Archive

Activity Thaws Into Winter

• The worst services PMIs thawed in November, broadening growth even as averages held steady. Activity in the US services ISM has trended up to exceed the PMI data now.
• A slight fading of stagflationary pressures in the latest US surveys probably balances out in the Fed’s policy trade-off. We still fear that it is easing excessively.
• Rising unemployment rates in the US and UK are concerns not experienced in most of the world. This theme feeds their recent divergence from the global surprise tendency.

By Philip Rush

EA: False Dawn For Disinflation

• A surprise rise in EA inflation to 2.2% in November meant October’s long-awaited dip was a false dawn for a disinflationary consensus exceeded by 0.4pp since June.
• The accumulated extent and the increase in service inflation to 3.5% are concerning, but the latest news was narrowly concentrated in Greece, with other errors being minor.
• Stronger underlying momentum into year-end is preventing the January base effects from driving it significantly below target. The ECB’s good place isn’t breaking dovishly.

By Philip Rush

HEM: Dec-25 Views & Challenges

• Volatile markets and policy guidance washed out, with pricing and forecasts little changed on the month.
• Bailey is biased to ease, but the BoE is awakening to its inflation problem. It should cut less than dovishly priced.
• Higher unemployment could move beyond a structural shift from policy to signal a less elevated neutral rate.

EA: Unsatisfying disinflationary snack

• Slower food price inflation nibbled the EA rate down to 2.1% in October, while services increased to their fastest pace since April. Labour costs are still rising too fast.
• Underlying inflation metrics are broadly a bit beyond target, risking a slight overshoot in the medium term, but the median impulse is reassuring, weighed down by France.
• Energy prices are set to bump inflation around the target in 2026, averaging above the consensus in our view. The ECB would need tightness elsewhere to shift rates, though.

By Philip Rush