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04 Jan. 2016 Uncertainty in Brazil Contrasts With Mexico's Benign Outlook (Publication Centre)

While we were out, Brazil's economic, fiscal and political position continued to deteriorate further. The recession deepened in the fourth quarter, with Brazil's economic activity index surprising yet again to the downside in October, falling for the eight consecutive month. The index fell 0.6% month-to-month and 6.4% year-over-year, the biggest contraction since the index began in 2004. And the prospects for first quarter consumption and industrial output have deteriorated substantially. Unemployment increased further in November, and inflation continues to rise, with the mid-month CPI--the IPCA-15 index-- increasing 1.2% month-to-month in November, after a 0.9% increase in October.

20 March 2018 The Transition Deal is Only as Certain as Mrs. May's Future (Publication Centre)

Sterling soared yesterday following news that Britain and the EU have agreed the terms of the transition period from March 2019, which will ensure that goods, services, capital and people continue to move freely, until December 2020.

27 November 2018 Japan's Flash PMI Puts a Q4 GDP Rebound into Serious Doubt (Publication Centre)

Japan's flash Nikkei manufacturing PMI report for November was abysmal, putting the chances of a recovery this quarter into serious doubt.

13 March 2019 Drawing the Right Conclusion from the ECB's Recent Decisions (Publication Centre)

Last week's decision by the ECB to keep rates unchanged until the beginning of 2020, at least, raises one overarching question for markets.

15 November 2017 Increasing Political Volatility Outshines Strong Brazil Sales Data (Publication Centre)

Politics remain centre-stage in Brazil, despite positive news on the economic front. President Michel Temer's government continues to advance pension reform, despite the tight calendar and concerns about his political capital. But volatility is on the rise.

21 June 2018 What Does Enhanced Forward Guidance Mean for Bond Yields (Publication Centre)

Last week's ECB meeting--see here--made it clear that the central bank does not intend to jump the gun on rate hikes next year, even as QE is scheduled to end in Q4 2018.

18 December 2018 The ECB will have to Lower its Core CPI Forecast, Again, in Q1 (Publication Centre)

Inflation pressures in the Eurozone edged lower last month.

12 February 2019 Is it Safe to Assume that the ECB Will be on Hold Through 2019 (Publication Centre)

Our suggestion that the ECB could still raise the deposit rate later this year, by 20bp to -0.4%, has met with strong scepticism in recent conversations with readers.

10 December 2018 Fires, Noise and Hurricanes Hit November Payrolls, not Tariffs (Publication Centre)

The softening in payroll growth in November appears mostly to be a story about short-term noise, rather than a sign that tariffs are hurting or that the broader economy is slowing.

10 September 2018 The Payroll Blip is Over, Expect Further Labor Market Tightening (Publication Centre)

Normal service appears to have resumed in August, with payrolls rising by 201K, very close to the 196K average over the previous year.

22 November 2017 Political Uncertainty is Rising in Mexico. Decisive Weeks Ahead (Publication Centre)

Next July, Mexico will hold presidential elections, an event that will gradually take centre stage as the date approaches. The pre-campaign will start on December 14, but the official campaign opening will take place in late March, when the three main candidates will begin to lay out their platforms.

13 March 2018 Piñera Takes Office in Chile Will he be Able to Deliver on his Promises? (Publication Centre)

The second presidency of Chile's conservative Sebastián Piñera, a billionaire turned politician, began on Sunday, March 11, in favourable economic circumstances.

17 September 2018 The EZ Output Gap Has Closed, But will Inflation Follow? (Publication Centre)

Last week's comments by Mr. Draghi--see here-- indicate that the ECB is increasingly confident that core inflation will continue to move slowly towards the target of "below, but close to 2%", despite elevated external risks, and marginally tighter monetary policy.

4 February 2019 Eurozone Inflation Data are Not a Threat to Markets, For Now (Publication Centre)

The days of +2% inflation in the Eurozone are long gone. Data on Friday showed that the headline rate slipped to 1.4% year-over-year in January, from 1.6% in December, thanks to a 2.9 percentage point plunge in energy inflation to 2.6%.

8 March 2019 Doves on Parade at the ECB No Hikes in 2019, and New TLTROs (Publication Centre)

Mr. Draghi and his colleagues erred on the side of maximum dovishness yesterday.

24 January 2018 Government Bonds Can Cope With an End to QE. Can C orporates? (Publication Centre)

Bond markets didn't panic when the ECB announced its intention further to reduce the pace of QE this year, to €30B per month from €60B in 2017.

26 July 2018 Today Will be a Copy Paste Job for Mr. Draghi and the ECB (Publication Centre)

Last month, the ECB set the scene for the majority of its key policy decisions over the next 12 months.

7 March 2019 The ECB Will Take a Knife to its GDP and CPI Forecasts Today (Publication Centre)

In some sense, today's ECB meeting will be a sobering one for policymakers.

24 November 2017 Risks to Mexico's Inflation Outlook are Increasing, but Q1 will be Better (Publication Centre)

The minutes of Banxico's November 9 policy meeting were released yesterday, in which the Bank left the reference rate unanimously unchanged at 7.0%.

26 February 2019 Your Guide to the New HICP Inflation Data in the Eurozone (Publication Centre)

For a central bank already fighting for every decimal in its attempt to convince markets that underlying inflation is slowly edging higher, the recent shift in HICP methodology drives home an increasingly problematic issue.

21 July 2017 Venezuela's Economic and Political Crisis Deteriorates, Risks is Soaring (Publication Centre)

The risk of political change in Venezuela is coming to a boil, following President Maduro's plans for a new constituent assembly that has the power to rewrite the constitution and scrap the existing National Assembly.

21 November 2018 The Curious Case of the Crash in the French Housing Market (Publication Centre)

The French economy has suffered from weakness in manufacturing this year, alongside the other major EZ economies.

22 August 2018 Venezuela's Economic Crisis Will Deteriorate Despite Recent Plan (Publication Centre)

To imagine an unstoppable macroeconomic policy disaster and desperate improvisation, just think of Venezuela.

23 November. 2016 Three Very Different Scenarios for the Eurozone Economy in 2017 (Publication Centre)

Political uncertainty has been a key theme in our recent conversations with clients, with many readers asking if it is time to step away, temporarily, from Eurozone assets. Valuations provide some support for that position.

20 Nov. 2015 Economic Conditions Deteriorate in Brazil - No Bottom Just Yet (Publication Centre)

This week economic data highlighted the severity of Brazil's economic recession and the huge challenges it will face next year to return to growth. The recession further deepened in the third quarter with the economic activity index--a monthly proxy for GDP--surprising, once again, to the downside in September. The index fell 0.5% month-to-month, pushing the year-over-year rate down to 6.2%, the steepest fall on record. The series is very volatile on a monthly basis, but the underlying trend remains grim.

24 July 2018 Sterling has Plenty of Scope to Rise in a Soft Brexit Scenario (Publication Centre)

Sterling depreciated further last week as the Prime Minister's Brexit plans were tweaked by Brexiteers and given a lukewarm reception by the European Commission.

1 May 2018 Why has Consumers' Confidence Suddenly Deteriorated Again? (Publication Centre)

On the face of it, the timing of the drop in the E.C.'s measure of consumers' confidence, to its lowest level since July 2016 in April, is peculiar.

14 December 2016 Labour Data Set to Show a Clearer Deteriorating Trend (Publication Centre)

Today's labour market figures likely will bring further signs that firms are recruiting more cautiously and limiting pay awards, due to still-elevated economic uncertainty.

