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The announcement and subsequent postponement of tariffs on Canada by President Donald Trump has sprung politicians into action. On Wednesday, Liberal Party leader hopefuls Mark Carney and Chrystia Freeland set out their economic policies. Today, Prime …
7th February 2025
The overall message from the Bank of England this week was decidedly dovish, raising the risk that interest rates will be cut further and faster than our forecast of a fall from 4.50% to 3.50% by early 2026. But as we unpacked in our reaction to the …
Inflation expectations surge due to tariffs The University of Michigan Consumer Sentiment Survey for February showed a decline in the headline index alongside a sharp rise in inflation expectations, suggesting that consumers are increasingly concerned …
Due to an error in the figures mentioned in the original, we are re-sending this Canada Economics rapid response. We apologise for any inconvenience caused. Strong across the board A further strong rise in employment and tick down in the unemployment rate …
The softer 143,000 gain in payrolls in January is nothing to be concerned about following the upward revisions to payrolls in November and December, which left the three-month average gain at a near-two year high of 237,000. That strength, together with a …
Imagine a world after Donald Trump. The returned president’s rapidly unfolding policy agenda will have bearing on the US and global economies in the near-term. But could forces like shifting demographics and AI play a greater role in shaping long-term …
18th February 2025
The ECB’s April meeting comes amid falling inflation – but also rising global risks, not least the potential growth shock from Trump’s aggressive tariffs. How will heightened macro uncertainty shape the Governing Council’s decision and communications? …
7th April 2025
This page has been updated with additional analysis since first publication. Housing market continues to shrug off sluggish economy The 0.7% m/m rise in the Halifax house price index in January is at odds with the muted 0.1% m/m increase in the Nationwide …
Pickup in consumption won't nix RBA rate cut Data released this week suggest that the Australian consumer felt rather upbeat last quarter. To start with, we learnt that retail sales held steady in December, a better result than most had anticipated. As a …
Wage growth strongest since 1997 According to the preliminary estimate released this week, labour cash earnings rose by 4.8% y/y in December, the largest increase since 1997. But while those strong gains boost household incomes, on their own they don’t …
The threat of US tariffs will hang over the economy for the foreseeable future, weighing on confidence and reducing investment. We have therefore revised down our GDP growth forecast for 2025 to 1.5%, from 1.8%. We still expect the Bank of Canada to cut …
6th February 2025
Even if mortgage rates drop back slightly and house price growth cools over the next few years as we expect, renting will remain the more cost-effective option, supporting apartment demand. Southeast and West Coast apartment markets stand to gain the …
Despite Donald Trump cutting deals with Mexico and Canada, we are not backtracking from our revised view that the Fed will stay on the sidelines for the next six months. (See here .) What’s more, if US tariffs end up close to our assumptions, we think the …
While cutting interest rates from 4.75% to 4.50% today, which was the third 25 basis point (bps) cut in seven months, the Bank of England showed some signs that it may cut rates faster and further than our forecast of a decline to 3.50% by early 2026. …
For updated and more detail analysis see here . Dovish development adds downside risk to our forecast for Bank Rate to fall to 3.50% While cutting interest rates from 4.75% to 4.50% today, which was the third 25bps cut in seven months, the Bank of …
Despite the recent weak news on activity and the uncertainty around the global outlook due to Trump’s US import tariffs, the stronger news on domestic price pressures means the Bank of England will probably continue to cut interest rates only gradually. …
5th February 2025
Survey evidence remains soft The fall in the ISM services index to 52.8 in December lends some support to our view that GDP growth will slow in the next couple of quarters, albeit with the caveat that the surveys have proved to be a poor guide to GDP in …
Trade deficit swells as businesses front-run tariffs The trade deficit ballooned to a 3-year high of $98.4bn in December, up from $78.9bn, as imports surged by 3.5% and exports fell by 2.6%. The strength of imports appears largely driven by businesses …
Strong end to 2024 but little reason for optimism in 2025 The surge in exports in December and recent improvement in the export order survey indicators add to the evidence that the economy was picking up momentum at the end of last year. The prospect of …
This page has been updated with additional analysis since first publication. Jump in applications does little to brighten bleak sales outlook The steep rise in home purchase mortgage applications in January left applications at their highest level since …
The largest increase in rice prices on record has provided a sizeable boost to inflation in recent months but we expect rice inflation to slow sharply this year. While our forecast is a 0.6%-pt decline in the contribution of rice to headline inflation by …
Regular earnings growth will hold strong at just under 3% for most of this year Growth in base pay rose the most since 1992 in December, and we think it will continue to hold strong in this year. According to today’s preliminary estimate, labour cash …
4th February 2025
This page has been updated with additional analysis since first publication. More slack than meets the eye With the labour market continuing to cool, another 50bp cut by the RBNZ later this month is all but nailed on. The 0.1% q/q fall in employment in Q4 …
Despite showing a modest fall in job openings, the totality of the December JOLTS data are consistent with a labour market that has stabilised at a healthy level. Despite falling to 7.60m, from an upwardly revised 8.16m in November, job openings have …
