Archive

HEW: Cockroaches Startle Pricing

• Losses on bad and fraudulent US loans raise the risk that more cockroaches will emerge, nourished by monetary policy stimulating asset prices outside of recessionary regimes.
• Market rates fell on this, while macro data didn’t offer direction as UK Q3 GDP kept tracking 0.2%, EA inflation was confirmed, and UK labour market data were mixed.
• Next week’s UK inflation data should reveal a rise, with the CPI reaching 4%. Delayed US CPI data will provide a rare signal more relevant to the Fed’s likely decision to cut.

By Philip Rush

UK: Unseasonably Resilient In Q3

• Slight growth in August sustains an above trend level of activity and is tracking to a 0.2% q-o-q pace for Q3, matching our forecast and the consensus, but disappointing the BoE.
• The ongoing slowdown in service sector activity repeats residual seasonality that would leave a trough in two months, but there is slightly more resilience this year.
• Policymakers shouldn’t react to statistical noise, and are unlikely to amid ongoing excesses in underlying inflation that a stabilising labour market wouldn’t break.

By Philip Rush

UK: Mixed Messages On Labour Market

• Most narratives can find some support in the latest labour market report, preserving uncertainty that should keep the BoE on hold at least until some clarity emerges.
• Unemployment has increased (LFS) or stabilised (payrolls), while pay is shockingly resurgent (inc-bonuses), slowing as expected (ex-bonus) or stagnating (private pay).
• Weakness isn’t as clear as the consensus and press sometimes make out, but concerns aren’t invalidated. We still expect resilience to preserve excess inflation hawkishly.

By Philip Rush

MAS Holds Course on Tightening

• MAS holds policy steady as Q3 GDP beats 2% consensus with 2.9% growth, core inflation at 0.5% for 2025.
• The central bank is less dovish on 2026 easing as the output gap stays positive through 2025, near zero in 2026.
• Tariff risks are contained as pharma exemptions are negotiated, and AI investments support manufacturing resilience.