Archive

June 17, 2025
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US/China: Sprint vs Stamina

  • Last week’s US/China trade talks underlined the extent to which Beijing has the upper hand in terms of both leverage and willingness to dig in. Avoiding a re-escalation at the end of the current 90-day truce, therefore, depends on Washington giving more ground.

By Alastair Newton

June 16, 2025
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Euro Area Wage Costs Closer To Target

  • Non-wage labour costs rebounded in Q1, damping the overall slowdown to a surprisingly modest extent after the crash in negotiated wage growth revealed in May.
  • Unit labour cost growth has encouragingly slowed below 3%, with the latest impulse only 0.6% q-o-q. Any further easing here could encourage monetary easing to resume.
  • Stability at a low unemployment rate still suggests the policy setting is close to neutral, so we doubt disinflationary pressures will mount further and forecast no more rate cuts.

By Philip Rush

June 12, 2025
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UK: Retreating To Trend Again

  • Residual seasonality shocked the consensus again, this time on the downside, as the spurious surge is replaced with stagnation for the rest of the year in our view.
  • The 0.3% m-o-m decline dragged GDP back toward its trend, wiping out the highly supportive statistical carryover effect for Q2, which we now forecast at 0.1% q-o-q.
  • BoE forecasts are on track, allowing the MPC’s bias to slow easing to materialise with a pause. We expect cuts to keep being rolled later, with no more delivered in this cycle.

By Philip Rush

June 11, 2025
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US Consumer Pricing Still Ignores Tariffs

  • Another downside surprise in headline US inflation reflected the lack of pass-through from tariff increases, with headline and core rates of only 0.1% m-o-m in May.
  • Commodities, less food, energy and car prices stalled as airfares and apparel fell again. But services (ex-shelter) inflation stayed too high to be consistent with the target.
  • Low headline rates raise dovish political pressure and the risk of a cut, but the tight labour market should encourage the Fed to keep rolling potential cuts later.

By Philip Rush

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