Brazil and Mexico Labour Productivity: A Headwind for Growth

November 19, 2024 12:03 PM UTC

Brazil and Mexico labour productivity has been stagnant in the last years, with both countries registering lower labour productivity levels than they were 12 years ago, with the gap with U.S. only widening. With both countries approaching full-employment, measures will need to be taken to foster gro

U.S.-Gilt Yields and Fed v BOE policy

November 19, 2024 10:07 AM UTC

We see scope for 10yr UK yields to diverge from the U.S. despite our new forecast of rising U.S. Treasury yields (here).  We feel that the BOE will ease by more than the Fed in 2025 and ease selectively in 2026 before and after our forecast of Fed Funds hikes.  Meanwhile, the UK fiscal stance is l

UK: Weak Growth – Don’t Blame It All on the Budget!

November 18, 2024 12:40 PM UTC

To suggest that the disappointing Q3 GDP data is largely down to apprehension about the Budget presented at the end of October is incomplete at best and misplaced at worst.  After all, monthly GDP data suggest that the economy has not grown since May and by only 0.2% since March.  These numbers ar

U.S.-Germany Yield Decoupling

November 18, 2024 9:25 AM UTC

We see scope for 10yr German Bund yields to remain close to current levels in the next 1-2 years, despite our new forecast of rising U.S. Treasury yields (here[MG(1] ).  A weak economic recovery; fiscal consolidation rather than easing in the U.S. and less underlying inflation pressures should all

Preview: Due November 27 - U.S. October Personal Income and Spending - A second straight 0.3% from Core PCE Prices

November 15, 2024 5:09 PM UTC

We expect October’s personal income and spending data to look similar to September’s, with gains of 0.3% in personal income, 0.5% in personal spending and a 0.3% rise in core PCE prices. A second straight 0.3% rise in core PCE prices would be a little high for comfort.

Preview: Due November 27 - U.S. Preliminary (Second) Estimate Q3 GDP - Marginally stronger still

November 15, 2024 4:34 PM UTC

We expect a marginal upward revision to 2.9% in the second (preliminary) estimate of Q3 GDP from an already healthy first (advance) estimate of 2.8%. 

SARB MPC Preview: Easing Cycle to Continue on November 21

November 15, 2024 4:04 PM UTC

Bottom line: After South African Reserve Bank (SARB) cut the key rate to 8.0% on September 19 following seven consecutive meetings at a 15-year peak of 8.25% given that September inflation hit below the midpoint of target band of 3% - 6%, power cuts (loadshedding) are suspended and inflation expecta

U.S. October Industrial Production - Decline largely due to Boeing strike and hurricanes

November 15, 2024 2:35 PM UTC

October industrial production fell by 0.3% after falling by 0.5% (revised from -0.3%) in September. The now settled strike at Boeing reduced October output by 0.2% after a hit of 0.3% in September. Hurricanes were only a modest negative in October, taking off 0.1% after taking 0.3% off in September.

U.S. October Retail Sales - Trend solid but may start to lose momentum

November 15, 2024 1:53 PM UTC

October retail sales are in line with expectations overall but stronger net of revisions, with September revised up to a 0.8% increase from 0.4%, outweighing a downward revision to August to -0.1% from a 0.1% increase. October gains were subdued ex autos and ex autos and gasoline, both up by 0.1%.

U.S. Yield Curve Steepens Then Flattening on 2026 Fed Tightening?

November 15, 2024 10:14 AM UTC

We see 10-2yr U.S. Treasury yield curve steepening in 2025, as the Fed keeps easing to 3.75% but the long-end is worried about medium-term issuance and the budget deficit trajectory being excessive.  A moderate Fed tightening cycle in 2026 to curtail inflation from fiscal stimulus/tariffs should th

UK GDP Review: Momentum Dissipated?

November 15, 2024 7:58 AM UTC

The latest data, including that for the Q3, very much questions the UK’s economy’s apparent solidity, if not strength, as apparently seen in sizeable q/q gains in the first two quarters of the year of 0.7% and 0.5% respectively.  Indeed, GDP growth has been positive in only two of the last six

China Data: Mixed Data Backs More Stimulus

November 15, 2024 7:42 AM UTC

China October data is mixed with a bounce in retail sales helped by government trade ins and a holiday, but industrial production and housing construction disappointing.  This all argues for further fiscal stimulus.  However, given our view that some tariff increases against China by the U.S will

Preview: Due November 15 - U.S. October Retail Sales - Trend still solid

November 14, 2024 2:47 PM UTC

We expect US retail sales to maintain momentum in October, with a 0.4% increase overall matching that of September. However gains of 0.2% ex autos and 0.3% ex autos and gasoline would see some loss of momentum from surprisingly strong respective gains of 0.5% and 0.7% in September.

