Data released last week showed that the euro-zone’s unemployment rate was unchanged at a record low in September. But a broader assessment of the labour market suggests that it is cooling, and the latest surveys suggest that it will continue to do so. …
5th November 2024
Earlier interest rate cuts are yet to have much effect on the Canadian economy, which remains trapped in a period of below-potential growth. Making matters worse, any boost to the economy from lower borrowing costs next year will be countered by a decline …
The net fiscal loosening of £36bn (1.1% of GDP) in 2029/30 relative to previous plans unveiled by the Chancellor in the Budget means we now expect GDP growth of 1.8% and 1.7% in 2025 and 2026 respectively, compared to 1.5% in both years previously. But …
Goods trade balance improves, but for the wrong reasons The improvement in the goods trade position in September was for all the wrong reasons, with a fall in imports outpacing a decline in exports. While this suggests that net trade provided a small …
Surge in imports to prove short-lived The trade deficit widened to $84.4bn in September, from an upwardly revised $70.8bn in August, as imports surged ahead of the short-lived port strike in October. Goods exports declined 1% m/m from $179.2bn to …
Inflation figures out of Turkey – including those published for October yesterday – have surprised on the upside and forward-looking indicators suggest that the disinflation process will be slow in the coming months too. Consensus expectations for the …
A positive start to Q4 for the Gulf This response has been updated with additional analysis since first publication. October’s batch of PMIs showed an increase across all of the Gulf economies, although there remained underlying signs that non-oil …
With inflation falling back further in October, growth struggling and the property market in the doldrums, the conditions are in place for the Bank of Korea to cut interest rates again soon. We think the consensus is wrong to rule out the prospect of a …
Although the Reserve Bank of Australia maintained a broadly neutral stance at its meeting today, we still think it will start to lower interest rates as soon as February next year. However, with the labour market remaining resilient and productivity …
Indonesia GDP (Q3 2024) Growth has been accelerating, not stable as the figures suggest Official figures released today suggest that economic growth in Indonesia was virtually unchanged again last quarter, but we don’t have much faith in the official …
RBA will cut rates early next year Although the Reserve Bank of Australia maintained a broadly neutral tone at its meeting today, we still think it start to lower interest rates as soon as February next year. The Bank’s decision to leave rates unchanged …
Investors are braced for turbulence in the Treasury market, even allowing for the big moves that we’ve already seen in it recently. That’s hardly a surprise, given the result of tomorrow’s election is on a knife-edge and the contrast in the protagonists’ …
4th November 2024
OPEC+’s latest delay to its long-held plans to raise output will have a marginal impact on oil supply over 2025. We still suspect that OPEC+’s most likely course of action is to gradually increase output in 2025. However, the risks of a more aggressive …
While the latest PMIs suggest that global industry started Q4 on a slightly better footing, the outlook for the manufacturing sector remains poor, especially in advanced economies. Meanwhile, although the big fall in DM goods inflation is now behind us, …
Despite the tick-up in the EM manufacturing PMI in October, manufacturing activity appears to have remained soft and we think this will be the case over the rest of the year. The surveys suggest that goods price pressures were contained last month, but …
The rise in Brazilian local currency government bond yields this year is now on a scale similar to that seen during its fiscal crisis in 2015. Back then, bond yields only started to fall back when wholesale political change was on the horizon. That’s not …
We expect interest rates to be cut to around the equilibrium of 3% or so in the US, UK and Australia. But rates in the euro-zone and Canada seem likely to fall below their equilibria next year, troughing at 1.5% and 2%, respectively. This judgement …
Dovish central bank hints at further rate cuts The State Bank of Pakistan (SBP) lowered its policy rate today by a further 250bps (to 15.0%) and sounded more dovish than it has done in previous meetings. Today’s cut marks the fourth consecutive meeting …
In a week in which the Federal Reserve and the Bank of England are expected to deliver further rate cuts, and there’s anticipation that the Standing Committee of China’s National People’s Congress will flesh out the details of much-anticipated fiscal …
Another upside surprise likely to reenforce CBRT’s hawkish stance The smaller-than-expected fall in Turkish inflation in October, to 48.6% y/y, is likely to dash any remaining hopes that a monetary easing cycle will start this year. The risks now seem …
Ahead of the year’s big political event, The Weekly Briefing from Capital Economics includes an exclusive clip from our client briefing all about what to expect from the US election. Chief Asia Economist Mark Williams and the team tackle everything from …
1st November 2024
Currency markets are ending the week broadly unchanged, on net, leaving the US dollar near a three-month high ahead of next week’s pivotal election. With polls continuing to point to a very tight race in the swing states and betting markets shifting back …
October’s distorted payrolls probably won’t change the outlook for the Fed, which we expect to cut by 25bp next week. Instead, earnings season and the looming US election continue to dominate markets. Treasury yields initially plunged in response to the …
