Archive

HEM: Better Never Than Late

• Companies are smoothing out volatile trade policies
• Activity remains strong and labour markets are tight
• Underlying price and wage inflation is still too high
• Markets expect cuts to resume later, contrary to history
• The risk of rate hikes in 2026 is widely underappreciated

Underlying GDP Trends Unbroken

• Imports frontloaded before tariff rises seemingly disappeared in broadly unrevised US GDP data. Underperformance is exaggerated as an unwind, or revisions, are likely in Q2.
• Final domestic private sales maintained their rudely bullish US trend while drifting back towards stagnation in the EA and are distorted by residual seasonality in the UK.
• Superior US productivity trends preserve its structural attractiveness. Unemployment’s stability also suggests monetary conditions are near neutral, with easing unnecessary.

By Philip Rush

US vs EU: Crying ‘Wolf’?

• Ursula von der Leyen’s 25 May call with Donald Trump can be seen as a ‘win’ for the US President following his threat to impose 50% tariffs on the EU from 1 June. Alternatively, one could see his reversion as the latest manifestation of the TACO principle.

By Alastair Newton

PMI Goods Vibes

• Broad improvements in the flash manufacturing PMIs demonstrate ongoing resilience relative to consumers’ bad vibes. Goods trade seemingly shrugged off the tariff shock.
• The UK was alone in weakening, but it is more susceptible to bad vibes, showing more noise than signal. April’s spurious lows were revised away and may repeat or rebound.
• Transmission to unemployment also isn’t happening, leaving little case for easing unless recessionary pressures build, and the PMIs still hawkishly suggest that isn’t the case.

By Philip Rush