27 Jan. 2016 The Curious Case of Missing Equity Earnings in the Eurozone (Publication Centre)

Eurozone investors continue to look to the ECB as the main reason to justify a constructive stance on the equity market. Last week, the central bank all but promised additional easing in March, but the soothing words by Mr. Draghi have, so far, given only a limited lift to equities. Easy monetary policy has partly been offset by external risks, in the form of fears over slow growth in China, and the risk of low oil prices sparking a wave of corporate defaults. But uncertainty over earnings is another story we frequently hear from disappointed equity investors. We continue to think that QE and ZIRP offer powerful support for equity valuations in the Eurozone, but weak earnings are a key missing link in the story.

16 Oct. 2015 Bund Yields are Too Low, but no Serious Increase Until Next Year (Publication Centre)

Bond markets in the euro area have been a calm sea recently relative to the turmoil in equities, credit and commodities. Following the initial surge in yields at the end of second quarter, 10-year benchmark rates have meandered in a tight range, recently settling towards the lower end, at 0.5%. Our outlook for the economy and inflation tells us this is to o low, even allowing for the impact of QE.

19 Feb. 2016 Weak Manufacturing is a Serious Problem, for Manufacturers (Publication Centre)

Manufacturing does not consistently lead the rest of the economy. Neither does it consistently lag. On average, turning points in the rates of growth of manufacturing output and GDP are coincident, as our first chart clearly shows. But coincidence is not causality.

2 January 2018 BoJ: Chinese Profit Story Deteriorates Amid Surprisingly Robust PMIs (Publication Centre)

China's official PMIs paint a picture of robust momentum going into 2018 but we find this difficult to reconcile with the other data.

2 Oct. 2015 Eurozone Manufacturing is Weak, and Will Likely Deteriorate in Q4 (Publication Centre)

Final PMI data in the Eurozone yesterday confirmed that manufacturing remains under pressure from global headwinds. The manufacturing PMI in the zone fell to 52.0 in September from 52.3 in August, in line with the initial estimate. A rare upside surprise in France was not enough to offset weakness in the other major economies, and the trend in private investment growth likely will stay subdued this year.

15 November 2018 Japan's Q3 GDP Drops Q4 will be Better but Trends are Deteriorating (Publication Centre)

Japanese leading indicators point to a slowdown, and the trend over this volatile year is emerging as firmly downward.

7 November 2018 Sentiment Surveys are Deteriorating in Mexico Texcoco Airport Effect (Publication Centre)

Recently released data in Mexico are sending weak signals for the business outlook, and the Texcoco airport saga won't help.

6 December 2017 Don't Take Seriously Surveys Pointing to Faster Q4 GDP Growth (Publication Centre)

November's Markit/CIPS surveys for the manufacturing, construction and services sectors suggest that GDP growth is on track to strengthen a touch in Q4.

Bloomberg - RDQ Economics' Dequadros Says Current Fed Is Less Likely to Blink Than Prior Fed (Media Centre)

Ian Shepherdson, chief economist at Pantheon Macroeconomics, and Conrad Dequadros, senior economist at RDQ Economics, discuss rising real yields and Federal Reserve monetary policy.

27 November 2017 The Outlook for Consumers' Spending is Deteriorating (Publication Centre)

Developments over the last month have heightened our concern about the near-term outlook for households' spending.

WALL STREET JOURNAL - Cheaper Oil Drags Down Business Inflation, but Long Deflationary Period Unlikely (Media Centre)

U.S. inflation gauges are sliding toward negative territory for the first time in more than five years. But the oil-fueled tumble in prices is far from the kind of growth-sapping episodes of deflation that tend to worry economists

6 Apr. Britain's Happy Period of Strong Growth and Low Inflation is Over (Publication Centre)

The latest PMIs have added to the weight of evidence that the economic recovery has lost momentum this year. The prevailing view in markets, however, that the Monetary Policy Committee is more likely to cut--rather than raise--interest rates this year continues to look misplaced because inflation pressure is building.

8 November 2017 The Period of Leverage-Driven Growth in House Prices is Over (Publication Centre)

Mortgage lender Halifax reported yesterday that the rate of increase in house prices has picked up since the summer.

3 January 2019 China's PMIs Deteriorate What are the Positives Amid the Gloom (Publication Centre)

China's Caixin manufacturing PMI doused hopes of turning over a January new leaf; it dropped to 49.7 in November, from 50.2 in December.

29 January 2019 No Trade Data Today, but You Can Assume the Trend is Deteriorating (Publication Centre)

The advance international trade data for December were due for publication today, but the report probably won't appear.

29 November 2018 The Bank's Brexit Deal Scenarios are Consistent with a May Rate Hike (Publication Centre)

Predictably, the Bank of England's estimate that GDP would plunge by 8% in the first year after a disorderly no-deal, no transition Brexit and that interest rates would need to rise to 5.5% to contain inflation grabbed the headlines yesterday.

3 May. 2016 BanRep Opts For Bold Rate Hike - Inflation a Priority, For Now (Publication Centre)

Policymakers in Colombia last Friday took aim at inflation by hiking interest rates by 50 basis points to 7.0%. The consensus expectation was for a 25bp increase. BanRep's bold move, which came on the heels of six consecutive 25bp increases since November, took Colombia's main interest rate to its highest level since March 2009.

30 May 2017 Why Don't Markets Take the Fed's Interest Rate Forecasts Seriously? (Publication Centre)

Markets expect the Fed will fail to follow through on its current intention to raise rates twice more this year and three times next year. Part of this skepticism reflects recent experience.

5 May. 2016 ISM Non-manufacturing Jobs Up, But are Prior Declines a Threat? (Publication Centre)

Markets and the commentariat seemed not to like the April ADP employment report yesterday but we are completely indifferent. We set out in detail in yesterday's Monitor the case for expecting a below consensus ADP reading--in short, the model used to generate the number includes lagging official data, some of which were hugely depressed by the early Easter--so it does not change our 200K forecast for tomorrow's official number.

29 November. 2016 Q3 Growth Set for Upward Revision, Too Soon for a Firm View of Q4 (Publication Centre)

Regular readers will know that we are very skeptical of the reliability of the quarterly GDP data. We just don't believe that the U.S. economy is as volatile over short periods as the data suggest.

29 May 2018 EM Markets Remain Under Stress, but will LatAm Resist the Pressure? (Publication Centre)

A long period of extremely accommodative U.S. monetary policy generated sizable capital inflows and asset price appreciation in EM countries.

3 June. 2016 May Payrolls Constrained By Verizon Strike, but Should be OK (Publication Centre)

The downside surprise in April payrolls reflected weakness in just three components--retail, construction, and government--compared to their prior trends. Of these, we think only the construction numbers are likely to remain soft in May. Had it not been for the Verizon strike, then, we would have expected payrolls to rise by just over 200K in May, but the 35K strike hit means our forecast is 170K.

29 Sept. 2015 Deflation Focus is Overwhelming, But Inflation will Pick Up in Q4 (Publication Centre)

Eurozone September CPI data this week will show that inflation pressures remain weak, appearing to support the ECB's focus on downside risks. We think Eurozone inflation--data released Wednesday-- rose slightly to 0.2% year-over-year in September from 0.1% in August, as core inflation edged higher, offsetting weak energy prices. Looking ahead, structural inflation pressures will keep inflation well below the central bank's 2% target for a considerable period.

3 Mar. 2015 Consumption and Construction Data Point to Sluggish Q1 GDP (Publication Centre)

Barring some sort of miracle, or substantial upward revision to prior data--it happens--first quarter consumption spending growth is unlikely to reach 3%, despite the robust 0.3% gain reported yesterday for January. Part of the problem is a basis effect.

29 Apr. 2016 Brazil's Central Bank Lays The Groundwork for a Rate Cut in Q3 (Publication Centre)

Brazil's macroeconomic scenario is becoming easier to navigate for the central bank. Both actual inflation and expectations are slowing rapidly, as shown in our first chart. And since the March BCB monetary policy meeting, the BRL has appreciated about 10% against the USD, while commodity prices and EM sentiment have also improved markedly.