Although President Trump has hit pause on tariffs on Canada, his communications suggest he still wants a broader agreement on various trade issues. Given the chaotic political situation in Canada, it seems unlikely that such an agreement can be made in …
Overview – Our forecast that mortgage rates will fall further than widely expected suggests that a decent recovery in transactions will allow house prices to rise by around 3.5% this year and by 4.5% next year, which would be a bit more than the …
Manufacturing recovery to prove short-lived The ISM manufacturing index finally rose back above the theoretical no-change level of 50.0 in January, but the trade war kicking off across the continent means that the recovery is likely to be short-lived. …
3rd February 2025
Australia’s housing slowdown continued into the new year, as demand softened further. Although the prospect of imminent rate cuts could temporarily buoy buyer sentiment, we don’t expect a meaningful rally in the housing market given that affordability is …
RBA's February rate cut is still on Although retail sales rose strongly last quarter, we doubt the pickup in consumer spending will keep the RBA from beginning its easing cycle later this month. The 0.1% m/m fall in sales values in December was a much …
Recovery in mortgage lending will pause in Q2 Demand for mortgage credit jumped in Q1 in response to the drop in mortgage rates over the second half of 2023. But a rise in financial market interest rates this week, due to higher-than-expected inflation in …
1st February 2025
Fed in no hurry with tariffs coming soon Underlying economic growth remains solid The 2.3% annualised gain in fourth-quarter GDP came broadly in line with the updated nowcast estimate maintained by our data team. (See here .) Although GDP growth slowed …
31st January 2025
Despite the best efforts of the Canadian government to convince US officials that the border is secure, President Trump reiterated on Thursday that his administration will impose a 25% tariff on imports from Canada this Saturday. That would be a big blow …
Real spending growth solid, price pressures muted December’s personal income and spending report brought news of another strong gain in real consumption, but with price pressures muted. As expected, core PCE prices increased by a muted 0.16% m/m in …
Still struggling for momentum ahead of potential tariff hit The larger-than-expected decline in GDP in November and flash estimate of only a moderate rebound in December suggest that growth was 1.6% annualised last quarter, a little lower than we and the …
The Chancellor’s plans to “kickstart economic growth”, which she set out in a speech this week, probably won’t lift the economy out of its recent malaise in the coming quarters. But at the margin, the announcement of some policies and initiatives aimed at …
We don’t think US equity market outperformance is over yet, despite the challenge from DeepSeek. The tone in US equity markets has turned more positive lately, with a modest gain on Thursday and futures pointing (at the time of writing) to another in …
This page has been updated with additional analysis since first publication. Higher mortgage rates starting to weigh on prices, but it won’t last Although the muted 0.1% m/m rise in Nationwide house prices in January was slightly worse than expected …
BoJ may need to lift inflation forecasts further The economic data released this week support our non-consensus view that the Bank will deliver two more 25bp rate hikes this year. For a start, two out of the three measures of underlying inflation the Bank …
We still expect a shallow easing cycle Over the past few weeks, we’ve been flagging the risk that the Reserve Bank of Australia would loosen policy settings sooner rather than later. With CPI data released this week surprising materially to the downside, …
Conditions for further tightening remain in place The end-month data rush vindicates the Bank’s decision to lift its policy rate last week and suggests that further tightening over the coming months is likely. Taking the activity data first, the 0.3% m/m …
The Q4 RICS commercial property survey saw investment sentiment turn positive for the first time since 2022 and a shift in perceptions of cycle phase, with the majority now believing we have reached the bottom or already in an early upturn. At the sector …
30th January 2025
January’s EC survey points to continued weak GDP growth at best. While it also suggests that there are some upside risks to inflation in the near term, firms’ employment expectations and labour shortages are easing which should help to bring down services …
We forecast a 170,000 gain in non-farm payrolls in January, which would mark a slight acceleration from the recent average if we are right in assuming that there will be downward revision to past payrolls figures. Meanwhile, we think the unemployment rate …
Underlying economic growth remains solid The 2.3% annualised gain in fourth-quarter GDP was a little weaker than the consensus estimate at 2.6%, but expectations would have come down a little after the December advance economic indicators showed a big …
Bank to cut interest rates by 25bps at February’s meeting, from 4.75% to 4.50% The tail risks of both faster disinflation and slower disinflation have increased Rate cuts to stay gradual, but rates to fall to 3.50% in 2026 versus market pricing of 4.00% …
This page has been updated with additional analysis since first publication. Downbeat outlook isn’t heavily weighing on households’ financial decisions December’s money and lending figures suggest the downbeat economic outlook isn’t weighing on households …
Fed moves to the sidelines The Fed left its key policy rate unchanged at between 4.25% and 4.50% today and the accompanying statement suggests the FOMC is happy to remain on the sidelines, as it awaits more clarity on the potentially stagflationary mix of …
29th January 2025
Fed moves to the sidelines The Fed left its key policy rate unchanged at between 4.25% and 4.50% and the accompanying statement suggests the FOMC is happy to remain on the sidelines, as it awaits more clarity on the potentially stagflationary mix of …
Overview – Inflation has proved somewhat stickier than we had anticipated, but the outlook of lacklustre growth, softening labour markets, normalising supply conditions and falling energy costs is consistent with further falls to come. Tariffs are a fly …
