December 03, 2024
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
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
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
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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