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Recession might be avoided, but outlook still poor The renewed increase in the Ifo Business Climate Index in January confirms that the recovery in German business sentiment that started at the end of 2022 has continued this year. But the fall in its …
25th January 2023
As 2023’s calendar of central bank meetings began, we held a special briefing on the first Federal Reserve, European Central Bank and Bank of England policy decisions of the year. Chief Global Economist Jennifer McKeown lead a discussion with economists …
24th January 2023
Recession on the cards for 2023 The renewed fall in the flash UK composite PMI in January suggests that some of the resilience in economic activity towards the back end of 2022 petered out in early 2023. That supports our view that the economy is …
Recession on the cards in 2023 The renewed fall in the flash UK Composite PMI in January suggests that some of the resilience in economic activity towards the back end of 2022 started to peter out in early 2023. While still very high, the price indices …
Big Budget giveaways will have to wait until March 2024 December’s worse-than-expected public finances figures suggest the Chancellor will wait until closer to the next election before announcing any significant tax cuts and/or spending rises. Public …
Borrowing overshoot further limits chances of big Budget giveaways December’s public finances figures provided more evidence that the government’s fiscal position is deteriorating fast. And high government spending in the early months of 2022/23 and the …
The flash PMI might have edged up in the euro-zone in January… (09.00 GMT) … but we think it fell back in the UK (09.30 GMT) We expect central banks in Hungary and Nigeria to keep interest rates on hold Key Market Themes We don’t think government bond …
23rd January 2023
The sharp fall in hiring intentions in the Bank of Canada’s Business Outlook Survey suggests that the 104,000 surge in employment in December is not a sign of things to come. The survey points to a slowdown in average monthly employment growth to just …
The CPI-trim and CPI-median measures of core inflation will be revised up next month but that does not change our view that they will fall sharply over the first half of this year. We think the 25 bp hike from the Bank of Canada next week will mark the …
20th January 2023
We expect the slowdown in investment activity in the second half of 2022 to persist into the first half of 2023. But we think transactions will begin to recover later this year once interest rates have topped out and much of the valuation adjustment has …
Join Paul Ashworth , our Chief North America Economist, Stephen Brown , who leads our Canada coverage, and Jonathan Peterson , Senior FX Markets Economist, held a 20-minute briefing shortly after the Bank’s January decision announcement. Paul, Stephen …
We now think German industry will continue to grow in the coming months as lower gas prices, easing supply shortages and high backlogs of orders support production. One of the reasons for the resilience of the German economy in the face of the energy …
With inflationary pressures easing and the global growth outlook improving, we no longer expect the US dollar to breach its late September peak. But we still think that souring risk appetite associated with recessions in developed markets will boost the …
The weakness of retail sales and manufacturing output over the final two months of 2022 has reignited market fears of a hard landing this week, with the Fed’s latest Beige Book acknowledging that activity appears to have ground to a halt. Admittedly, …
CPI inflation is falling and the Bank of England Governor, Andrew Bailey, sounded optimistic this week when he said that “a corner had been turned on inflation”. But he and most other Monetary Policy Committee (MPC) members will probably still be …
Disappointing end to a difficult year The 1.0% m/m fall in retail sales volumes in December was much worse than both we and the consensus (+0.5% m/m) had expected. That meant sales volumes fell 1.3% q/q in Q4 and were a disappointing 5.4% below their …
Disappointing end to a difficult year The surprise 1.0 % m/m fall in retail sales volumes (consensus +0.5%) meant that sales volumes fell by 1.3% q/q over Q4 as a whole and ended the year a disappointing 5.4% below their level at the start of the year. …
10-year JGB yield retreats from ceiling Following the Bank of Japan’s decision on Wednesday to keep its short-term policy rate and Yield Curve Control (YCC) settings unchanged, 10-year Japanese Government Bond (JGB) yields fell to as low as 0.37% that …
Real incomes rising despite soaring inflation The biggest news coming out of New Zealand this week was the resignation of Labour Party PM Jacinda Ardern. The conservative National Party is leading the polls ahead of the next election in October and has …
Inflation will fall below 2% by mid-2023 Inflation hit 4% in December but due to the government’s energy subsidies we expect it to fall below the Bank of Japan’s 2.0% target by mid-year. The increase in inflation from 3.8% to 4.0% in December was in line …
Government measures to lower inflation from January Inflation hit 4% in December but due to the government’s energy subsidies we expect it to fall to around 3.0% in January, and further below the Bank of Japan’s 2.0% target by mid-year. The increase in …
19th January 2023
We expect the China’s Loan Prime Rate to remain unchanged (01.30 GMT) Retail sales in the UK probably increased by 2.5% m/m in December… (07.00 GMT) …but in Canada we think that preliminary data will show retail sales declined (13.30 GMT) Key Market …
The Fed’s hawkish transformation has been so marked that, if its forecasts are to be believed, over the next couple of years it would effectively be adopting the same reaction function last followed during the Greenspan and Bernanke eras between 1987 and …
Starts hold up better than expected Single-family housing starts surprised on the upside in December. But it is too soon to call the bottom of the market. Indeed, another substantial fall in permits means we think starts are set to resume their downward …
