Mexico: Exports Loosing Traction

May 20, 2024 2:38 PM UTC

At the beginning of the year, Mexico's exports are losing traction, stagnating as imports surpass exports. This could be due to adjustments to U.S. demand and inflation effects. With internal demand cooling and the U.S. economy decelerating, growth may shift to Mexico’s internal economy, bolstered

China: Lopsided Growth and New Housing Measures

May 17, 2024 6:54 AM UTC

Overall, the April industrial production suggests Q2 GDP should be reasonable, but weak retail sales suggests H2 2024 can be disappointing. We stick with a 4.6% forecast for 2024 GDP growth.    

Brazil: Possible Impacts of the Floods

May 16, 2024 1:07 PM UTC

Unprecedented floods in Rio Grande do Sul, a state that contributes 6.4% to Brazil's GDP and 13.3% to its agricultural production, have submerged several cities. The immediate halt in economic activity may reduce Brazil's Q2 GDP by up to 0.4%. The federal government is increasing aid, potentially ra

U.S. CPI and Retail Sales Show Some Loss of Momentum in April

May 15, 2024 1:14 PM UTC

April CPI has provided some relief by coming in lower than expected at 0.3% on the headline and while the 0.3% core is on consensus, it is on the soft side at 0.292% before rounding. Retail sales have also lost some momentum in April, unchanged overall, up 0.2% ex autos but down 0.1% ex autos and ga

Eurozone: Consumers - Still Missing?

May 15, 2024 10:34 AM UTC

Revised national account data confirmed the upside surprise in the preliminary data with EZ GDP rising 0.3% q/q.  The question is whether this emergence from the modest H2 2023 recession is the start of more sustained momentum.  We think not, mainly due to what are still weak consumer fundamentals

China: Too Much Debt In Some Sectors

May 15, 2024 9:55 AM UTC

While part of corporate debt is quasi government (SOE and LGFV’s) and China creditors can be pursued to rollover by the authorities for larger borrowers, households and part of the private sector are focused on the previous buildup of debt.  With China authorities reluctant to aggressive ease fis

BCB Minutes: Worsening Conditions Demand Caution

May 14, 2024 2:35 PM UTC

The Brazilian Central Bank's latest meeting revealed a shift in forward-guidance, reducing the cut from 50bps to 25bps. While no immediate actions were taken, the minutes highlighted worsening conditions in three key areas: External Environment, Fiscal, and Economic Activity. Despite split votes on

Preview: Due May 15 - U.S. April CPI - Core rate not quite as strong as the preceding three months

May 14, 2024 1:48 PM UTC

We expect April CPI to rise by 0.4% overall for a third straight month but with the ex food and energy pace slowing to 0.3% after three straight months at 0.4%. We expect the strong start to the year to fade as the year progresses, though April PPI strength was disappointing and inflationary pressur

UK Labor Market: Further Signs of Resilient Wage Pressure But Soggier Activity More Notable

May 14, 2024 8:40 AM UTC

As we have underscored repeatedly, the BoE has come to regard the official ONS average earnings data with some suspicion given response rates to the surveys that have fallen towards just 10%.   But the BoE will not be able to dismiss the latest earnings data given that alternative (and more author

The Aussie Chapter 3: Risk

May 14, 2024 12:00 AM UTC

In "The Aussie", we will look into the "well-known "correlation among the Aussie and well-known benchmark to give our readers a closer look towards factors that have been affecting the movement of the Australian Dollar. In Chapter 3, we will look into the performance of the Aussie against major equi

UK CPI Inflation Preview (May 22): Inflation to Fall Further and More Broadly

May 13, 2024 12:10 PM UTC

It is very clear that labor market and CPI data are crucial to BoE thinking about the timing and even existence if any start to an easing cycle.  But perhaps the CPI data is the most crucial making the looming April data all the more important for markets as they weigh the chances of an initial rat

Asset Allocation 2024: Tricky Seven Months Remaining

May 10, 2024 1:06 PM UTC

Fed easing expectations for 2025 and 2026 can shift from a terminal 4% Fed Funds rate towards 3%, as the U.S. economy slows due to lagged tightening effects.  Combined with Fed easing starting in September this should mean a consistent decline in 2yr yields.  However, 10yr U.S. Treasury yields wil

Mexico CPI Review: 0.2% Growth in April

May 9, 2024 6:11 PM UTC

April's CPI data, despite a 0.2% m/m growth, reveals a significant y/y uptick to 4.6% from March's 4.4%, challenging norms due to electricity tariff adjustments. Core CPI maintained stability with a 0.2% increase, while Core Goods CPI rose by 0.3% and Services CPI by 0.1%, accumulating a 5.2% y/y gr

BoE Review: Data Dependent Easing Bias Clearer?