30 November. 2016 Recovery in Lending Unlikely to Maintain October's Momentum (Publication Centre)

October's money data show that households and firms have regained the appetite for borrowing that they lost immediately after the referendum. But the recent rise in swap rates and the deterioration in consumers' confidence likely will cut short the revival in consumer lending, while persistent Brexit uncertainty likely will continue to subdue firms' investment intentions.

30 April 2018 A Tough Week for the BRL, Any Relief Likely will be Temporary (Publication Centre)

The deterioration of global risk appetite and, in particular, domestic politics have put the Brazilian real under severe pressure in recent weeks.

3 May. 2016 Auto Sales Set for Clear April Rebound, Boosting Consumption (Publication Centre)

The startling 5.5% drop in auto sales in March left sales at just 16.5M, well below the 17.4M average for the previous three months and the lowest level since February last year. A combination of the early Easter, which causes serious problems for the seasonal adjustments, and the lagged effect of the plunge in stock prices in January and February, likely explains much of the decline.

27 July 2018 Argentina's Economy Plunged in Q2 When will it Stabilize (Publication Centre)

Data released this week confirmed that economic activity deteriorated sharply in Argentina in Q2.

27 February 2019 Brazil's External Accounts Likely will Remain a Bright Spot this Year (Publication Centre)

Brazil's external accounts are well under control, despite the wider deficit in January, mainly driven by seasonal deterioration on the trade account.

26 May. 2015 Is Core Inflation Really Rising, or are the Recent Gains Just Noise? (Publication Centre)

After four straight above-trend increases in the core CPI, you could be forgiven for thinking that something is afoot. It's still too soon, though to rush to judgment. The data show three previous streaks of 0.2%-or-bigger over four-month periods since the crash of 2008, and none of them were sustained.

26 February 2019 No-Deal Brexit Risk Likely Will Fall Further this Week (Publication Centre)

The Prime Minister's announcement on Sunday that the meaningful vote in parliament on her Brexit deal will be delayed from this week, until March 12, came as no surprise after a series of prior postponements.

26 August. 2016 Brazil's Market-set Prices Remain Sticky, Rate Cuts to be Postponed? (Publication Centre)

According to Brazil's mid-August inflation reading, which is a preview of the IPCA index, overall inflation pressures are easing. But some price stickiness remains, due to inertia and temporary shocks, despite the severity of the recession and the rapid deterioration of the labour market in recent months.

27 January 2017 Q4 Growth Likely Hit by Foreign Trade, Temporarily (Publication Centre)

We expect to learn today that the economy expanded at a 1.7% rate in the fourth quarter. At least, that's our forecast, based on incomplete data, and revisions over time could easily push growth significantly away from this estimate. The inherent unreliability of the GDP numbers, which can be revised forever--literally--explains why the Fed puts so much more emphasis on the labor market data, which are volatile month-to-month but more trustworthy over longer periods and subject to much smaller revisions.

30 Oct. 2015 Brazil's Central Bank Minutes Underline Policymakers' Problems (Publication Centre)

The key message of the minutes of the Copom meeting, released yesterday, is that policymakers remain worried about the inflation outlook and, in particular, about uncertainties surrounding fiscal tightening. But the Committee reinforced the signal that the Selic rate is likely to remain at the current level, 14.25%, for a "sufficiently prolonged period". The economy is in a severe recession and the rebalancing process has been longer and more painful than the Central Bank anticipated.

28 June 2017 Chinese Profits Growth to Decelerate, That's a Good Thing (Publication Centre)

Chinese industrial profits growth rose to 16.7% year-on-year in May, from 14.0% in April. But this headline is highly misleading. Profits growth data are about as cyclical as they come so taking one point in the year and looking back 12 months is very arbitrary. Moreover, the data are very volatile over short periods.

28 July. 2016 Acceleration of Q2 GDP Won't Have Much Bearing on Stimulus Debate (Publication Centre)

Taken at face value, the preliminary estimate of Q2 GDP suggests that the economic recovery weathered Brexit risk well. But growth received support from some unsustainable sources, and also probably was boosted by a calendar quirk. Meanwhile, with few firms or consumers expecting a vote for Brexit prior to the referendum, Q2's brisk growth tells us little about how well the economy will cope in the current climate of heightened uncertainty.

27 Mar. 2015 No Hit from Oil Sector's Troubles Yet - Gains Elsewhere Offsetting? (Publication Centre)

We argued in the Monitor yesterday that the plunge in capital spending on equipment in the oil sector could cost about 300K jobs over the course of this year. Adding in the potential hit from falling spending on structures, which likely will occur over a longer period, given the lead times in the construction process, the payroll hit this year could easily be 500K, or just over 40K per month.

27 June. 2016 Life After Brexit: LatAm Suffers Higher Volatility, But Will Survive (Publication Centre)

The U.K.'s unexpected decision to vote to leave the E.U. will have serious ramifications for the global economy, and LatAm economies are unlikely to emerge unscathed. It is very difficult to quantify the short-term effects due to the intricacies of the financial transmission channels into the real economy.

28 Oct. 2015 Q3 Slowdown Marks the Start of a Sustained Softening (Publication Centre)

Markets responded to yesterday's disappointing GDP figures by pushing back expectations for the first rise in official interest rates even further into 2017. The first rate hike is now expected--by the overnight index swap market--in April 2017, two months later than anticipated before the GDP release. The figures certainly look weak--particularly when you scratch below the surface--and we expect growth to slow further over the coming quarters. But we don't agree they imply an even longer period of inaction on the Monetary Policy Committee.

5 March 2018 Whatever the Problem is, Tariffs aren't the Answer (Publication Centre)

The apparently imminent imposition of 25% tariffs on imported steel and 10% on aluminum does not per se constitute a serious macroeconomic shock.

8 May 2018 Brazil's Q1 Looks Poor - we Expect a Rebound Soon, but Risks Remain (Publication Centre)

Brazil's March industrial production report, released on Thursday last week, was weaker than we and the markets were expecting, while the recent deterioration in sentiment surveys highlights the downside risks to the rather fragile economic recovery.

8 March 2017 Rising Interest Payments may Slash the Chancellor's Rainy Day Fund (Publication Centre)

The Chancellor's Budget today looks set to prioritise retaining scope to loosen policy if the economy struggles in future, rather than reducing the near-term fiscal tightening. In November, the OBR predicted that cyclically-adjusted borrowing would fall to 0.8% of GDP in 2019/20, comfortably below the 2% limit stipulated by the Chancellor's new fiscal rules.

8 February 2017 Banxico to Hike Rates Tomorrow, but its Tone Likely Will be Softened (Publication Centre)

Banxico's likely will deliver the widely-anticipated rate hike this Thursday. Policymakers' recent actions suggests that investors should expect a 50bp increase, in line with TIIE pric ing and the market consensus. The balance of risks to inflation has deteriorated markedly on the back of the "gasolinazo", a sharp increase in regulated gasoline prices imposed to raise money and attract foreign investment.

8 Dec. 2015 Productivity Growth Still too Weak to Prevent Inflation Rebound (Publication Centre)

By any yardstick, U.K. productivity growth has been terrible in recent years. Output per hour exceeded its pre-recession peak only in the second quarter of 2015, and it has grown at an average annual rate of just 0.6% this decade. U.S. productivity growth has been equally dismal since 2010. But the U.K.'s performance is more worrying, because the productivity slump during the recession suggested scope for a period of catch-up. In the U.S., by contrast, productivity surged during the recession as firms cut headcount sharply.

9 February 2018 The MPC's Guidance is Too Fuzzy to Make a May Hike the Base Case (Publication Centre)

The MPC signalled yesterday that it is actively considering a May rate hike, stating that rates likely will "...need to be tightened somewhat earlier and by a somewhat greater degree over the forecast period than anticipated at the time of the November Report".

