A brief respite for the manufacturing sector The 0.9% m/m rise in manufacturing sales volumes in July implies there are upside risks to the flash estimate that total GDP was unchanged at the start of the third quarter, although the negative tone of the …
16th September 2024
Low saving rate not a major concern The continued decline in the saving rate, which is now close to a 16-year low, is not a major concern given the recent surge in household net wealth. Furthermore, as the saving rate is calculated from two different …
This week is set to be dominated by one question: will the Federal Reserve kickstart its easing cycle with a 25 or 50 basis point interest rate cut? Market pricing on this question has been swinging around. Having effectively priced out a 50bps cut …
Disinflation continues, CBN in place to cut rates yet Nigeria’s headline inflation rate dipped to 32.2% y/y in August, confirming the disinflation trend is firmly on course as the pass through from previous sharp falls in the naira continues to fade. This …
China’s renminbi looked, before the country’s markets closed for the mid-Autumn festival, to have finally beaten this year’s depreciation pressure. Not only did it break its string of weakness to rally against the dollar last month, but measures of …
A disappointing outturn Activity growth slowed last month, falling short of expectations across the board. The service sector is still faring reasonably well and the fiscal support that’s already in the pipeline should help to stabilise wider growth over …
As the much-anticipated start of Fed easing approaches, the debate has centred on whether Powell & Co. will opt for a 25 or a 50-basis point rate cut. On the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil …
14th September 2024
The US is moving to limit the de minimis tariff exemption that has supported a surge in low value shipments from China over recent years. Only a subset of the roughly 8% of China’s exports to the US that are currently tariff-exempt would be at risk under …
13th September 2024
US households’ appetite for equities often depends on how confident they feel. Its strength in recent years is therefore rather surprising, given that their mood hasn’t been upbeat. Sentiment did perk up this month, judging by the University of Michigan’s …
The Office for Budget Responsibility’s (OBR) “Fiscal risks and sustainability report”, published this week, showed that if left unchecked the public debt to GDP ratio would spiral from 98% now to 274% by the mid-2070s. Assuming a recession comes along …
25bp vs 50bp debate finely poised The 25bp vs 50bp debate seemed settled following Governor Christopher Waller’s speech shortly after the August Employment Report, in which he suggested that he was leaning toward the smaller move. The cautious tone of …
The US dollar is ending the week on the back foot against most currencies amid mounting expectation for a 50bp cut by the Fed next week. That comes in the wake of two seemingly coordinated pieces in the FT and WSJ which suggested it will be a close call …
The sharp rebounds in both residential and non-residential building permit issuance in July eased concerns that the construction sector is about to take a turn for the worse. Risks remain, however, particularly for residential construction in Toronto. …
Consumer mood improves, but remains sour Despite the small rise in the University of Michigan consumer sentiment index in September, consumer confidence remains in a slump. At face value, weak sentiment points to softer consumer spending, but confidence …
Mexico: judicial reform clears final major obstacle Outgoing Mexican President Amlo’s controversial judicial reform passed the final major hurdle this week with approval in the senate. This has contributed to a sharp fall in the peso – the currency is …
By making life harder for unscrupulous landlords, the Renters’ Rights Bill may help drive tenant demand toward institutional landlords who are already complying with most aspects of the proposed legislation. That said, an apparent ‘win-win’ ability for …
A temporary boost to employment growth After years of delay, China’s legislature today passed a bill that raises the statutory retirement age for the first time since 1978. In January, it will increase from 60 to 63 for men, 55 to 58 for white-collar …
“Gold’s poor cousin” to lag behind For all the attention on gold this year, silver has been the better performer with prices increasing by over 25% year-to-date. Some of the tailwinds that have boosted the gold price, like lower Treasury yields and a …
Renewed slowdown in credit Both broad credit and bank loan growth slowed in August, coming in below expectations. (See Chart 1.) While stronger government spending should give the economy a boost over the coming months, that doesn’t seem likely to be …
The ECB’s easing cycle continued this week and the first Fed rate cut is just around the corner, but we still think that central banks in Central and Eastern Europe (CEE) are now at the beginning of a slower phase of their easing cycles and will loosen …
The main event of this week was the ECB’s meeting on Thursday, where the Bank cut its deposit rate by 25bp, to 3.5%, as widely expected. Christine Lagarde made clear in the press conference that further rate cuts are on the cards, but she gave little away …
SARB set to join the EM rate-cutting party The current make-up of the MPC means that it will be a close call, but we expect the South African Reserve Bank to embark on an easing cycle next week. How quickly rates come down, though, partly depends on …
CBR delivers surprise hike The decision by the Russian central bank (CBR) to hike its policy rate today by 100bp, to 19.00%, suggests that policymakers are even more concerned about the inflation outlook than we’d previously thought. While our forecast is …
