- 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
In one line: Slight uptick in China's industrial profits driven by better performing upstream sectors
Kelvin Lam (Senior China+ Economist)China+
China lowered interest rates and revealed plans to enhance government finances; Korea early trade data propelled by AI-chips demand
Kelvin Lam (Senior China+ Economist)China+
In one line: Strong AI-driven exports propel Korea’s early July trade figures
Kelvin Lam (Senior China+ Economist)China+
In one line: China’s loan prime rates and short-term rates were unexpectedly lowered in July; plans revealed to revive local government finances
Kelvin Lam (Senior China+ Economist)China+
- The low personal saving rate stems from low unemployment and recent rapid growth in asset prices.
- The saving rate will likely rise over the next year as unemployment rises and stock price growth slows.
- Consumer confidence probably ticked up in July, but from a level consistent with soft consumption growth.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Brazil’s current account deficit is widening, driven by both domestic factors and global headwinds.
- Mexico’s trade balance has deteriorated, hit by fewer oil exports and ongoing manufacturing weakness.
- Both nations must address economic uncertainties; tight financial conditions will keep a lid on imports.
Andrés Abadía (Chief LatAm Economist)Latin America
- The ECB’s CES suggests young people’s inflation expectations have increased since the pandemic…
- …This, in turn, implies that tail-risks for inflation have shifted to the upside, and above 2%.
- Relative inflation expectations for women and low-income workers seem correlated with wage growth.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Increased risk appetite and approaching rate cuts led firms to raise finance for the third month in four.
- Consumers continue to plough money into ISAs to take advantage of good deposit rates.
- But we doubt households will save more, as they are already building up real liquid assets at a decent clip.
Rob Wood (Chief UK Economist)UK
- In one line: Fading consumer caution and renewed corporate risk appetite bode well for growth.
Rob Wood (Chief UK Economist)UK
- In one line: Fading consumer caution and renewed corporate risk appetite bode well for growth.
Rob Wood (Chief UK Economist)UK