May 9, 2024 12:52 PM UTC

There was little surprise that Bank Rate was kept at 5.25% for the sixth successive MPC meeting, nor that the dissent in favor of an immediate rate cut doubled to two as a result of Dep Gov Ramsden confirming more dovish leanings.  The updated projections at least validated the rate path discounted

CBRT Lifts End-Year Inflation Forecast to 38%

May 9, 2024 10:22 AM UTC

Bottom Line: Central Bank of Turkiye (CBRT) released the second quarterly inflation report of the year on May 9, and lifted end-year inflation prediction from 36% to 38% citing that the rebalancing process for demand will be more delayed compared to what was projected that in the first inflation rep

China Equities: A Tactical Play

May 8, 2024 2:20 PM UTC

China equities can see a tactical bounce of 5-10% in the coming months.  Cheap valuations and  underweight global fund positions means that the scale of pessimism only has to get less bad on the economy and China authorities attitude towards businesses.  While we see a tactical opportunity, we do

Ukraine War Update: Major Russian Offensive is Expected This Summer Despite U.S. Military Aid

May 8, 2024 12:06 PM UTC

Bottom Line: The offensives at the front lines started to pick up steam after March/April as the Russian forces plan for their larger summer 2024 offensive operation, aiming to seize more territory before the U.S. presidential elections in November. In the meantime, U.S. approved a $61 billion warti

Sweden Riksbank Review: Biting the Bullet

May 8, 2024 8:24 AM UTC

It very much seemed to be a question of when, not if, as far as policy easing is concerned for the Riksbank.  In this regard, albeit surprising in terms of timing, the Riksbank delivered, cutting its policy rate by 25 bp (to 3.75%), despite clear concerns it has flagged about recent and continued k

U.S. Fiscal Problems: 2025 More Than 2024

May 7, 2024 1:10 PM UTC

Current real yields in the U.S. government bond market already large reflect the large government deficit trajectory.  Even so, H1 2025 could see some extra fiscal tensions that add 30-40bps to 10yr U.S. Treasury yields as the post president election environment will either see a reelected Joe Bide

Fed SLOOS on Bank Lending mostly resilient

May 6, 2024 6:27 PM UTC

The Fed’s Q2 Senior Loan Officer Opinion Survey on bank lending practices generally sustains a less negative tone seen in the last survey for Q1, and does not suggest that the Fed need to have any serious concerns about the business investment outlook. 

Preview: Due May 15 - U.S. April Retail Sales - Pause after a strong month

May 3, 2024 5:00 PM UTC

After a 0.7% increase in March, we expect April retail sales to rise by only 0.3%. Ex autos we expect a 0.2% increase to follow a 1.1% rise in March, while ex autos and gasoline we expect sales to be unchanged after a 1.0% increase in March which was the strongest since October 2022.

U.S. April Employment - On the weak side in all key details, following strength in March

May 3, 2024 1:18 PM UTC

April’s non-farm payroll is on the low side of consensus across the board, with a 175k increase (though the 167k private sector rise is only modestly below consensus), with a 0.2% rise in average hourly earnings, a fall in the workweek and a rise in unemployment to 3.9% from 3.8%. The data should

EMFX: Diverging On Domestic Forces Not Less Fed Easing Hopes

May 3, 2024 10:45 AM UTC

While U.S. economic developments, plus Fed policy prospects, will be important in terms of EM currency developments, domestic politics and fundamentals will also be decisive. These can keep the South Africa Rand volatile in the remainder of 2024, given the risk of a coalition government and African

Norges Bank Review: Even More Caution?

