Archive

July 31, 2025
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ECB Job Tightened By Jobs

  • The EA labour market proved tighter than the ECB expected in Q2 as the unemployment rate held at a downwardly revised 6.2%. That is hawkish news to its neutral stance.
  • Most countries still face falling unemployment, suggesting monetary conditions were slightly loose, and avoiding pressure to lower underlying inflation further.
  • A hawkish domestic surprise should keep the ECB on hold, especially with the US trade policy risk fading. Passthrough of past cuts may mean the ECB needs to hike later.

By Philip Rush

July 30, 2025
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Activity’s Tariff Hangover In Q2

  • GDP growth broadly beat expectations again in Q2 on both sides of the tariff disruption. Euro area growth slowed by less, while the US rebounded vigorously.
  • Temporal distortions to demand didn’t open up slack as European supply growth stays stagnant. Surveys suggest it won’t appear in Q3 either as demand growth rebounds.
  • Underlying US GDP growth may have slowed, but the extent is modest and questionable. Rolling resilience should keep delaying rate cuts, preventing them from occurring.

By Philip Rush

July 29, 2025
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UK: Loans Secured Despite Tax Hike

  • Credit extended its rebound far beyond expectations in June. Reformed stamp duty raises costs and housing tenure, but it hasn’t broken the housing or mortgage markets.
  • Demand for loans looks more resilient than banks expected amid easing monetary conditions. Refinancing may not have much effect on cash flow anymore.
  • Higher transaction costs probably won’t break expectations into a downwards spiral, but are now widely cited as a major hurdle, contributing to slower UK activity growth.

By Philip Rush

July 23, 2025
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UK Structurally Unemployed

  • Higher employment taxes can entirely explain the fall in payrolls as the tax wedge hits its highest since 1987, raising our structural unemployment rate estimate by 0.48pp.
  • That could understate the structural shift amid a substantial drop in the threshold, rise in the minimum wage (jobs ban) and benefit rates. Some will go ‘inactive’ on disability.
  • The unemployment rate must rise more than its natural rate to deliver disinflationary pressure sustainably. Our structural estimates suggest it won’t break excess inflation.

By Philip Rush

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