Confidence improves, but the fundamentals are still shaky.
Oliver Allen (Senior US Economist)US
WAGES AND SERVICES INFLATION REMAIN ELEVATED
- ...BUT THE MPC WILL CUT IN SEPTEMBER, IF NOT IN AUGUST
Rob Wood (Chief UK Economist)UK
- In one line: Resilient but slowing, amid domestic and external challenges.
Andrés Abadía (Chief LatAm Economist)Latin America
In one line: A smaller q/q increase than we thought.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Continuing to outperform; inflation fell further than expected in July.
Melanie Debono (Senior Eurozone Economist)Eurozone
- US - Q2’s rapid growth is unsustainable; expect a slowdown ahead
- EUROZONE - Solid Q2 GDP headline in the EZ, but the details are on the soft side
- UK - MPC preview: Almost ready to cut interest rates, cautiously
- CHINA+ - BoJ likely to move cautiously, mindful of fragile growth
- EM ASIA - Should we start to worry even more about inflation in India?
- LATAM - Trade balances improve in LatAm amid weaker currencies
Ian Shepherdson (Chief Economist, Chairman and Founder)Global
- Chair Powell says a September easing “could be on the table”, now that labor market risks loom larger.
- Growth in employment costs slowed in Q2, and a further softening in wage growth ahead looks likely.
- The July ISM survey probably will show manufacturing is still treading water; claims are a wildcard today.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Q2 GDP growth in Taiwan surprised to the upside, coming in at 5.1%, after 6.6% in Q1...
- ...Benefiting from higher external demand for AI-related manufacturing and investment.
- We now expect stronger 2024 GDP growth, at 4.1%, compared to 3.7% previously.
Moorthy Krshnan (Senior Asia Economist)Emerging Asia
- The BoJ yesterday announced a policy rate hike, despite cutting its inflation forecast for this year.
- Governor Ueda said the Bank will continue to raise rates if growth and inflation match its expectations.
- The real motivation for the rate increase is probably to minimise the risk of a steep JPY reversal.
Duncan WrigleyChina+
- Inflation was slightly hotter than we expected in July but is still on track for a sharp fall in August.
- Disinflation in core goods and food will reverse soon, creating a challenge for the ECB in Q4.
- We still see an ECB rate cut in September, but no longer in December; we now have two cuts in H1-25.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Smaller utility price cuts this July than in 2023 will push up CPI inflation to 2.2%, from 2.0% in June.
- We expect the easing of utilities price deflation to be offset by slower goods and services inflation.
- Uncertainty is high as our call hinges on volatile public rents, likely strong, and hotel prices, likely weak.
Rob Wood (Chief UK Economist)UK
In one line: The trend in GDP growth is still around zero; core inflation fell further in July.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Decent, but the details point to soft domestic demand.
Claus Vistesen (Chief Eurozone Economist)Eurozone
LATAM ECONOMIES SHOWING RESILIENCE...
- ...AMID POLICY CHALLENGES AND GLOBAL UNCERTAINTY
Andrés Abadía (Chief LatAm Economist)Latin America
- The FOMC likely will say inflation progress has been better than “modest” and highlight labor market risks.
- A September easing remains very likely; further easing this year is probable, but won’t be signalled strongly yet.
- We expect a below-consensus increase of 0.8% in the ECI in Q2, supporting our dovish Fed view.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Mexico’s economic growth slowed in H1; nearshoring and public spending saved the day.
- Economic activity is facing challenges amid high political uncertainty and elevated interest rates.
- Weak external conditions and policy risk add to the difficult environment over the coming quarters.
Andrés Abadía (Chief LatAm Economist)Latin America
- China’s industrial profit growth edged up in June, thanks to better upstream sector profits.
- But two-thirds of industries saw profit growth ease, echoing the weak domestic demand in Q2 GDP.
- More stimulus will be deployed to support growth and put profit’s recovery on a more sustainable path.
Kelvin Lam (Senior China+ Economist)China+
- Germany was a laggard in Q2, again; GDP jumped in Spain, and rose solidly in Italy and France.
- We think the Q2 GDP numbers have increased the probability of a second ECB rate cut in September.
- German HICP inflation was hot, but Spain’s was soft; we still see EZ inflation stable at 2.5% in July.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Chancellor Rachel Reeves’ spending audit suggests £16.5B higher government borrowing in 2024/25.
- Interest costs will add to pressures; we expect borrowing £22B above the Budget forecast for 2024/25.
- Fiscal pressures build over time, so tax hikes along with higher borrowing are likely in the longer term.
Elliott Laidman Doak (Senior UK Economist)UK