9 May. 2016 Payrolls Will Rebound--Maybe not in May--and Wages Are Rising (Publication Centre)

The undershoot in April payrolls, relative to the consensus, is a story of a fluke number in just one sector. Retail payrolls reportedly shrank by 3K, after rising by an average of 52K over the previous six months. Our first chart shows clearly that the retail payrolls are quite volatile over short periods, with sudden and often inexplicable swings in both directions quite common.

26 April 2017 Poor Q1 Data Puts Pressure on BanRep to Cut Rates Rapidly (Publication Centre)

Colombia's economy activity is deteriorating rapidly, suggesting that BanRep will have to cut interest rates on Friday. Incoming data make it clear that the economy has moved into a period of deceleration, painting a starkly different picture than a year ago.

BUSINESS INSIDER - Wages for American workers still look like they are about to go higher (Media Centre)

In January, average hourly wages grew 0.5% over the prior month, the biggest month-on-month increase since November 2008......Ian Shepherdson at Pantheon Macro said the outlook for wage growth is still strong

CHANNEL NEWS ASIA - US weekly jobless claims fall 14% (Media Centre)

Initial jobless claims, a sign of the pace of layoffs, dropped to a seasonally-adjusted 265,000 in the week ending Jan 24, a hefty decline of 43,000 from the prior week's slightly upwardly revised level of 308,000

9 Sept. 2015 Ignore Swings in Random Labor Force Data: Focus on Job Gains (Publication Centre)

We read after the employment report that the drop in the unemployment rate was somehow not significant, because it was due in p art to a reported 41K drop in the size of the labor force, completing a 404K cumulative contraction over the three months to August. In our view, though, analysts need to take a broader approach to the picture painted by the household survey, which is much more volatile and less reliable than the payroll survey over short periods.

7 Sept. 2015 Mexico's Recovery In Place But Constrained By External Headwinds (Publication Centre)

Growth momentum in Mexico has improved marginally over the last few months after the soft patch during the first quarter, with business and households gaining confidence in the economic recovery. But the upswing has been rather modest, due to the volatility in global financial markets and the challenging external environment. The outlook for the global economy has deteriorated over recent months due to China's problems, and commodity prices remain under pressure. All these factors are now weighing on investors' confidence and hurting EM across asset classes.

7 February 2017 January's Rise in Car Sales is Misleading, it won't be Sustained (Publication Centre)

The 5% year-over-year increase in private new car registrations in January ended a nine-month period of falling sales. January's increase, however, is unlikely to be a bellwether for car sales over the whole year, or for the strength of consumer spending more generally.

5 February 2018 January's Wage Acceleration is not Definitive, but it's a Clear Warning (Publication Centre)

To be clear, the 2.9% year-over-year increase in headline hourly earnings in January does not restore the prior relationship between the rate of growth of nominal wages and measures of labor market tightness.

5 December 2018 China and U.S. Agree a Truce Exports Still Face Headwinds (Publication Centre)

Data last Friday showed Japan's labour market trends deteriorating.

4 January 2017 Brazil's PMI Lost Momentum in Q4, but Should Stabilize Soon (Publication Centre)

Brazil's manufacturing PMI edged down to a six-month low of 45.2 in December, from 46.2 in November. This marks a disappointing end to Q4, following a steady upward trend during the first half of the year, as shown in our first chart. December's new work index fell to 45.2 from 47.7 in November, driving a slowdown in production, purchases of materials, and employment. The new export orders index also deteriorated sharply in December, falling close to its lowest level since mid-2009.

4 Dec. 2014 - November Data Might Hide Underlying Labor Market Strength (Publication Centre)

The ADP report yesterday has not changed our view that tomorrow's payroll number will be about 180K, well below our estimate of the underlying trend, which is about 250K. ADP's numbers are heavily influenced by the BLS data for the prior month, and tell us little or nothing about the next official report.

5 June 2017 May Payrolls Hit by the Calendar, Expect a Rebound, and a Fed Hike (Publication Centre)

We don't believe that payrolls rose only 138K in May. History strongly suggests that when the May payroll survey is conducted relatively early in the month, payroll growth falls short of the prior trend.

6 November 2017 Pressure is Building in Venezuela, the Default Clock is Ticking (Publication Centre)

Macroeconomic and financial conditions in Venezuela are deteriorating at an accelerating pace.

7 April 2017 Mexico Sentiment is on the Mend as U.S. Threats are Easing, for Now (Publication Centre)

Sentiment has been improving gradually in Mexico in recent weeks, reversing some of the severe deterioration immediately after the U.S. presidential election. Year-to-date, the MXN has risen 10.3% against the USD and the stock market is up by almost 8%. We think that less protectionist U.S. trade policy rhetoric than expected immediately after the election explains the turnaround.

6 September. 2016 Chile's Economy Still Under Strain, but Recession Will be Avoided (Publication Centre)

Chile's economy remains under pressure, at least temporarily. After signs of recovery in Q1, activity deteriorated in Q2 and at the start of the third quarter. The sluggish global economy--especially China, Chile's main trading partner--is exacerbating the domestic slowdown, hit by low business and consumer confidence.

6 September 2017 Chinese Service PMI Still Stable but Glosses Over Subsector Divergence (Publication Centre)

The services sector in China is notoriously difficult to track, with the major aggregate statistics published only on a quarterly or even annual basis.

6 November 2018 Colombia's Inflation Pressures are Tame, but Upside Risks are Looming (Publication Centre)

Inflation in Colombia right now is under control but risks are increasing rapidly, and the outlook for next year has deteriorated significantly.

31 July 2018 Brazil's Solid External Accounts Offsetting Fiscal Risk, For Now (Publication Centre)

Brazil's external accounts remain solid, despite the recent modest deterioration.

26 Oct. 2015 MPC Can't Wait too Long After the U.S. Fed Raises Rates (Publication Centre)

Markets currently judge that U.K. interest rates will rise about six months after the first Fed hike. But the Bank of England seldom lagged this far behind in the past. Admittedly, the slowdown in the domestic economy that we expect will require the Monetary Policy Committee to be cautious. But wage and exchange rate pressures are likely to mean six months is the maximum period the MPC can wait before following the Fed's lead.

14 December 2016 Brazil Consumption Under Strain in Early Q4, but it Will Improve, Soon (Publication Centre)

Brazil's consumer recession seems never-ending. Retail sales fell 0.8% month-to-month in October, pushing the headline year-over-year rate down to -8.2% in October, from -5.7% in September. Recent financial market volatility, credit restrictions and the ongoing deterioration of the labour market continue to hurt consumers.

14 Sept. 2015 Italy's Structural Problems Persist, but Cyclical Upturn is Firming (Publication Centre)

Italy's long-term challenges--chiefly, structurally high government debt and deteriorating demographics--remain daunting, but the cyclical picture is improving steadily. Final GDP data last week revealed that growth in the first half of the year was 0.2% better than initially estimated, taking the annualised growth rate to 1.4%, the highest in five years. This is the first sign of a durable business cycle upturn since the sovereign debt crisis crashed the economy in 2012.

14 September. 2016 Brazil's Soft July Retail Sales Don't Change the Improving Trend (Publication Centre)

The Brazilian consumer will continue to suffer from high interest rates and a deteriorating labour market this year. But sentiment data imply that the fundamentals are stabilising, at least at the margin. The headline consumer sentiment gauge, published by the FGV, has improved significantly in the past five months, and we expect another modest increase later this month

15 December 2017 The PBoC's Meagre Hike Implies the RMB is set to Depreciate (Publication Centre)

Following this week's 25bp Fed hike, the PBoC hiked the main interest rates in its corridor by... 5bp. The move was unexpected so the RMB strengthened modestly; commentary is full of how this means the deleveraging drive is serious.

