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Banks and Credit

Consumer Prices (Jul.)

The fall in headline inflation to 7.6% in July left it lower than the Bank of Canada’s recent forecast but, amid continued broad upward pressure on core prices, we still judge that the Bank is more likely to opt for a 75 bp interest rate hike in September rather than drop down to a 50 bp move as many now expect.

16 August 2022

Risk of a bigger and longer-lasting squeeze on real incomes

The prospect of a bigger rise in utility prices in October and in the first half of 2023 means the risks to our forecast for CPI inflation to rise from June's 40-year high of 9.4% to a peak of 12.5% in October are skewed to the upside. This increases the risk of a bigger and longer-lasting squeeze on households' real incomes and supports our view that consumer spending will be at the epicentre of a recession in 2022/23.  

12 August 2022

Demographic woes persist, tourists waiting at the gate

An exodus of long-term migrants contributed to the 0.6% fall in Japan’s population last year but with border controls loosened since March net migration is bouncing back strongly. Even so, we still see GDP growth settling around 0.5% over the longer-term as a shrinking workforce offsets productivity gains. Meanwhile, Japan remains a highly popular tourist destination and once the onerous procedural requirements for entry are lifted, probably sometime in Q4, tourist arrivals and spending should rebound strongly.

12 August 2022
More Publications

Norges Bank has further to go

The Norges Bank said in June that it was likely to raise its policy rate by 25bp at its meeting next week, but we now think it is more likely to go for a 50bp hike. Whatever it decides on interest rates, we expect it to signal strongly that further hikes will be needed in the coming months.

Rise in delinquencies not a major threat

The rise in new delinquencies on consumer loans over the first half of the year mostly reflects rising interest costs. With debt levels low, real incomes on track to begin rising again amid a drop back in inflation and the labour market holding up well, that rise in delinquencies is unlikely to turn into a surge.

Consumer Prices (Jul.)

Consumer prices were unchanged in July and there's a good chance that prices will fall outright in August. With core consumer prices increasing by a more modest 0.3% m/m last month, which was a 10-month low, we still think the Fed will hike interest rates by 50bp at the upcoming meeting in September. CPI Drop-In (10th Aug): Will July finally mark the turning point for US inflation? Join our US Economics team for a briefing shortly after the CPI release for a briefing on the inflation outlook and the Fed response. Register now.  

Drop in productivity most likely a statistical mirage

The 2.5% slump in productivity over the past year – the worst since records began in 1948 – is another illustration of the chasm that has opened up between the GDP and employment figures. The only plausible explanation to our minds is that one or both of those series will be revised over the coming months, leaving productivity growth stronger and unit labour cost growth weaker. CPI Drop-In (10th Aug): Will July finally mark the turning point for US inflation? Join our US Economics team for a briefing shortly after the CPI release for a briefing on the inflation outlook and the Fed response. Register now.  

Will Canadians retire themselves into a recession?

The sharp increase in retirements this year presents downside risks to our forecasts for employment and, with GDP growth already faltering, further raises the probability that economic activity will contract.

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