- EZ inflation fell to its lowest since July 2021 in August, marginally above the ECB’s target...
- ...The Bank will find it hard to justify its current restrictive stance, especially with wage growth easing.
- We think a September rate cut is more likely than not and keep our October cut in too, for now.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Consumers and firms seem gradually to be shifting behaviour in response to expected interest rate cuts.
- Households raised liquid assets by the least in 11 months, and mortgage approvals jumped.
- Smoothing through volatility, corporates have been raising net external finance since March.
Rob Wood (Chief UK Economist)UK
- The small recent rise in continuing claims suggests July’s unemployment rate was overestimated.
- We are pencilling in a 0.1pp dip in the rate to 4.2% in August, despite the worsening trend.
- The rapid 2.9% growth in consumers’ spending in Q2 looks unsustainable; expect a sharp slowdown.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Chile’s latest data paint a picture of a struggling economy, with risks tilted to the downside.
- We expect the BCCh to resume rate cuts to support the economic upturn, but electricity tariffs pose a risk.
- Improving external demand, rate cuts and Fed easing will support the economic recovery in 2025.
Andrés Abadía (Chief LatAm Economist)Latin America
- Spanish inflation was pulled down sharply in August by falling energy inflation.
- The German headline also took a leg down, to a 41-month low, despite stable services inflation.
- We now think EZ inflation data today will show a 2% print for August; EZ inflation is at the ECB’s target.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Ofgem announced a 9.5% utility price-cap increase for October, fractionally lower than we expected.
- Accordingly, we edge down our December CPI inflation forecast to 2.7%, from 2.8% previously.
- Wholesale energy futures prices and geopolitical risk point to further utility-bill hikes in 2025.
Elliott Laidman Doak (Senior UK Economist)UK
In one line: HICP inflation below consensus in Spain and in Germany.
Melanie Debono (Senior Eurozone Economist)Eurozone
- An October cut is our base case, with a month’s delay if the BoK needs more time to monitor financial risks.
- Korea’s 20-day export data indicate solid external demand for full-month August, due to the chip cycle.
- Renewed EU demand more than offset slowing ASEAN exports; China is the biggest downside risk.
Kelvin Lam (Senior China+ Economist)China+
BSP PULLS THE TRIGGER ON RATE CUTS
- …INDIA’S FINAL 2024/25 BUDGET IS NO GAME-CHANGER
Miguel Chanco (Chief EM Asia Economist)Emerging Asia
- We look for little change in in initial jobless claims today, and a run of lower numbers this fall…
- …Leading indicators have improved and the seasonals will help; but lower hiring will slow job gains.
- The hit to growth from the rising trade deficit will be offset by boosts from inventories and investment.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Money data suggest the savings rate is no longer rising, pointing to a pick-up in spending…
- ...Lending and credit figures are also turning up, consistent with stronger investment growth.
- For how long will money data remain positive? We see nascent signs they will turn down soon.
Melanie Debono (Senior Eurozone Economist)Eurozone
- Gilt yields have fallen sharply at the short end of the curve since the MPC cut rates in August.
- But we make minimal changes to our gilt yield forecasts, as the fundamental drivers are unchanged.
- The market continues to function well, and buyers have been attracted back to gilts.
Elliott Laidman Doak (Senior UK Economist)UK
In one line: Fall in real money continues to slow.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Continuing to edge up, despite still-high unemployment fears.
Melanie Debono (Senior Eurozone Economist)Eurozone
- - CHINA’S WEAK DOMESTIC DEMAND JUSTIFIES MORE STIMULUS
- - JAPAN’S Q2 GDP EVIDENCES A WAGE-PRICE SPIRAL
- - BOK TO CUT IN OCT AS BASE CASE; NOV CUT A POSSIBILITY
Kelvin Lam (Senior China+ Economist)China+
Consumers unlikely to remain so upbeat.
Oliver Allen (Senior US Economist)US
- Mexico’s economic outlook suggests a continued shift towards monetary policy easing.
- Declining core inflation and stagnant economic activity will allow Banxico to cut rates further.
- The US Fed’s incoming easing cycle is one of the key reasons for further normalisation, but risks remain.
Andrés Abadía (Chief LatAm Economist)Latin America
- US - Dovish pivot complete; the Fed now has serious catching-up to do
- EUROZONE - Olympic boost to the EZ PMIs, and a big drop in Q2 wage growth
- UK- Higher output, lower inflation; MPC will still be wary of labour demand
- CHINA+ - China’s consumption struggles amid low confidence and policy challenges
- EM ASIA - BoT held, again, but is becoming anxious about domestic demand
- LATAM - COPOM’s cautious stance amid inflation risks and economic threats
Ian Shepherdson (Chief Economist, Chairman and Founder)Global
- We look for a 0.13% rise in the July core PCE deflator, implying downside risk to the 0.2% consensus.
- Real consumption probably rose by 0.3% in July, setting up a strong base for growth in Q3…
- …But we expect a slowdown ahead, due to weak income growth and rising the saving rate.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Destatis confirmed the decline in German GDP in Q2, despite still not publishing services data.
- Survey data for Q3 paint an ugly picture for the start of the second half of the year.
- We suspect surveys may be underestimating growth, but we will need to wait and see.
Melanie Debono (Senior Eurozone Economist)Eurozone