14 August. 2015 Robust Real Spending Signals Consumers aren't Saving More (Publication Centre)

The robust July retail sales numbers, coupled with the substantial upward revisions to prior data, should finally put to bed the idea that consumers have chosen spontaneously to raise their saving rate, accelerating the pace of deleveraging seven years after the financial crash. People just don't behave like that unless interest rates are soaring and the economy is rolling over, and that's not happening.

13 November 2018 Will Poor Sentiment and Political Uncertainty Knock EZ Investment (Publication Centre)

The outlook for private investment in the Eurozone has deteriorated this year, especially in manufacturing.

13 August 2018 Core Inflation won't Repeat the Jump of the Past Few Months (Publication Centre)

The jump in core inflation in recent months is about as alarming as the sudden decline in the same period last year; that is, not very.

13 January 2017 The MPC Is In For a Nasty Inflation Shock This Year (Publication Centre)

Over the last decade, the MPC has underestimated the extent and duration of departures of CPI inflation from the 2% target. Inflation exceeded the MPC's expectations in the early 2010s, as policymakers underestimated the impact of sterling's prior depreciation and overestimated the role that slack would play in stifling price pressures. Inflation also undershot the MPC's forecast between 2014 and 2016, when sterling's appreciation reduced import prices.

13 June 2017 The Eurozone and Asia's Big Economies are Joined at the Hip (Publication Centre)

In her inaugural Monitor, our Chief Asia Economist Freya Beamish plots three scenarios for the Chinese economy. The best-case scenario is that China makes a smooth transition to consumer-led growth.

15 January 2018 Volatility in the Eurozone's Bond Markets is on the Rise (Publication Centre)

Markets' reaction last week to the ECB's October meeting accounts--see here--shows that investors are beginning to take seriously the idea of an inflection point in Eurozone monetary policy.

15 March 2018 Mortgage Arrears Likely Won't Keep Falling This Year (Publication Centre)

The Mortgage Lenders and Administrators Return for Q4, published on Tuesday, suggests that the fall in households' real incomes last year has not led to a deterioration in lenders' mortgage books.

17 August 2017 China's Reform Scorecard Part Five: Monetary Policy Operation (Publication Centre)

Chinese monetary policymakers can rely on several different instruments to affect market and broad liquidity, ranging from various forms of open market operations to interest rates to FX intervention. The tool kit is constantly changing as the PBoC refines its operations.

17 Dec. 2015 Why are Retail Sales Losing Momentum? (Publication Centre)

On the face of it, recent retail spending surveys have been puzzlingly weak in light of the pick-up in employment growth, still-robust real wage gains and renewed momentum in the housing market. We think those surveys are a genuine signal that retail sales growth is slowing, and expect today's official figures to surprise to the downside. But retail sales account for just one-third of household spending, and, in contrast to the early stages of the economic recovery, consumers now are prioritising spending on services rather than goods.

17 February 2017 Retail Sales Likely got off to a Soft Start This Year (Publication Centre)

Today's official retail sales figures look set to show that consumers tightened their purse strings at the start of this year, following last year's spending spree. We think that retail sales volumes rose by just 1.0% month-to-month in January; that would be a poor result after December's 1.9% plunge. Surveys of retailers have been weak across the board. The reported sales balance of the CBI's Distributive Trade Survey collapsed to -8 in January, from +35 in December. The balance is notoriously volatile, but the 43-point drop is the largest since the survey began in 1983.

17 July 2017 September Rate Hike Odds Have Fallen, but it's not Over Yet (Publication Centre)

After four straight sub-consensus core CPI readings, we think the odds now favor reversion to the prior trend, 0.2%, over the next few months.

16 Sept. 2015 Industry in Less-Bad Shape Than August Data Suggest - Q4 Better? (Publication Centre)

We aren't going to pretend for a minute that the manufacturing sector is anything other than weak, but the 0.5% drop in output in August--the worst month since January 2014--hugely overstates the extent of industry's struggles. All the decline was due to a 6.4% plunge in auto output, but a glance at the recent path of production in this sector makes it very clear that its short-term swings aren't to be taken seriously. Auto production fell by 4.5% in June, rocketed by 10.6% in July, and then dropped sharply in August.

16 Nov. 2015 Wage Gains to Drive Consumption as the Gas Price Boost Fades (Publication Centre)

The acceleration in real consumption over the past year reflects the upturn in real after-tax income growth. This, in turn, is mostly a story of falling gasoline prices, which have depressed the PCE deflator. Gross nominal incomes before tax rose 4.2% year-over-year in the three months to September, exactly matching the pace in the three months to September 2014. But real income growth, after tax, accelerated to 3.3% from 2.5% over the same period, as our first chart shows.

15 May. 2015 No Rest For Brazilian Consumers - Even Tougher Times Ahead (Publication Centre)

Consumption has been a serious weak spot in Brazil over the past year. After reaching record growth rates in 2010, it has gradually slowed to its lowest pace in more than ten years.

16 Dec. 2014 - Industrial rebound continues, despite the plunging Empire State (Publication Centre)

You'd have to be very brave to take the weakness of yesterday's Empire State survey more seriously than the strong official industrial report published 45 minutes later. The hard data showed industrial production up 1.3% month-to-month, and only two tenths of that gain was explained by the cold weather, which drove up utility energy output.

25 October. 2016 Can the Government Afford to Sacrifice the City? (Publication Centre)

When you read between the lines of its public statements on Brexit, the Government appears to be prioritising controlling immigration over maintaining unfettered access to the single market, much to the chagrin of the financial sector.

12 October 2018 What Happens Under Maximum China Tariffs Clue It's not Good (Publication Centre)

The imposition of 10% tariffs on $200B-worth of Chinese imports is not a serious threat either to U.S. economic growth--the tariffs amount to 0.1% of GDP--or inflation.

12 November 2018 Mexico's Industrial Sector did Well in Q3, but Politics are a Threat for 2019 (Publication Centre)

The Mexican economy gathered strength in Q3, due mainly to the strength of the services sector, and the rebound in manufacturing, following a long period of sluggishness, helped by the solid U.S. economy and improving domestic confidence.

10 February 2017 Still no Sign of a Sustained Trade Boost From Sterling's Depreciation (Publication Centre)

Today's trade figures likely will continue to show that the benefits from sterling's depreciation are being outweighed by the costs. Exports still are barely growing, but consumers are about to endure a substantial import price shock. The monthly trade deficit has been extremely volatile over the last year, generating a series of excessively upbeat or gloomy headlines. The truth is that the deficit has been on a slightly deteriorating trend, as our first chart shows. We think the trade deficit likely narrowed to £3.8B in December, from £4.2B in November, bringing it closer to its rolling 12-month average of £3.0B.

10 June. 2016 Nominal Corporate Sales Set to Rebound, Supporting Stock Prices (Publication Centre)

For some time now we have argued that the forces which have depressed business capex--the collapse in oil prices, the strong dollar, and slower growth in China--are now fading, and will soon become neutral at worst. As these forces dissipate, the year-over-year rate of growth of capex will revert to the prior trend, about 4-to-6%. We have made this point in the context of our forecast of faster GDP growth, but it also matters if you're thinking about the likely performance of the stock market.

10 Mar. 2016 Calendar Distortions Plague the Hours Data, Not Just Wages (Publication Centre)

We've had some correspondence questioning our view on the "weakness" of February hourly earnings, which we firmly believe were depressed by a persistent calendar quirk. Almost nine times in 10 over the past decade, when the 15th of the month has fallen after the week of the 12th--the payroll survey week--the monthly gain in wages has undershot the prior trend.

10 October 2017 China's Services Sector Losing Momentum as Consumers Flag (Publication Centre)

We wrote last month about how the Caixin services PMI appeared to be missing the deterioration in several key services subsectors.

