Archive

May 22, 2025
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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

May 15, 2025
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UK: Spurious H1 Surge Again

  • GDP’s resurgence caught the consensus off guard, as it failed to recognise the residual seasonality still skewing activity growth into the first half of the year.
  • The 0.7% q-o-q outcome for Q1 matched our forecast and leaves a powerful carry-over to Q2, where GDP seems set to exceed the BoE’s 0.1% forecast at about 0.4% q-o-q.
  • Strength discourages another policy rate cut. Disappointment in H2 is the hangover, but we doubt it will motivate renewed easing amid excessive price and wage inflation.

By Philip Rush

May 14, 2025
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USD Bears Broke The Bandwagon

  • Investors ask whether threats to the USD’s reserve currency status are resting or dead, whereas we wonder if it was ever alive. Commentators routinely overextend narratives.
  • The USD share of allocated FX reserves is already trending downward. A potential acceleration from smaller deficits and higher tariffs would partly offset the impact.
  • Fuller hedging of USD asset holdings abroad may have already reached its limit. We still see more attractive mispricing elsewhere, such as excessively dovish rate curves.

By Philip Rush

May 13, 2025
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UK: Tax Not Breaking Cost Pressures

  • Underlying unemployment rates are broadly stable, despite higher headline and underemployment rates, where the latter lacks relevance to disinflationary pressures.
  • Activity levels are expanding healthily and redundancies fell in April, suggesting no substantial jobs impact from the NICs rise, contrary to dovish fears.
  • Wage growth should slow to accommodate some of the tax cost increase, but there isn’t much evidence yet. Total pay growth is little changed in recent years.

By Philip Rush

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