June 12, 2025

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

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
June 10, 2025

UK: Some Workshy Start Looking
- A broadly softer labour market report could easily be used to overstate the fundamental significance. Unemployment’s rise was expected and only 0.2pp on the year.
- Employment is growing and redundancies are low, but when the inactive look for work, long-term unemployment rises. Yet the workshy will struggle to compete for jobs.
- Wage growth slowed despite a 0.5% m-o-m impulse. Costs are rising excessively fast, so the BoE still doesn’t have space to keep easing, and we expect no more rate cuts.
By Philip Rush
June 09, 2025

Trade Avoidance Easing Shocks
- China’s crashing exports to the US partly reflect avoidance measures, including rerouting through other countries and marking down import prices to subsidiaries.
- Exports to the EU and UK are only trending slightly higher, making little difference to disinflation. ASEAN countries, and especially Vietnam, are seeing trade surge again.
- The US may clamp down on avoidance measures that have eased the shock so far. It could make a painful example of one to encourage concessions from all trade partners.
By Philip Rush
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