1 December 2017 Relapse in Confidence Signals the Economy is Only Muddling Through (Publication Centre)

Economy-wide confidence deteriorated in November, highlighting that Britain continues to struggle to shake off its malaise.

08 Feb. 2016 Banxico Is Focused on the MXN, But the Fed Still Leads (Publication Centre)

Banxico left Mexico's benchmark interest rate at 3.25% last week, after increasing it by 25bp in December, when the U.S. Fed raised rates. Banxico's board maintained its neutral tone and indicated that the balance of risks has deteriorated for growth and short-term inflation. As usual, policymakers reiterated the importance of following the Fed closely to avoid financial instability, which in turn could spill over to inflation.

*October 2018 - U.S. Economic Chartbook* (Publication Centre)

A Serious Slowdown is Still Some Way Off...So the Fed has to Keep Turning the Screws

04 Feb. 2016 Are Jobless Claims Starting to Rise? If so, Where Will They Stop? (Publication Centre)

The pace of layoffs might be picking up. Our first chart looks pretty convincing, but it's much too soon to know for sure. The claims data from mid-December through late January are subject to serious seasonal adjustment problems, partly because Christmas falls on a different day of the week each year and partly because the exact timing of post-holiday layoffs varies from year-to-year.

05 Feb. 2016 Bonds Signal an Imminent EZ Recession, but Don't Take the Bait (Publication Centre)

Strong real M1 growth suggests the cyclical recovery is in good shape. But recent economic data indicate GDP growth slowed in Q4, and survey evidence deteriorated in January. This slightly downbeat message, however, is a far cry from the horror story told by financial markets. The recent collapse in stock-to-bond returns extends the decline which began in Q2 last year, signalling the Eurozone is on the brink of recession.

11 Apr. 2016 Economic Weakness Starting To Reduce Inflation in Brazil and Chile (Publication Centre)

Brazil's March report reinforced recent evidence indicating that inflation is decelerating. The headline CPI surprised to the downside again, slowing to a nine-month low of 9.4% year-over-year from 10.4% in February. The index rose 2.6% quarter-to-quarter in Q1, well below the 3.8% increase in the same period last year.

11 Apr. 2016 Stronger Growth and Accelerating Wages Will Shift Rate Sentiment (Publication Centre)

A reader sent us last week a series of five simple feedback loops, all of which ended with the Fed remaining "cautious". For example, in a scenario in which the dollar strengthens--perhaps because of stronger U.S. economic data--markets see an increased risk of a Chinese devaluation, which then pummels EM assets, making the Fed nervous about global growth risks to the domestic economy.

11 October 2018 Weak GDP in August Sets the Tone for the Rest of this Year (Publication Centre)

The stagnation of GDP in August, following five consecutive month-to-month gains, confirms that the economy's momentum in prior months was simply weather-related.

12 Jan. 2015 - Unemployment Plunging Towards the Nairu - What Will the Fed Do? (Publication Centre)

The strength in payrolls in recent months is real. The three-month moving average increase in private payrolls now stands at 280K, despite adverse seasonal adjustments totalling 91K in the fourth quarter, compared to the same period last year.

12 July 2018 Trade Skirmishes are on the Brink of Spiralling into War, but not Quite Yet (Publication Centre)

The U.S. Commerce Department on Tuesday released a list of Chinese imports, with an annual value of $200B, on which it is threatening to impose a 10% tariff, after a two-month consultation period.

12 June 2018 Core Inflation to Trend Gently Higher - Many Risks in Both Direction (Publication Centre)

We continue to expect core CPI inflation to drift up further over the course of this year, partly because of adverse base effects running through November, but it's hard to expect a serious acceleration in the monthly run rate when the rate of increase of unit labor costs is so low.

11 January 2017 Import Substitution Will Be Modest, Despite Sterling's Depreciation (Publication Centre)

A year has now elapsed since sterling began its precipitous descent, and the trade data still have not improved. Net trade subtracted 0.9 percentage points from year-over-year growth in GDP in Q3. And while the trade deficit of £2.0B in October was the smallest since May, this followed extraordinarily large deficits in the previous two months. In fact, the trade deficit has been on a slightly deteriorating trend over the last year, as our first chart shows, and we expect today's data to show that the deficit re-widened to about £3.5B in November.

11 Jan. 2016 Brazil's Inflation Hits a 13-Year High - Copom Will Hike Again (Publication Centre)

Last week's events highlighted the seriously challenging global environment for LatAm equities and currencies. Trading in Chinese shares was stopped twice early last week, after falls greater than 7% of the CSI 300 index reverberated around the world. Markets were calmer on Friday but the volatility nevertheless reminded investors that LatAm's economies are floating in rough waters and their resilience will be put to the test again this year. The Fed's policy normalization, the unwinding of the leverage in EM, the continued slowdown of the Chinese economy, low commodity prices and currency depreciation are all real threats across the continent.

11 April 2017 Why are Small Firms' Capex Plans so Soft even as Sentiment Soars? (Publication Centre)

Nowhere is the gap between sentiment and activity wider than in the NFIB survey of small businesses. The economic expectations component leaped by an astonishing 57 points between October and December, but the capex intentions index rose by only two points over the same period, and it has since slipped back. In February, the capex intentions index stood at 26, compared to an average of 27.3 in the three months to October.

11 August 2017 Core CPI Looks Set to Revert to 0.2% in July, but Nothing is Certain (Publication Centre)

Our base case forecast for today's July core CPI is that the remarkable and unexpected run of weak numbers, shown in our first chart, is set to come to an end, with a reversion to the prior 0.2% trend.

11 August. 2016 Mortgage Demand is Faltering, Will it Rebound Soon? (Publication Centre)

The medium-term trend in the volume of mortgage applications turned up in early 2015, but progress has not been smooth. The trend in the MBA's purchase applications index has risen by about 40% from its late 2014 low, but the increase has been characterized by short bursts of rapid gains followed by periods of stability.

17 July. 2015 Colombia's Business Sector Continues to Feel the Oil Pain (Publication Centre)

Colombia is one of the fastest growing economies in LatAm but over the last few quarters the country has been adjusting to the collapse in oil prices, the depreciating currency and rising inflation. But the slowdown, especially on the domestic side of the economy, has been less dramatic than expected, so far. Our main scenario is that the adjustment process to challenging external conditions will continue over the coming quarters.

16 Mar. 2015 Temporary Reversal - Bad Numbers for Mexico, Good for Brazil (Publication Centre)

Two key points can be extracted from the minutes of the last BCB meeting, when policymakers increased the Selic interest rate by 50bp to 12.75%. First, the bank recognized that the balance of risks to inflation has deteriorated, due to the huge adjustment of regulated prices and the BRL's depreciation, but it specifically referred only to "this year" in the communiqué.

21 February 2019 How High Would Inflation Get After A No-deal Brexit? (Publication Centre)

With a no-deal Brexit still a potential outcome and just over five weeks to go until the U.K. is scheduled to leave, it's about time we put some numbers on how high inflation could get in this worst-case scenario.

22 August. 2016 Will Inflation be the Dog That Doesn't Bark, Again? (Publication Centre)

The period of surprisingly low inflation following sterling's plunge when the UK left the Exchange Rate Mechanism in September 1992 appears to challenge our view that inflation will overshoot the MPC's 2% target over the next couple of years. As our first chart shows, CPI inflation averaged just 2.5% in 1993 and 2% in 1994, even though trade-weighted sterling plunged by 15% and import prices surged.

17 June. 2015 Brazilian Retailers Face Tough Times As Consumers Tighten Belts (Publication Centre)

Consumption remains a serious weak spot in Brazil's economic cycle. High inflation, rising interest rates, surging unemployment, plunging confidence, and the government's belt tightening, have trashed Brazilians' purchasing power. Retail sales surprised to the downside in April, falling 0.4% month-to-month, equivalent to a huge 3.5% contraction year-over-year, down from a revised 0.3% gain in March. The underlying trend is awful, as our first chart shows.