First came the inversion of the yield curve. Next the index of leading indicators began to fall. Then the survey-based activity indicators plunged well below the 50 mark. Finally, this week we learned that the weakness had spread to the hard data on …
Demand for mortgages collapses due to spike in mortgage rates The Q4 2022 Credit Conditions Survey shows that while lenders tightened lending criteria in the aftermath of the “mini” budget, the main constraint on lending volumes was a collapse in demand …
Unemployment rate will soon start to rise in earnest The labour market struggled in December and the unemployment rate has started to rise. With economy activity set to slow sharply, t won’t be long before unemployment increases in earnest . The 14,600 …
Exports heading into 2023 on the backfoot While the trade deficit narrowed further in December, most of that reflects falling import prices. Export volumes likely fell slightly and with the global downturn weighing on external demand, export growth will …
Unemployment rate to rise in earnest before long The labour market struggled in December and it won’t be long before unemployment starts to rise in earnest. The 14,600 drop in employment in December was well below the analyst consensus of +22,500. And …
Economic growth slowing and inflation falling But labour market still tight and inflation expectations too high Bank to drop down to 25 bp hike, but likely to add hawkish guidance The Bank of Canada is set to raise interest rates by a smaller 25 bp …
18th January 2023
Japan’s trade deficit probably widened in December (23.50 GMT) We think the Norges Bank will hike its policy rate by 25bp, to 3.00% (09.00 GMT) US housing starts may have fallen sharply in December (13.30 GMT) Key Market Themes The latest signs that …
Manufacturing output slumps to 14-month low The manufacturing sector appears to be in recession and, even if China’s emergence from its Covid restrictions provide some boost later this year, the deterioration in the survey evidence suggests the …
Consumers buckle under higher rates The 1.1% m/m fall in retail sales in December, which followed a downwardly-revised 1.0% fall in November, adds to the evidence from the surveys that the economy was losing momentum towards the end of last year. …
Manufacturing falls into recession, with output at a 15-month low Echoing the recent slump in the survey-based indicators, industrial production declined by a worse-than-expected 0.7% in December, with November’s decline revised up to 0.6% m/m, from 0.2%. …
Consumers starting to buckle under higher rates The 1.1% m/m fall in retail sales in December, which follows a downwardly-revised 1.0% fall in November, adds to the evidence from the surveys that the economy was rapidly losing momentum towards the end of …
Movements in REIT pricing provide a good indication of where property capital values are heading. And the latest data are consistent with our expectation that all-property values will see a peak-to-trough fall of around 20% by the end of this year. But …
Inflation may be falling, but services inflation is still too strong for comfort The small drop in CPI inflation from 10.7% in November to 10.5% in December (consensus forecast 10.5%) and the unchanged core rate of 6.3% (consensus 6.2%) suggest the …
The BoJ kept policy settings unchanged today, but the increase in its medium-term inflation forecasts supports our view that Yield Curve Control will be abandoned once a new Governor takes over in April . Following the unexpected widening of the tolerance …
Inflation is falling, but services inflation still too strong for comfort The small fall in CPI inflation from 10.7% in November to 10.5% in December (consensus forecast 10.5%) and unchanged core rate 6.3% (consensus 6.2%) suggests it is too early for the …
The shortage of new housing caused by the government’s HomeBuilder grant is showing signs of easing. That means that the housing downturn should soon start to weigh on homebuilding in earnest and that new dwellings inflation will continue to slow. The Q3 …
New Governor will ditch Yield Curve Control in April The Bank of Japan kept policy settings unchanged today, but the increase in its medium-term inflation forecasts supports our view that Yield Curve Control will be abandoned once a new Governor takes …
Business investment likely ended 2022 with a whimper “Core” machinery orders fell to their lowest level since February 2022 in November, pointing to a contraction in spending on machinery and transport equipment in Q4 from Q3. The upshot is we now have …
Further signs of investment slowdown Weakness in the manufacturing sector led to “core” machinery orders falling to their lowest level since February 2022, and points to a slowdown in investment last quarter. “Core” orders crashed by 8.3% m/m in November …
House prices fall further despite lower new listings The large fall in new listings in December failed to prevent another sizeable drop in house prices, but the improvement in the sales-to-new listing ratio offers some hope that the downward pressure on …
17th January 2023
Encouraging signs despite elevated core inflation Although the annual rates of core inflation remain elevated, the three-month annualised rates of CPI-trim and CPI-median dropped back to 2.5% in December. Elevated inflation expectations mean that the …
Some encouraging signs despite elevated core inflation Unfavourable base effects mean that the small falls in CPI-trim and CPI-median inflation in December are better than they look. And with prices falling on the month for the first time since July 2020, …
The process of “global fracturing” that we outlined in our annual Spotlight series last year will remain the dominant macro theme for the next decade. But speculation that it will result in the rise of a “petroyuan” on a scale sufficient to challenge …
Outlook improving, but high interest rates will keep economy weak Economic sentiment in Germany improved further at the start of 2023 adding to the signs that the economy will hold up better than we feared. But with underlying price pressures still …
Strong wage growth adds pressure on the Bank of England to raise rates Consistent with the economy proving to be more resilient than expected, November’s labour market data showed that conditions remained tight and wage growth stayed strong. This will …
