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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 …
18th January 2023
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 …
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 show that conditions remain tight and wage growth stayed strong. This will only …
Wage and price inflation expectations still too strong for comfort The Bank of Canada’s latest quarterly surveys leave no doubt that higher interest rates are weighing on demand, but still don’t show a convincing moderation in wage and inflation …
16th January 2023
Lending activity still strong in December On the surface, net lending to real estate in December looks to have reached its highest since October 2008. However, this apparent spike in lending was almost entirely due to the addition of a recently-converted …
Surge in motor vehicle sales fails to offset weakness elsewhere The easing of supply shortages provided a big boost to motor vehicle shipments in November, but this failed to offset falls elsewhere. While there is scope for transportation equipment …
The recent resilience of the economy to the dual drags of high inflation and higher interest rates doesn’t mean the pain has been avoided. Instead, our analysis suggests that higher interest rates will become a bigger drag on activity in the most …
This Update makes four key points about corporate earnings in the US as the Q4 results season gets into swing. They all feed into our view that the S&P 500 will remain under pressure until the spring and underperform Treasuries as a recession there begins …
13th January 2023
BoJ may abandon Yield Curve Control as soon as next week (Wed) We think the PBOC will leave rates on hold next week, buts cuts are coming We anticipate interest rate hikes in Norway, Indonesia and Malaysia Key Market Themes An end to Japan’s Yield Curve …
The December CPI data and the Bank of Canada’s quarterly business and consumer surveys, released next week, could have a big bearing on the policy outlook. For the Bank to pause after one final 25 bp hike this month, as we assume, it will need to see …
Sentiment rebounding from historically weak level The further rise in the University of Michigan consumer sentiment index to 64.6 in January, from 59.7, illustrates that consumers have taken some encouragement from the fall in energy prices. Nevertheless, …
While the medium-term outlook for the renminbi and other Asian currencies has improved, and we have revised some of our forecasts accordingly, we continue to anticipate that a deterioration in risk sentiment as other major economies slide into recession …
Core CPI continues to moderate The 0.1% m/m decline in headline CPI in December was principally due to a 9.4% m/m drop in gasoline prices, but core consumer prices also increased by a more modest 0.3% m/m, extending the run of weaker monthly gains to …
It’s remarkable that the economy appears to have avoided a recession (defined as two consecutive quarters of falling real GDP) in 2022. Most economists thought that the recession began in Q2 2022 as back in August the ONS estimated that real GDP fell by …
Q4 contraction probably avoided Annual GDP data for Germany suggest that the economy avoided a contraction in Q4 and that the euro-zone as a whole will probably prove more resilient to the energy crisis than we initially feared. But activity clearly …
Recession averted in 2022, but unavoidable in 2023 The small 0.1% m/m gain in real GDP in November (consensus -0.2% m/m, CE -0.3% m/m) suggests the economy did not contract in Q4 and is not in recession. Even so, it is too soon to conclude the economy …
Another rise in core inflation means 50bp hike in February nailed on Yet another larger-than-expected increase in the Riksbank’s target measure of inflation and in the core rate suggest that policymakers are highly likely to raise rates by 50bp in …
GDP resilient, but still set for contraction in Q1 The small 0.1% m/m gain in real GDP in November (consensus -0.2% m/m, CE -0.3% m/m) suggests the economy was not as weak in Q4 as we had previously thought. But even if the economy does a bit better than …
Inflation strong, consumption resilient On balance, the economic data released this week are consistent with our view that the RBA has more work to do. For a start, inflation rose back up from 6.9% to 7.3% in November, with trimmed mean inflation reaching …
There are growing signs that housing market activity may be close to a trough. The decline in mortgage rates over the past couple of months has led to a small improvement in affordability and a rise in homebuyer sentiment, albeit from a record low. …
12th January 2023
The Bank of Korea is likely to implement one final 25bp hike (01.00 GMT) Chinese trade data will probably show falls in both imports and exports in December We think UK GDP fell by 0.3% m/m in November (07.00 GMT) Key Market Themes The latest evidence …
Another more muted gain in core CPI Core CPI inflation was still an elevated 5.7% in December but, with another more muted 0.3% m/m gain, the three-month annualised rate fell to a 20-month low of 3.1%. Admittedly, the latter is still slightly above the …
Slump in gasoline prices drives decline in headline CPI Consumer prices declined by 0.1% m/m in December, helped by a 9.4% m/m drop back in gasoline prices and a more modest 0.3% m/m increase in food prices. The pace of monthly gains in food away from …
Construction activity contracts as profits decline The latest RICS Construction Survey showed the first contraction in workloads since the height of the COVID-19 pandemic in mid-2020. Weakening demand and rising financing costs are cutting profits and …
Net trade to provide sizeable boost to Q4 GDP growth The trade balance widened to a five-month high in November even though import prices outpaced export prices last quarter, which suggests that net trade provided a sizeable boost to Q4 GDP growth. The …
Net trade to boost GDP growth in Q4 The trade balance widened to a five month high in November even though import prices probably outpaced export prices last quarter, which suggests that net trade provided a sizeable boost to Q4 GDP growth. The trade …
Our updated remote worker metro ranking shows some important changes since the end of the pandemic, though the winners remain in the South. Nashville tops the table, having climbed seven places. Tucson and Memphis also climb into the top 10, with …
11th January 2023
Commercial crude stocks surge and could have further to rise Commercial crude stocks surged last week at the fastest pace since February 2021, as net imports rose and disruption to refineries lingered from the recent cold weather disruption. Going …
Speculation is mounting that the Bank of Japan is finally moving to end its yield curve control (YCC) regime following December’s surprise policy tweak. How likely is the Bank to take this step, what would it mean for its monetary policy, and what impact …
Reform of the French pension system is notoriously difficult and it is possible that the proposals unveiled yesterday will be watered down or even withdrawn completely. However, on balance, we think there are more reasons for cautious optimism that they …
Widening of tolerance band has done little to improve market functioning Nomination of less dovish Governor would signal Yield Curve Control is on its way out However, renewed slowdown in inflation will prevent policy rate hikes The widening of the …
Stubbornly high inflation will prompt further RBA rate hikes While falling job vacancies point to rising unemployment, the resilience in retail sales coupled with stubbornly high inflation will prompt the RBA to press ahead with another 25bp rate hike …
Stubbornly high inflation will prompt further RBA tightening The renewed rise in inflation in November coupled with strong retail sales data will prompt the Reserve Bank of Australia to press ahead with another 25bp rate hike at its February meeting. …
The activity and labour market data imply the economy carried more momentum into 2023 than we expected, but the weakness of temporary employment suggests cracks are showing beneath the surface. The revised preliminary estimate that GDP edged up by 0.1% …
10th January 2023
After a stellar first six months, rising interest rates and a slowing economy brought commercial property returns crashing down in the second half of 2022. All-property total returns are therefore set for their worst year since 2008. And 2023 will not be …
While the shift towards higher taxes and spending after the pandemic appears to be here to stay, there is little to suggest an expanded state would curtail GDP growth. But without supply-side reforms aimed at solving the UK’s fundamental problems of low …
Household spending may have fallen in Q4 already The slowdown in household spending in November largely reflects base effects from the ending of lockdowns in 2021. Even so, the data suggest that household spending may have started to fall last quarter. …