22 Dec. 2015 Miserable Economic And Political News Keeps Coming For Brazil (Publication Centre)

Brazil's recent political and economics news has shifted the near-term outlook from bad to worse. President Rousseff on Friday replaced hawkish Finance Minister Joaquim Levy, appointed just over a year ago, with a close partner, Planning Minister Nelson Barbosa. Mr. Levy resigned after continued conflicts with the government, including frustration by the Congress of his attempts to rein in the fiscal mess. Mr. Barbosa is known to be less market friendly, and will likely defend countercyclical measures, delaying any rapid fiscal consolidation. The appointment will deteriorate investors' confidence even further, placing the markets under enormous strain.

21 February 2017 Brazil's Current Account Remains Healthy, FDI In ows are Robust (Publication Centre)

Brazil's current account data last week provided further evidence of stabilisation in the economy, despite the modest headline deterioration. The unadjusted current account deficit increased marginally to USD5.1B in January, from USD4.8B in January 2016, but the underlying trend remains stable, at about 1.3% of GDP. Our first two charts show that the overall deficit began to stabilize in mid-2016, as the rate of improvement in the trade balance slowed, reflecting the easing of the domestic recession.

20 September. 2016 Homebuilders Need to Catch up to Rising Sales - Expect a Q4 Surge (Publication Centre)

The information available to date--which is still very incomplete--suggests that new housing construction will decline in the third quarter. This would be the second straight decline, following the 6.1% drop in Q2. We aren't expecting such a large fall in the third quarter, but it is nonetheless curious that housing investment--construction, in other words--is falling at a time when new home sales have risen sharply.

20 Jan. 2015 Current Account Surplus Stays Robust, but Watch Deficit in Spain (Publication Centre)

Eurozone current account data yesterday provided further evidence of stabilisation in the economy despite a headline deterioration. The adjusted current account surplus fell to €18.1B in November from a revised €19.5B in October, but the decline was mainly driven by an increase in current transfers; the core components remain solid.

20 July. 2015 Brazil's Economic Woes Set to Continue Over the Third Quarter (Publication Centre)

Brazil's April economic activity index--a monthly proxy for GDP--surprised to the downside, again. The IBC-BR index was unchanged month-to-month but contracted a dreadful 4.8% year-over-year, down from a revised 3.2% contraction in March. These results imply Q2 GDP of about -1.9% quarter-on-quarter, much worse than the 0.2% contraction in Q1. The release offers no details, but the report signals a continued steep, steady deterioration.

20 Mar. 2015 LatAm FX Rally After Fed's Signal, But Relief Will be Temporary (Publication Centre)

The global economy is heading towards a new scenario, triggered by the impending start of the monetary policy normalization process in the U.S. In some major economies, notably the Eurozone, the Fed's actions will not derail or even jeopardize the cyclical economic upturn.

22 December 2017 Strong November Consumption Sets Course for 3½% Q4 Gain? (Publication Centre)

This is the final U.S. Economic Monitor of 2017, a year which has seen the economy strengthen, the labor market tighten substantially, and the Fed raise rates three times, with zero deleterious effect on growth.

22 January 2018 China Growth Met Target Before Q4, Environmental Targets hit in Q4 (Publication Centre)

The China Daily ran an article entitled "Beijing, nation get breath of fresh air" on the day Chinese GDP figures were published last week, underlining where the authorities' priorities now lie.

23 November 2017 Olympics Preparations Should Lift Japan's GDP Growth Next Year (Publication Centre)

Japan will host the Olympics in 2020 and the preparatory surge in construction investment makes 2017-to-2018 the peak spending period.

24 January 2019 Future Fiscal Stimulus Is Still Secure, Despite Worse Borrowing Data (Publication Centre)

On the face of it, the trend in public borrowing deteriorated sharply late last year. In the three months to December, borrowing on the main "PSNB ex ." measure, which excludes banks owned by the public sector, was a trivial £0.3B, or 1.6%, lower than in the same months of 2017.

25 August. 2015 Market Panic Puts Pressure on ECB, but Fed's Response is Key (Publication Centre)

Weakness in risk assets turned into panic yesterday with the Eurostoxx falling over 6%, taking the accumulated decline to 19% since the beginning of August, and volatility hitting a three-year high. Market crashes of this kind are usually followed by a period of violent ups and downs, and we expect volatile trading in coming weeks. Following an extended bull market in risk assets, the key question investors will be asking is whether the economic cycle is turning.

25 May. 2016 Trade Deficit Set for April Rebound, but the Future Looks Brighter (Publication Centre)

A widening core trade deficit is the inevitable consequence of a strengthening currency and faster growth than most of your trading partners. Falling oil prices have limited the headline damage by driving down net oil imports, but the downward trend in core exports since late 2014 has been steep and sustained, as our first chart shows. The deterioration meant that trade subtracted an average of 0.3 percentage points from GDP growth in the past three quarters.

23 Nov. 2015 How to Scare Yourself Over the U.S. Inflation Outlook (Publication Centre)

Should you be feeling in the mood to panic over inflation risks--or more positively, benefit from the markets' underpricing of inflation risks--consider the following scenario. First, assume that the uptick in wages reported in October really does mark the start of the long-awaited sustained acceleration promised by a 5% unemployment rate and employers' difficulty in finding people to hire. Second, assume that the rental property market remains extremely tight. Third, assume that the abrupt upturn in medical costs in the October CPI is a harbinger o f things to come. And finally, assume that the Fed hawks are right in their view that the initial increase in interest rates will--to quote the September FOMC minutes--"...spur, rather than restrain economic activity". Under these conditions, what happens to inflation?

23 March 2018 Stock up on Chinese-Made T-Shirts, While They're Still Nearly Free (Publication Centre)

Yesterday's announcement that the administration plans to imposes tariffs worth about $60B per year -- thatìs 0.3% of GDP -- on an array of imports of consumer goods from China is a serious escalation.

22 March 2019 The Phlegmatic MPC Still Envisages a 2019 Rate Hike (Publication Centre)

Unlike other central banks, the MPC has stuck to its message that "an ongoing tightening of monetary policy over the forecast period" likely will be required to keep inflation close to the 2% target, provided a no-deal Brexit is avoided.

22 May 2017 LatAm Markets Under Renewed Pressure, but Hold on, for Now (Publication Centre)

LatAm's relatively calm market environment has been thrown into disarray over the last few weeks.New fears of a slowdown in China, political turmoil in the U.S. and, most importantly, the serious corruption allegations facing Brazil's President, Michel Temer, have triggered a modest correction in asset markets and have disrupted the region's near-term policy dynamics.

23 April 2018 Behind the Base-Case Forecast, Risks Abound, in Both Directions (Publication Centre)

For now, we're happy with our base-case forecast that growth will be nearer 3% than 2% this year, and that most of the rise in core inflation this year will come as a result of unfavorable base effects, rather than a serious increase in the month-to-month trend.

20 December 2017 China's Anti-Pollution Curbs are On, Is it Working too Well? (Publication Centre)

We highlighted in previous reports that the Chinese authorities appear to be making a serious pivot from GDPism--the rigid targeting of real GDP growth-- toward environmentalism, with pollution targets now taking centre stage.

22 Dec. 2015 Low Household Saving Implies Little Upside to Spending Outlook (Publication Centre)

The national accounts for the third quarter, released on Wednesday, are likely to show that households are saving a very small proportion of their incomes. Low unemployment, subdued inflation and the healthier condition of households' balance sheets suggests that very low saving is more sustainable than in the past. Nonetheless, the low rate underlines that household spending can't grow at a faster rate than incomes for a sustained period again.