U.S. October PPI - No surprises but a little too high, Initial Claims lower in early November

November 14, 2024 2:11 PM UTC

October PPI with a 0.2% increase overall, and 0.3% gains in the core rates ex food and energy and ex food., energy and trade, is in line with expectations but not soft enough to be consistent with inflation at the Fed’s 2.0% target. The labor market appears to be regaining momentum in early Novemb

ECB October Meeting Account: It’s the (Real) Economy Stupid!

November 14, 2024 1:42 PM UTC

It is clear but hardly surprising that the ECB rate cut last month was driven as much, if not more by real economy consideration than prices or possible fiscal tightening.  The Oct account 16-17 suggested that the downside risks to the growth outlook in the September baseline, with the associated w

U.S. Fed's Kugler - Mindful of risks on both sides

November 14, 2024 1:02 PM UTC

Kugler's cautious comments suggest a December easing is still data-dependent.

U.S. Fed's Musalem puts a hawkish spin on recent data

November 13, 2024 6:10 PM UTC

Fed's Musalem, like Logan earlier, does not seem convinced of the need to ease in December.

Elevated Inflation in Russia Remains Persistent and Sticky in October

November 13, 2024 5:21 PM UTC

Bottom Line: According to Russian Federal Statistics Service (Rosstat) data released on November 13, inflation slightly cooled off to 8.5% YoY in October after hitting 8.6% in September but remained well above the Central Bank of Russia’s (CBR) midterm target of 4%, due to surges in services and

Argentina CPI Review: Monthly Inflation Drops to 2.7%

November 13, 2024 3:09 PM UTC

Argentina's October CPI rose by 2.7%, hitting a three-year low and reducing the Y/Y inflation to 192%. Milei’s fiscal shock plan aims to curb inflation, with anticipated tariff adjustments potentially keeping inflation near 3% monthly in the next month. With inflation dropping Argentine government

U.S. October CPI - A more balanced report

November 13, 2024 2:13 PM UTC

October CPI has seen the fourth straight rise of 0.2% overall and the third straight rise ex food and energy of 0.3%, both on consensus. Before rounding the gains were 0.24% and 0.28% respectively, the latter slower than September’s 0.31% but in line with August’s. The data leaves the December F

India CPI Review: CPI Hits New Heights

November 13, 2024 12:05 PM UTC

Bottom line: The latest CPI figure of 6.2% yr/yr underscores significant inflationary pressures within the Indian economy, primarily driven by food prices but also influenced by housing costs. With inflation now at a 14-month high, the RBI's response will be another rate hold in December. Earliest r

UK CPI Preview (Nov 20): Inflation Back Above Target But Core Pressures Lower

November 13, 2024 11:51 AM UTC

Helped by a fall in fuel prices and airfares, amplified by base effects, alongside some belated broader softening in services costs, UK inflation dropped to 1.7% in the September CPI (from 2.2%), thus falling below target for the first time since April 2021.  This drop was greater than expected and

U.S. Tariffs on China: How and When?

November 13, 2024 9:55 AM UTC

The U.S. can put pressure on other countries by starting tariffs at a more moderate scale and country and industry specific and then credibly threatening to increase and broaden tariffs as it did in 2018-19 to get trade concessions from other countries.  This also reduce the scale of the adverse in

U.S. Fed's Kashkari - Could pause if prices surpirse to upside

November 12, 2024 7:46 PM UTC

Fed SLOOS on Bank Lending shows weaker demand for C+I loans

November 12, 2024 7:32 PM UTC

After showing an improved tone in Q3, the Fed’s Q4 Senior Loan Officer Opinion Survey of bank lending practices is mixed, with demand for commercial and industrial loans taking a step back. This suggests that strength in business investment, in particular equipment, which supported Q2 and Q3 GDP g