May 3, 2024 8:46 AM UTC

Surprising few, the Norges Bank Board left the policy rate at 4.5% for a third successive meeting at its latest Board meeting.  It also retained the thinking first aired at the December meeting, namely ‘policy to stay on hold for some time ahead’ rhetoric, this more formally evident in what wer

Turkiye’s Inflation Continues to Jump in April with 69.8%

May 3, 2024 7:40 AM UTC

Bottom Line: Turkish Statistical Institute (TUIK) announced on May 3 that Turkish CPI ticked up 69.8% annually and 3.2% monthly in April due to increases in transportation, restaurant & hotel and education prices, coupled with the lingering impacts of the wage hikes on the services sector. We feel u

Moody’s Improves Outlook Perspective Due to Higher Growth

May 2, 2024 2:27 PM UTC

Moody’s upgraded Brazil's outlook to positive from stable, maintaining its Ba2 rating, signaling a potential move to Ba1 soon. Strong growth prospects, attributed to institutional reforms, drove this shift. Despite lingering doubts, improved fiscal conditions and anticipated tax reform are bolster

U.S. Unit Labor Costs and Initial Claims suggest inflationary risk from labor market strength

May 2, 2024 12:56 PM UTC

Initial claims at 208k are unchanged at a very low level while continued claims at 1774k are also unchanged, the preceding data revised from 207k and 1781k respectively. The labor market remains tight while unit labor costs saw a significant bounce to 4.7% annualized in Q1.

BoE Preview (May 9): Easing Bias Clearer?

May 2, 2024 11:06 AM UTC

In flagging no need to be dominated by Fed policy, we think that the BoE is not only moving towards rate cuts but the MPC majority may be overtly advertising such a likelihood.  But we do not see any move at the looming May 9 verdict, with Bank Rate again likely to remain at 5.25%. But the accompan

China Politburo: Help for Housing, But No Game changers

May 2, 2024 10:50 AM UTC

Politburo statement in late April suggests extra support for residential property.  However, we see this as being incremental rather than any game changers and we still see residential investment remaining a negative drag on 2024 GDP growth.

FOMC Still Waiting For Data to Justify Easing

May 1, 2024 7:58 PM UTC

The May 1 FOMC statement, and Chairman Jerome Powell’s press conference, while noting recent inflation disappointment, did not deliver a strong pivot in tone. The Fed is still waiting for data to allow easing to take place, but still expects inflation to slow, and looks ready to respond once data

FOMC Notes Lack of Further Inflation Progress, QT to be Tapered in June

May 1, 2024 6:27 PM UTC

The FOMC has left rates at 5.25%-5.50% as expected and added to its statement that in recent months there has been a lack of further progress towards the 2% inflation objective. Otherwise the changes to the statement were fairly minor other than announcing a slowing in the pace of balance sheet redu

Sweden Riksbank Preview (May 8): When, Not If?

May 1, 2024 8:09 AM UTC

It seems to be a question of when, not if as far as policy easing is concerned.  Even at it previous policy assessment in February it was clear(er) that the Riksbank accepted that it could and should make its policy stance less contractionary, at least in conventional terms.  But its last decision

Mexico GDP Review: 0.2% Growth but Still Subpar

April 30, 2024 5:54 PM UTC

INEGI released Mexico's Preliminary GDP for Q1 2024, showing 0.2% growth, slightly above expectations. Annual GDP slowed to 2.0% from 2.8% in Q4 2023. The economy is losing momentum due to tight monetary policy and weakened U.S. demand. Agriculture contracted by 1.1%, Industry by 0.4%, while Service

UK GDP Preview (May 10): Fragile Sideways-Moving Activity Continues?

April 30, 2024 2:19 PM UTC

The economy may have been in only mild recession in H2 last year, but the ‘recovery’ now evident is hardly much better with GDP growth only modestly positive.  Admittedly, coming in as largely expected, and despite industrial action, GDP rose by 0.1% m/m in February accentuating the upgraded 0.

Eurozone Data Review: Less Weak But Soft Domestic Demand Taking Less Toll on Core Inflation?

April 30, 2024 9:29 AM UTC

According to revised official national accounts data, the EZ economy was in recession in H2 last year, albeit modestly so and against a backdrop of marked, if not increasing, national growth divergences. This geographical variation continued into Q1 (Figure 1) where the flash GDP reading exceeded ex

UK Consumers: Rent the Growing Hit to Spending Power

April 29, 2024 2:02 PM UTC

The UK has faced a series of cost-of-living shocks in the last few years.  Some such as the surge in food prices may even be reversing, while it now looks likely the BoE hiking cycle may also start to reverse, although rising market rates may mean little further fall in effective mortgage rates in