18 Mar. 2015 Strong position for the EU in the coming negotiations with Greece (Publication Centre)

Demands that Germany pay reparations from the Second World War, and the apparently deteriorating relationship between Messrs. Varoufakis and Schauble, have further complicated talks between the Eurogroup and Greece in recent weeks.

18 Nov. 2015 Weak Producer Price Inflation Won't Prevent CPI Rebound (Publication Centre)

CPI inflation held steady at -0.1% in October, matching its lowest rate since March 1960. We had expected the rate to tick down to -0.2%, but the rebound in clothing inflation in October, following a period of discounting in September, was larger than we had anticipated. Looking ahead, we can be fairly confident that CPI inflation will pic k up sharply over the coming months.

18 October 2017 Venezuela's Woes Will Increase Even A er Maduro's "Win" (Publication Centre)

Venezuela's fundamentals continue to deteriorate, economic chaos is increasing and the social/political situation remains fragile.

19 August. 2016 The Consumer Bubble Will Pop Around the Year-End (Publication Centre)

It would be a serious mistake to conclude from July's retail sales figures that consumers' spending will be immune to the fallout of the Brexit vote. Households have yet to endure the hiring freeze and pay squeeze indicated by surveys of employers, or the price surge signalled by sterling's sharp depreciation. The real test for consumers' spending lies ahead.

18 July 2017 Colombia's Economic Prospects Remain Poor, but they will Improve (Publication Centre)

May's activity data underline the weakness of Colombia's economic growth. Domestic demand still is under pressure due to the lagged effect of the deterioration in the terms of trade and other temporary shocks in 2016, and the VAT increase in January this year.

18 August. 2015 Can the Fed Hike if the Empire State Survey is Right? (Publication Centre)

Just how weak would the manufacturing sector have to be in order to persuade the Fed to hold fire this fall, assuming the labor market numbers continue to improve steadily? The question is germane in the wake of the startlingly terrible August Empire State manufacturing survey, which suggested that conditions for manufacturers in New York are deteriorating at the fastest rate since June 2009.

17 May. 2016 Core Inflation is Still Trending Higher - Expect Rebound Today (Publication Centre)

The year-over-year rate of core CPI inflation rose steadily from a low of 1.6% in January 2015 to 2.3% in February this year. At that point, the three-month annualized rate had reached a startling 3.0%. You could be forgiven, therefore, for thinking that the dip in core inflation back to 2.2% in March was an inevitable correction after a period of unsustainably rapid gains, and that the underlying trend in core inflation isn't really heading towards 3%.

17 May. Wage Growth to Continue to Rise, Despite Jobs Slowdown (Publication Centre)

The 21K rise in the headline, three-month average, unemployment rate between November and February confirmed last month that the U.K.'s period of fantastically strong growth in employment has ended. Timelier indicators, however, suggest unemployment is stabilising, not on the cusp of a major increase.

20 August 2018 LatAm Markets Were Under Stress This Month, Will Sentiment Improve? (Publication Centre)

While we were away, EM growth prospects and risk appetite deteriorated, due mainly to rising geopolitical risks and Turkey's currency crisis.

19 Feb. 2016 Even Spendthrift U.K. Consumers Will Have to Slow Down in 2016 (Publication Centre)

January's retail sales figures, released today, look set to indicate that consumers are keeping the recovery going, amid deteriorating business sentiment and faltering external trade.

17 Nov. 2015 Core Inflation Creeping Stealthily Higher - Soon, Markets Will Notice (Publication Centre)

The upturn in core CPI inflation this year has passed by almost unnoticed in the markets and media. In the year to September, the core CPI rose 1.9%, up from a low of 1.6% in January. But that's still a very low rate, and with core PCE inflation unchanged at only 1.3% over the same period, it's easy to see why investors have remained relaxed. In our view, though, things are about to change, because a combination of very adverse base effects and gradually increasing momentum in the monthly numbers, is set to lift both core inflation measures substantially over the next few months.

2 December. 2016 Friendly Seasonals Set to Push Payrolls Back Above 200K? (Publication Centre)

Our payroll model, which incorporates survey data as well as the error term from our ADP forecast, points to a hefty 225K increase in November employment. We have tweaked the forecast to the upside because of the tendency in recent years for the fourth quarter numbers to be stronger than the prior trend, as our first chart shows.

2 November 2018 The MPC will Hike Twice in 2019, Provided a Transition Deal is Secured (Publication Centre)

The MPC's "Super Thursday" communications left markets a little more confident that interest rates will rise again in May, shor tly after the likely start of the Brexit transition period.

19 Jan. 2016 Market Chaos in January Does Not Drive Fed Actions All Year (Publication Centre)

To paraphrase recent correspondence: "How can you possibly believe, given the terrible run of economic data and the turmoil in the markets, that the Fed will raise rates in March/June/at all this year?" Well, to state the obvious, if markets are in anything like their current state at the time of the eight Fed meetings this year, they won't hike. That sort of sustained downward pressure and volatility would itself prevent action at the next couple of meetings, as did the turmoil last summer when the Fed met in September. And if markets were to remain in disarray for an extended period we'd expect significant feedback into the real economy, reducing--perhaps even removing--the need for further tightening.

19 October. 2016 Housing Construction has Faltered - Outlook is Cloudy (Publication Centre)

We have given up, more or less, on the idea that housing construction will be a serious driver of economic growth in this cycle. The next cycle should be different, but it was never realistic to expect the sector which brought down the economy to recover fully as soon as the dust settled.

2 December. 2016 Sterling's Depreciation Has Not Been a Boon for Manufacturers (Publication Centre)

The deterioration of the Markit/CIPS manufacturing survey in November should temper optimism about the potential benefits of sterling's depreciation. The PMI fell to 53.4 in November, from 54.2 in October.

19 June 2018 A Trade War of Attrition Looks Likely, but the Damage for now is Minimal (Publication Centre)

On the face of it, trade negotiations have deteriorated in the last week.

19 October. 2016 Consumers Still Under Strain in Brazil, but Rate Cuts will Help (Publication Centre)

Yesterday's retail sales data in Brazil surprised to the downside. Consumers are still being squeezed by high interest rates and a deteriorating labour market. Retail sales declined 0.6% month-to-month in August, leaving the year-over-year rate little changed at -5.5%.

19 October 2017 China's Leaders Will Allow 2018 Growth to run Below Target (Publication Centre)

President Xi Jinping started China's Party Congress yesterday with a speech setting out the priorities for the next five years.

19 July. 2016 Why is Homebuilding not Keeping Pace with Demand? (Publication Centre)

The sustained upturn in mortgage applications since last fall ought to have driven up the pace of new home construction quite sharply. But our first chart shows that single-family building permit issuance--we use permits rather than starts, as they are much less volatile--rose only 8.3% year-over-year in the three months to May, while applications for new mortgages to finance house purchase jumped by 18.8% over the same period.

Miguel Chanco

Miguel Chanco helps to produce Pantheon's Asia service, having covered several parts of the region for nearly ten years. He was most recently the Lead Analyst for ASEAN at the Economist Intelligence Unit. Prior to that role, Miguel focused on India and frontier markets in South Asia for Capital Economics and BMI Research, Fitch Group.

CNBC - D-Day for Draghi (Media Centre)

Ian Shepherdson, Pantheon Macroeconomics, provides insight to the European Central Bank's path and whether to expect Mario Draghi to announce additional stimulus.

Samuel Tombs

Samuel Tombs has focused on the U.K. economy since 2009. Prior to joining Pantheon, he was Senior U.K. Economist at Capital Economics, leading the team which topped the 2014 Sunday Times' poll of forecasters. In 2011, Samuel won the Society of Business Economists' prestigious Rybczynski Prize for an article on quantitative easing in the UK.

Question of the Week, WC 25th June (Media Centre)

With the Mexican Elections on July 1st, our Chief Latam Economist Andres Abadia has received many questions about the possible outcomes and how this will affect the Mexican economy going forward.

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