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Soft household formation to curb US housing

The recently released Census Bureau’s Annual Social and Economic Supplement (ASEC) brought sobering news for the US housing market: new household formation slowed significantly, to 405,000 in 2016, the lowest level since 2009 (+357,000), compared with 1,232,000 in 2015. In other terms, the number of households grew only 0.3% last year, compared with +1.0% in […]

House View, September 2017

Asset allocation There are two ways to hedge geopolitical risk: buying gold or buying protection for portfolios. We prefer the latter, to take advantage of current low volatility and because gold’s gains so far this year reflect the depreciation of the dollar. We remain constructive on DM equities, particularly the euro area and Japan. We […]

ECB hints at October decision on QE

The ECB left its assessment and communication broadly unchanged at its meeting on 7 September. Draghi confirmed that “the bulk of the decisions” on QE extension should be made at the 26 October meeting. The statement mentioned recent currency volatility as “a source of uncertainty” to be monitored in the future, and the staff projections […]

Internet disruption is affecting the laws of economics

The US economy is challenging ‘textbook’ macroeconomics. The labour market is tight, but wage growth is paltry. Growth is chugging along steadily and the output gap (the difference between actual GDP and its theoretical trajectory at full potential) is gradually closing, but inflation remains muted. Clues as to why things are not panning out the […]

The SNB still in wait-and-see mode

The SNB’s 14 September meeting could be one of the most interesting in a while, as it comes just after a period when the Swiss franc has witnessed significant depreciation, mainly against the euro. The key focus of the SNB’s September 14 meeting will be its assessment of exchange rate moves. We do not expect […]

Long-term US dollar cycle has probably peaked

The US dollar index has declined significantly this year, challenging our constructive view on the US dollar. Disappointment regarding potential US tax reform, the decline in US inflation, the significant overvaluation of the greenback and strong economic recovery in the rest of the world all help explain a large part of the US dollar’s decline. […]

US job creation is still healthy, but wage growth remains modest

Non-farm payrolls (NFPs) rose 156,000 in August, bringing the three-month average to a still-robust 185,000/month. The three-month average stands higher than the 12-month average of 175,000, suggesting that underlying momentum in the US labour market – and the broader economy – remains healthy. The unemployment rate increased marginally (+0.1%) to 4.4%, but this remains within […]

Slow-motion exit from QE

The ECB will likely prepare for a cautious, flexible, slow-motion exit at its Governing Council meeting on 7 September, tasking its committees to study all policy options for 2018. We continue to expect an announcement in October that quantitative easing (QE) will be extended for six months, but at a reduced pace of EUR40bn per […]

Chinese PMI point to continued expansion

China’s official manufacturing PMI in August came in at 51.7, rising slightly from July (51.4), and remaining firmly in expansionary territory. The Markit PMI extended its ascendance for the third consecutive month to reach 51.6 in August. Domestic demand seems to be holding up well. The production, new orders and imports sub-indices of the official […]

Upward momentum in euro area inflation is building

Euro area flash HICP inflation rose to 1.5% y-o-y in August from 1.3% in July, while core inflation remained stable at 1.2% year on year. In our opinion, modest upward price momentum has started to build over the past few months, with core inflation likely to edge slightly higher from here. Euro area core inflation […]

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