Pantheon Macroeconomics

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25 Jan 2022 Omicron Takes its Toll on Japanese Activity, Despite a Boost to Exports

Japanese manufacturing activity strengthened in January, likely on the back of external demand. Soaring Covid cases have hit Japan's services sec- tor; surging hospitalisations will worry China.. Price pressures picked up again, though the Japanese consumer is unlikely to notice much.

Craig BothamChina+

18 Jan 2022 A Better Year for Consumption, but Now Normal Service Resumes

Growth was stronger than expected at the end of 2021, but still slowed... The outsized contribution from both consumption and exports will now fade... ...as the central government takes centre stage, supported from the wings by the PBoC.

Craig BothamChina+

14 Jan 2022 Credit Growth is Grease to the Wheels, not Fuel for the Fire

China's money and credit growth improved in December, but this isn't a stimulus surge. The authorities are laying down the groundwork to bail out swathes of the economy. We expect the Q4 GDP reading to be the weakest since the start of the pandemic.

Craig BothamChina+

17 Dec 2021 Further Tentative Signs of Easing Bottlenecks in Japanese Exports

Japanese exports jumped in November, amidst signs of reduced supply chain pressures. Unfortunately, the outlook for December is dimming, thanks in part to Chinese Covid policy. Omicron is set to renew supply disruptions, just as they were easing, but it will also weaken demand.

Craig BothamChina+

16 Dec 2021 Infrastructure is Still En Route, but Other Headwinds are Forming

November's data are a mixed bag, but investment weakness, led by property, is the main concern. Infrastructure should begin to offset property soon, but manufacturing faces its own challenges. Omicron has entered China, and will intensify the cycle of zero-Covid lockdowns.

Craig BothamChina+

14 Dec 2021 Service Sector and SME Revivals are Boosting Japanese Growth

Japan's Tankan survey points to an improvement in Q4, particularly outside manufacturing. Success in containing Covid, for now, has boosted the services sector, and smaller firms are reviving. Inflationary pressures continued to build in Q4, but will not disturb BoJ policy yet.

Craig BothamChina+

23 Nov 2021 Bottlenecks and Chinese Policy to Ease, but Keep Calm

Korean trade data show further signs of an easing in congested supply chains. Chinese policymakers turn more dovish, but no real relief for the property sector. Renminbi strength starts to bother the PBoC, but "two-way volatility" is more likely than devaluation.

Craig BothamChina+

17 Nov 2021 Japan's Recovery Can't Afford Policy Mistakes

Japanese growth fell sharply in Q3, as both consumption and capex declined. A near-term rebound is on the cards, as temporary headwinds fade. Beyond Q4, however, growth needs policy support merely to return to, let alone surpass, its trend.

Craig BothamChina+

11 Nov 2021 Chinese Inflation Spikes, but Policymakers Won't Panic

Food and energy prices drove Chinese consumer price inflation sharply higher in October. Partial energy liberalisation, coupled with soaring coal prices, led to record PPI inflation. We think both spikes will be transitory, and will not necessitate a monetary policy response.

Craig BothamChina+

19 Oct 2021 EZ Equity Earnings are Rising, but Can the Upturn Continue?

EZ equity earnings have recovered handsomely this year, leaving valuations more attractive. Markets still expect strong earnings growth in the next 12 months; the macro data suggest otherwise. The pace of policy tightening implied by global rate expectations will soon be an issue for EZ equities.

Claus Vistesen (Chief Eurozone Economist)Eurozone

13 Oct 2021 A Hawkish Hold, but Future Hikes Likely to be Interrupted

The BoK struck a hawkish note despite holding rates, strongly suggesting a November hike. Household debt remains the focus of policy, but there's a risk of complacency over growth. China is still deteriorating, and data over the next fortnight will be just a taste.

Craig BothamChina+

6 Oct 2021 How to Understand and Use Inflation Expectations in the EZ

EZ inflation expectations don't predict inflation, but they're not entirely without value either. Industrial production in France rose again in August; Q3 as a whole likely was decent. We think the PMI surveys are underestimating actual GDP growth in Q3, especially in Spain.

Claus Vistesen (Chief Eurozone Economist)Eurozone

30 Sept 2021 What is the Fiscal Multiplier for Government Spending in Italy

The Italian government's GDP growth forecast for next year looks too high to us. Spain's new ERTE scheme is the first of, probably many, Covid-led labour market reforms in the EZ. We continue to expect the EZ jobless rate to fall be- low most estimates of NAIRU by end-2023.

Claus Vistesen (Chief Eurozone Economist)Eurozone

29 Sept 2021 The ECB is on Team-Transitory on Rising Inflation in the EZ, for Now

Ms. Lagarde strikes a dovish tone at the ECB Forum, but sticks to the script that PEPP will end in Q1. Rate expectations have increased substantially in the EZ; we doubt the ECB is happy with this. Solid consumer sentiment data in France and Germany offer contrast to soft business surveys.

Claus Vistesen (Chief Eurozone Economist)Eurozone

21 Sept 2021 Inflation Next Year Will be a Challenge for the ECB and Markets

Our 2022 core inflation forecast signal that trouble is brewing for markets and the ECB. Core inflation will fall in Q1, but it will be back at just under 2% by spring, and through the summer. The ECB will stay dovish, but it will lift its inflation forecasts further; this will unsettle markets.

Claus Vistesen (Chief Eurozone Economist)Eurozone

16 Sept 2021 EZ Wages are Back to Pre-Virus Levels, and More Gains to Come

Growth in EZ hourly labour costs plunged in Q2, but other, more timely, data point to robust wage gains. Ms. Lagarde's comments last week suggest that we should watch negotiated wages closely in H2. We see few signs of accelerating wage growth in 2021 collective bargaining agreements, yet.

Claus Vistesen (Chief Eurozone Economist)Eurozone

10 Sept 2021 A Slight Slowdown in PEPP is Coming in Q4, as Expected

The ECB will slow the pace of PEPP in Q4, probably by around €20B, to €60-€70B per month. Bond yields fell as Ms. Lagarde spoke, but will the ECB's decision on PEPP in Q4 satisfy markets? The German trade surplus snapped back in July, as imports plunged; more of the same is coming.

Claus Vistesen (Chief Eurozone Economist)Eurozone

27 Aug 2021 The BoK Takes a Calculated Risk, to Re-focus on High Household Debt

The Monetary Policy Board kicked off normalisation yesterday with a 25-basis point hike, to 0.75%. Korea still is deep in the Covid woods, especially as protection from prior infection is very low... ...But rapid jabs give the BoK room to manoeuvre, and re-focus towards curbing financial imbalances.

Freya Beamish (Chief Asia Economist)China+

27Aug 2021 Europe Still has Low Birthrates, but they're Not Falling Anymore

European birth rates have rebounded since the end of the 1990s, but remain below replacement levels. The rebound in German marriage and birth rates stands out; not much sign of a rebound elsewhere. Women are still postponing having their first child; that will continue to hold back total fertility rates.

Claus Vistesen (Chief Eurozone Economist)Eurozone

24 Aug 2021 Including Housing Costs would lift EZ HICP Inflation, but not by Much

There are many statistical hurdles to overcome to include housing costs into the EZ HICP... ...A rough & ready estimate suggests inflation would have been 0.3pp higher, on average, since 2011. Even if house price growth continues to accelerate, we doubt it will lead to tighter monetary policy.

Claus Vistesen (Chief Eurozone Economist)Eurozone

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