expected given the resumption of GST in the middle of last month, broader price increases elsewhere in the economy …
With the Fed almost certain to leave interest rates unchanged on Wednesday, the real focus was on how FOMC participants would update their economic forecasts to fit the policy course being charted by the new Trump administration. In the end, policymakers …
A pause for thought? The Bank of England was never going to do anything but continue the cut-hold-cut-hold pattern and keep interest rates unchanged at 4.50% this week. But the Monetary Policy Committee’s (MPC) hawkish tone suggests it is preparing to …
Consumption outlook deteriorating The sharp drop in retail sales volumes in January is not a major concern, coming off a massive GST holiday-driven surge the month before. The worry is that it could signal what's to come, with the preliminary estimate …
The latest data suggest that the world economy has made a relatively weak start to 2025. Activity in China has been soft so far this year amid a pullback in fiscal spending, while a surge in US imports due to tariff front-running appears to have caused US …
This page has been updated with additional analysis since first publication. Gloomy news ahead of next week’s spring fiscal event Although it will have no impact on the fiscal update next week, the significant overshoot in borrowing in February highlights …
Foreign student arrivals not a gamechanger Yesterday the ABS published data showing that Australia’s population growth slowed from 2% y/y in Q2 to 1.8% y/y in Q3. That slowdown was driven primarily by easing net overseas migration: on a 12-month basis, …
Export volumes jump the most on record While export values have surged in recent years as the weaker exchange rate lifted the yen-value of shipments and firms passed on soaring input costs, the same can’t be said for export volumes, which have tread water …
Strength in inflation suggests BoJ will hike rates again soon The strength in underlying inflation in February suggests that the Bank of Japan could hike rates at its next meeting in May but we still expect that uncertainty over the impact of US tariffs …
20th March 2025
While leaving interest rates at 4.50% today, the Bank of England seemed less committed to continuing to cut rates by 25bps every quarter. We had already been pondering this possibility and today’s news has tipped us towards putting a pause in the rate …
Unexpected rise not a sign of strength to come The small rise in existing home sales in February is unlikely to mark the start of a period of strength for buying activity given that purchase mortgage applications, which lead transactions by a month or …
A large drag from net trade will likely tip GDP growth into negative territory this quarter but we should see a rebound in Q2. Nonetheless, we expect quarterly growth to be weaker this year on average, as President Trump’s trade and immigration policies …
For an updated and more detailed version of this analysis, click here . Committee less committed to collection of rate cuts The Bank of England was always going to continue its cut-hold-cut-hold pattern by leaving interest rates at 4.50% today but, in the …
This page has been updated with additional analysis since first publication. Labour market cooling rather collapsing With the labour market cooling rather than collapsing and wage growth stuck in the 5.5-6.0% range, we doubt the Bank of England will cut …
Australia’s labour market won’t loosen much further The labour market remained tight in February and we don’t expect it to loosen much further. The 52,800 fall in employment in February was much weaker than the analyst consensus of a 30,000 rise and …
New Zealand economy escapes recession As expected, the New Zealand economy came out of recession at the end of last year. As the impact of recent monetary loosening filters through, we expect the recovery to continue apace in the coming quarters. The 0.7% …
19th March 2025
Although the FOMC stuck to its projection for two rate cuts this year, a growing number of officials share our view that further loosening is unlikely amid the increased upside risks to inflation. Otherwise, the Fed confirmed that it will slow the pace of …
Fed continues to expect two rate cuts this year, while slowing QT to a crawl Although the FOMC stuck to its median projection for two interest rate cuts this year, some officials now share our view that further loosening is unlikely and we continue to …
Our new CE UK Employment Indicator , which extracts the overall signal from a range of measures of employment, suggests that while employment growth has continued to slow in Q1 this year, it is cooling rather than collapsing. This lends support to our …
The recent slump in the S&P 500 raised the spectre of a bear market. But even if one happened this year – rather than next year as we have been tacitly assuming in our forecasts – in response to the bursting of a bubble in Artificial Intelligence (AI), we …
With the Bank of Japan sounding a bit more worried about downside risks to activity from US tariffs than about upside risks to inflation, we’re pushing back our forecast for the next rate hike from May to July. However, we still expect the Bank to lift …
Bank of Japan will lift rates to 1.5% by 2027 The BoJ’s decision to leave policy settings unchanged today was widely anticipated but we still think that the Bank’s tightening cycle has much further to run. After having lifted its policy rate to 0.5% in …
The latest PREA consensus forecasts reveal a downward revision in total returns and capital value changes across most sectors, especially for offices and industrial. However, the consensus remains more optimistic than our projections. That said, the …
18th March 2025
Rise in output the calm before the tariff storm The rise in industrial production in February should further soothe concerns that the economy is on the cusp of recession. Nonetheless, with production supported by rebounds in motor vehicle and aerospace …