BCB Minutes: Hawkish and Indicating Hikes

November 12, 2024 2:49 PM UTC

The Brazilian Central Bank (BCB) remains hawkish, raising rates by 50 bps to 11.25% amid resilient domestic growth and unanchored inflation expectations. Key concerns include rising uncertainty in the fiscal landscape and exchange rate volatility, prompting cautious monetary policy. The BCB signals

Preview: Due November 13 - U.S. October CPI - Similar to August and September

November 12, 2024 1:38 PM UTC

We expect October’s CPI to increase by 0.3% overall for a fourth straight month with a third straight 0.3% increase ex food and energy. Before rounding we expect a 0.20% rise overall, slightly stronger than the three preceding outcomes, with a 0.28% rise ex food and energy. The latter will be soft

UK Labor Market – Private Payrolls Contract Amid Cost Pressures?

November 12, 2024 12:27 PM UTC

To suggest that the UK labor market is merely getting less tight misses the point entirely.  Amid continued reservations about the accuracy of official labor market data produced by the ONS, alternative and very clearly more authoritative data on payrolls suggest that employment is continuing to co

Brazil CPI Review: Food and Energy Drive Inflation Up

November 11, 2024 9:13 PM UTC

Brazil’s October CPI rose 0.56%, pushing the year-over-year rate to 4.7%, above the Brazilian Central Bank’s (BCB) 4.5% target. The increase was driven by food and housing costs, especially due to rising electricity tariffs impacted by low hydroelectric reservoir levels. Although core CPI remain

U.S. Economic Outlook under Trump

November 11, 2024 7:23 PM UTC

Uncertainty over how the U.S. election results will impact the economic outlook remains very high, but the evidence at present suggests that incoming President Donald Trump, assuming Republican control of the House is confirmed, will attempt to implement a substantial part of his campaign promises.

China Yuan10trn Package: Shifting Debt Not Stimulus

November 11, 2024 10:06 AM UTC

Details of the Yuan10trn fiscal package show that it is all directed at a debt swap for LGFV’s and repackaging hidden local government debt.  This will have little net fiscal stimulus.  True fiscal stimulus will be seen for 2025 GDP growth, but it could be delayed until further details are seen

Imports Surge, Growth Slows: Indonesia’s Q3 GDP Falls Short of 5% Mark

November 11, 2024 6:43 AM UTC

Bottom line: Indonesia’s Q3 GDP growth slipped to 4.95% yr/yr in Q3, missing the 5% target as soaring imports weighed on the headline figure. Private consumption remained steady, while fixed investment showed resilience with notable gains. Looking ahead, Q4 may bring further softening. 

India CPI Preview: Food prices to weigh on headline CPI

November 11, 2024 5:00 AM UTC

Bottom line: India's inflation rate for October is projected to rise to 5.7% y/y  due to base effects and domestic food prices. In the short term, global crude oil prices and domestic food price surge may pressure inflation further. The Reserve Bank of India is anticipated to maintain a neutral mon

U.S. November Michigan CSI - Rise reflects pre-election sentiment

November 8, 2024 3:17 PM UTC

November’s preliminary Michigan CSI was surveyed before the election and shows consumers getting more optimistic, with a rise in the index led by future expectations at 68.9 while current conditions moved lower. The optimism may reflect supporters of both candidates expecting victory and if so may

Mexico CPI Review: Agricultural Goods Drive Inflation Up

November 8, 2024 2:58 PM UTC

Mexico's CPI rose 0.54% month-over-month in October, with a year-over-year increase to 4.8%, slightly above expectations. Agricultural goods and energy prices were key contributors. Core CPI, showing positive recent trends, rose 0.3% month-over-month and dropped to 3.8% year-over-year. Banxico is ex

Canada October Employment - Details mostly positive, suggesting economy regaining momentum

November 8, 2024 1:53 PM UTC

While Canada’s 14.5k October rise in employment was not very impressive on the headline, the details are mostly positive and support a view that the Canadian economy is starting to regain momentum now that the Bank of Canada is easing monetary policy.

UK GDP Preview (Nov 15): Momentum Slowing?

November 8, 2024 8:02 AM UTC

Much has been made of the UK’s economy’s apparent solidity, if not strength, so far this year given sizeable q/q gains in the first two quarters of the year of 0.7% and 0.5% respectively.  But this may have been something of a flash in the pan, not least as GDP growth has been positive in only