While there were some positives to take from this week’s GDP data release, it still points to an economy stuck in a period of below potential growth. This reinforces our view that the Bank of Canada will cut by 50bp again in December. Third-quarter GDP …
Race going down to the wire Although the betting markets are still convinced that Donald Trump will win next week’s presidential election, the polls remain much closer – and within the margin of error. Many of those polls have tweaked their methodologies …
Mexico in the firing line The US election race is heading into the final stretch. All our analysis on what it means for EMs can be found on our dedicated webpage here . For Latin America, the implications for Mexico are largest. Both Harris and Trump …
CEE struggling, Hungary in a league of its own The Q3 GDP data out of Central Europe this week continued a bleak run of activity data for the region. The Czech economy grew by just 0.3% q/q – in line with our forecast, but some way below the central …
South Africa reembraces fiscal discipline The biggest event this week was South Africa’s Medium-Term Budget Policy Statement (MTBPS) on Wednesday, which was pitched as pro-growth, but the numbers underline that the Treasury sees little room to loosen the …
Manufacturing hampered by temporary disruptions The decline in the ISM manufacturing index to a 15-month low in October suggests that the sector continued to struggle as hurricanes and the ongoing strike at Boeing disrupted manufacturing activity further …
Risks from North Korea on the rise North Korea’s relations with South Korea and its allies have taken a marked turn for the worse over the past month. This week’s test of an intercontinental ballistic missile has prompted South Korea and the US to conduct …
The next few weeks promise to be eventful ones for commodity markets. Not only will the US president-elect be confirmed, but we may finally get details on the size of China’s fiscal stimulus as well as confirmation of OPEC+ production policy in 2025. The …
It’s still unclear if consumption will be prioritised Over the weekend, the Vice Finance Minister confirmed that the NPC Standing Committee is set to approve a fiscal package at its upcoming meeting , set to last from Monday to Friday of next week. At a …
We think that if Vice President Harris wins the US presidential election next week, she would be more likely to stick to policy continuity, and EM risk premia would remain low. If former president Trump is elected, we would expect an initial adverse …
While the market fallout from Wednesday’s Budget is still a long way from the 2022 mini-budget episode, investors are clearly nervous about the fiscal outlook. Gilt yields have risen sharply since Wednesday’s Budget. The 10-year yield is up about 21 basis …
This page has been updated with additional analysis since first publication. Temporary disruptions can’t explain all the labour market weakness The near-complete flatline in payrolls in October was only partly due to disruptions caused by hurricanes and …
The main economic news in the euro-zone this week were the stronger-than-expected GDP figures for Q3 and inflation figures for October, as well as a concerted effort by ECB policymakers to play down the need to accelerate the pace of rate cuts. So it is …
Euro-zone investment has been weak since the pandemic. And despite the recent downward revision to our ECB interest rate forecasts, we don’t think it will pick up substantially, given the sluggish outlook for both economic growth and the competitiveness …
The economy has already regained some momentum on the back of increased policy support. But the extent of the recovery hinges on the scale of fiscal stimulus, which remains uncertain. Our base case is for growth to pick up over the coming quarters before …
Inflation to drop sharply next year Another larger-than-expected fall in both headline and core inflation in Switzerland will increase concerns that the country could temporarily enter deflation next year. This will pile on pressure on the SNB to act …
Elevated services inflation not a deal breaker Markets have continued to dial back expectations for policy loosening by the RBA following the release of Q3 CPI data this Wednesday. They are now fully pricing in a rate cut only by May, whereas they were …
This page has been updated with additional analysis since first publication. Mortgage rates will still fall next year and support house prices October’s 0.1% m/m rise in Nationwide house prices was a bit weaker than expected (consensus forecast +0.3% m/m, …
The October PMIs from Asia remained weak and while the PMI surveys aren’t always a good guide to the hard activity data, their recent signals are consistent with our expectation for manufacturing activity in Asia to struggle in the near term, price …
LDP loses majority for first time since 2009 We already indicated last week that the LDP might lose its majority in last Sunday’s House of Representatives election, but the fact that it failed to achieve a majority even once we include the seats of …
Rate cuts likely to cushion house price slowdown Australia’s housing rally continued to lose steam in October. However, with the RBA set to cut interest rates from early-2025, there are good reasons not to be too bearish on the outlook for house price …
31st October 2024
While the market fallout from yesterday’s UK budget announcement is still a very long way from the 2022 “mini-budget” debacle, the surge in Gilt yields and fall in sterling over the past couple of days has some similarities to that episode. A meltdown of …
The policies announced in yesterday’s Budget won’t have a significant bearing on the housing market. But the prospect that interest rates are a bit higher may soften demand and creates some downside risk to our forecast for house price growth of 5.0% next …
While inflation in the US and elsewhere has generally converged towards target this year, it might continue to haunt central bankers for a while yet, and in turn keep investors on their toes. There was nothing too scary in the inflation data released …
