Capital Economics

Compared to other independent providers of macroeconomic research, we have three outstanding qualities:

• The quality and breadth of our staff. Unlike some economics consultancies, we are not a one or two man band. We employ more than 30 economists and a similar number of support and administrative staff. This means that, for economic research, our staffing is higher than almost all banks or brokerage houses anywhere in the world. Moreover, our key people all have extensive front-line experience of financial markets. Our high staffing levels and wide expertise give us strength in depth, and enable us to provide the full service which clients need.
• The style and content of our research. It is concise, timely and written in a jargon-free and user-friendly style. We are acutely conscious of the competing pressures on our clients' time. Accordingly, our written research is designed so that clients can, if they so wish, quickly glean the essential message without reading the whole document.
• The flexibility of our services. Our research is provided in several different subject streams and each stream is available in a series of packages, covering different combinations of publications, presentations and personal contact. This allows clients to select subject areas and packages which exactly suit their needs - and their budgets. Moreover, we are happy to include several people at the same institution on our lists to receive research, all covered by the one subscription. And we are happy to include some people to receive some sorts of research and not others, while other people receive the lot - whatever arrangement best suits the client.

The quality of our staff shows up in our track record. We can point to many recent successful predictions - often as a lone voice.

Throughout the global credit crunch and economic downturn that began in 2008, Capital Economics was well ahead of other forecasters in anticipating the seriousness of the crisis and its effects on economies and financial markets. In particular, Capital Economics was:

• one of the first to warn about the over-valuation of house prices in the US, UK and in many other developed countries, and about the wider implications;
• among the first forecasters to identify the growing threat to the US economy from a slump in the housing market, in a prescient Focus piece "The coming US recession" which was published in late 2005;
• among the first to predict that official interest rates would fall close to zero in many advanced economies and remain low for a prolonged period;
• well ahead of the pack in predicting the fundamental economic and fiscal problems that have hit the euro-zone so hard and among the first to warn of the prospect of a default by one of its smaller economies.

More recently:

• In 2009 we stressed that US official interest rates would remain near-zero for several more years. Early in 2010, we correctly predicted that 10-year US Treasury yields would fall to 3% when most other forecasters expected a surge above 5%. At the start of 2011 we forecast a further decline, when again most expected yields to rise sharply. We were also one of the first to predict that official interest rates in Canada would be held for a long period at just 1.0%.
• When UK interest rates were cut to 0.5% in March 2009 we argued that they could stay at this level for as long as five years in response to prolonged fiscal tightening, weak bank lending and a sluggish economic recovery. At the start of 2010 we were one of only two forecasters predicting that rates would still be at 0.5% at the end of 2011, where they remain today.
• As early as July 2010 we said that it was more likely than not that the euro-zone would break apart within five years - a prospect that others now recognise is no longer unthinkable. We also warned of the mounting risks in Emerging Europe before the crisis of 2008-09.
• For emerging markets in general, and particularly in Latin America, we were among the first to call the peak in inflation and the turn in the interest rate cycle in 2011.
• We were among the first to predict that Emerging Asia would enjoy a V-shaped economic recovery in 2009 and 2010, with Asian currencies among the strongest. Our proprietary measure of Chinese economic activity enabled us to spot the pick-up in China's growth during the summer of 2010 at a time when many were still warning of a hard landing. We were also quick to spot the recent slowdown.
• We correctly forecast a strong rebound in Japan in 2010 but were also right to predict that the economy would soon be back in recession, even before the earthquake in March 2011.
• We launched our commodities service in May 2011 with a warning that commodity prices had reached levels that were unsustainably high and were likely to fall sharply. By the end of September the benchmark S&P GSCI index had fallen by around 25%.