We think the markets are wrong to expect two more interest rate cuts this year But we think rates will be cut more quickly next year and to 3.00% in early 2026 MPC may speed up QT by announcing a £110bn reduction in the balance sheet We agree with the …
A large part of the decline in euro-zone industry over recent years shown by the monthly data appears to be due to mismeasurement. Nevertheless, the sector is struggling with a loss of international competitiveness and the medium-term outlook is poor. …
What will the US election mean for the Asia growth outlook? Will China’s economy overtake the US? Will India fulfil its growth potential? We’re tackling these issues and more in our Asia roundtable in London on Tuesday, 24th September. If you’d like to …
More signs of a thawing in relations with China We recently took a deep-dive into the evolution in Sino-Indian relations (see here ), arguing that India’s attempt to establish more conciliatory relations with China speaks to an important way in which …
The public sector isn’t the main game In a speech this week, RBA Assistant Governor Sarah Hunter reiterated the Bank’s view that conditions in the labour market are currently not conducive to “wages growing at a rate consistent with achieving the …
Stronger yen reducing upside risks to inflation Developments over the past week seem to support the consensus view that the Bank of Japan will wait at least until December before hiking interest rates again. After all, the yen reached a fresh high against …
We now think the RBNZ will be one of the few central banks to cut rates below neutral this cycle, which would be bad news for the New Zealand dollar. New Zealand markets have so far shrugged off the RBNZ’s dovish tilt – and rate cut – last month. While …
Overview – There are tentative signs of improvement in the investment market, but we continue to think refinancing requirements will weigh on transactions. We still think appraisal-based valuations need to adjust further and that cap rates will increase …
12th September 2024
All of the historical data supporting this publication can be found on our new Rate Cuts & Asset Returns dashboard. All of the forecasts in this publication can be found on our US Macro or Financial Markets dashboards. This Focus explores the key lessons …
This dashboard has been launched as an accompaniment to this Asset Allocation Focus , which looks at patterns in financial markets around previous Fed easing cycles. If you would like subscriber access to this dashboard contact …
A second Trump term would bring greater uncertainty to US-China relations, challenges to a global economic order that has helped China prosper, higher tariffs (probably) on Chinese goods, and (possibly) a global retreat from free trade. All of this would …
Today’s decision by the ECB to cut the deposit rate by 25bp was widely anticipated, and even the press conference provided little new information. We stand by our view that too much easing is now discounted in money markets, which is why we think …
Inflation keeps falling more quickly than Norges Bank’s forecasts but policymakers will be uneasy about the renewed weakening of the krone. We expect them to repeat that the policy rate will be unchanged “for some time ahead”, but we think they will opt …
There was never any doubt that the ECB would cut its deposit rate by 25bp today, to 3.5%. Meanwhile, the policy statement and press conference were largely as expected and do not change our view that the next rate cut is most likely to be in December – …
The structural deterioration in the fiscal situation suggests that a tight grip on the public finances in the Budget on 30 th October will be necessary. That’s why we think the government will maintain existing plans for fiscal policy to be tightened, but …
OPEC+ roll over doesn’t stop the oil price slide After we published our last Weekly , OPEC+ released a statement confirming that the group would roll over current oil production cuts until 1 st December. It also included previous phrasing that it has the …
PPI also points to another muted gain in core PCE The August PPI data provide more encouragement for the Fed that inflation has been tamed. Together the CPI and PPI data point to a muted 0.14% m/m increase in the core PCE deflator last month, with the …
Slight rise in headline rate tips balance in favour of October rate hold The slight rise in India’s headline CPI inflation in August reinforces our view that the Reserve Bank will proceed with a bit of caution and keep rates unchanged in its next meeting …
ECB likely to ease policy only gradually There was never any doubt that the ECB would cut its deposit rate by 25bp today, to 3.5%. Otherwise, the policy statement is largely as expected and does not change our view that the ECB will probably leave rates …
Global Economics Chart Pack (September 2024) …
New data released in the past week show that global greenhouse gas emissions rose by almost 2% y/y in 2023. Most of this increase was driven by growth in China’s emissions as its economy recovered from pandemic-related disruptions. Looking ahead, we …
The Fed’s upcoming monetary easing cycle will probably provide less of a tailwind to EMs than is widely thought. While it’s likely to give some central banks (such as in the Gulf, Mexico and Indonesia) a green light to lower interest rates, EM rate …
Rising demand points to faster house price growth August’s RICS survey provided further evidence that housing demand is picking up in response to the recent falls in mortgage rates. What’s more, our view that Bank Rate will be lowered by more than …
