Archive

December 03, 2024
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UK Revisions Raise Inflationary Pressure

  • Updated UK population estimates and projections drove a 402k upward revision to the employment level while unemployment was broadly unchanged.
  • With output and wages unaffected, productivity was weakened into a slight trend decline while implied unit wage costs are 1.3pp higher and stuck above 5% y-o-y.
  • Full typical passthrough to consumer prices reinforces the underlying inflation problem. The BoE should discount labour market data and cautiously hold rates in December.

By Philip Rush

November 29, 2024
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ECB Gradualism Secured By Reflation

  • Euro area inflation increased by another 0.3pp in November to 2.3% y-o-y. Headline surprises were small and balanced, but the resilience doesn’t fit dovish pricing.
  • Core and services price inflation rates were little changed at above-target levels. They will likely rise again in December and stay too high throughout 2025.
  • The ECB believes policy is tight and demand is too weak, allowing it to cut again in December. Gradualism is required to avoid over-easing amid ongoing data resilience.

By Philip Rush

November 28, 2024
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EA Activity Sentiment Is Floating Fine

  • Gloomy PMI data increasingly appear noisy as the equivalent ESI surveys broadly reveal resilient output and employment across sectors and countries.
  • Price expectations are also at or above their long-term averages, signalling sticky inflationary pressures rather than any dovish shock to below-target levels.
  • The ECB faces a consistent hawkish signal in a mirror of the dovish dataset that pushed it to cut in October. It should resist a 50bp cut in December, supporting EURUSD.

By Philip Rush

November 27, 2024
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Green Bubble Deflating

  • Donald Trump’s re-election breaks global momentum in green policies. The COP29 flop demonstrated the green bubble’s deflation amid a return of much-needed pragmatism.
  • The EU and UK face competitive pressure to soften their few plans to lower emissions. For example, mandating synthetic fuel would pivot clear from China’s EV advantage.
  • Preserving the non-green capital stock would reverse some stagflationary pressures. Adaptation remains the answer to climate change, even if many don’t want to hear it.

By Philip Rush

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