Can the world cope with higher interest rates? We expect the most aggressive policy tightening cycle in decades to cause a slowdown in global economic growth, not a severe downturn. The biggest risk is that inflation stays higher for much longer than we anticipate, causing central banks to raise interest rates well beyond neutral levels to quash it. We judge that an extra ~100bp of hikes beyond our forecasts might be enough to cause downside risks to crystallise. 1st June 2022
Russia’s economy is wounded, not screaming in pain Western sanctions have caused activity in certain sectors of Russia’s economy to collapse, but activity has held up reasonably well in key areas such as oil production and less import-dependent manufacturing. What’s clear, though, is that the full effect of sanctions will take years to feed through. This underpins our view that sanctions have severely reduced Russia’s medium-term growth potential. EM Drop-In (4th August, 10:00 ET/15:00 BST): Join our monthly online session on the big issues in emerging markets. In this 20-minute briefing, the team will be answering your questions about debt risks amid global tightening, the latest on the inflation outlook and much more. Register now. 3rd August 2022
Weighing up the relative prospects for stock market sectors We think the macroeconomic backdrop that we envisage is consistent with certain “defensive” sectors of the S&P 500 – utilities, healthcare and consumer staples – outperforming over the rest of this year. 17th August 2022
Private sector well placed for higher rates in major DMs In addition to revealing that higher interest rates had barely affected household and corporate finances, national accounts data for Q1 suggested that, with the exception of households in a handful of medium-sized economies, private sectors are generally well placed to cope when debt service costs rise. 19th August 2022
Is there really such thing as a ‘jobful’ recession? While history shows that recessions can begin even while employment is still rising, the current rate of payroll employment growth is far too strong to be consistent with an economic downturn. By the same token, although we think an outright contraction will be avoided, any recession over the next couple of years would almost certainly coincide with a decline in employment and rise in the unemployment rate. 11th August 2022
We’re less upbeat about OPEC oil supply Concerns about the demand outlook have dragged the Brent crude oil price towards $90 per barrel this week. But, the supply-side concerns which pushed the price over $120 per barrel not too long ago haven’t entirely vanished. Indeed, following the OPEC+ meeting this week, we are now less upbeat on supply. Oil and the Gulf Drop-In (9th Aug): What’s the outlook for oil prices and what does that mean for Gulf economic outperformance? Join economists from our Commodities and Emerging Markets teams for this 20-minute briefing. Register now. 5th August 2022
Gloomy outlook for use of agriculturals in industry Deteriorating global economic growth over the coming quarters will weigh on industrial demand for cotton, natural rubber and lumber. That said, high oil prices will offer some support to cotton and natural rubber prices, and our expectation for rate cuts in the US in late 2023 could boost the price of US lumber. 10th August 2022
The six major markets will not be the only losers Pandemic-accelerated migration patterns were already driving outperformance in the southern states. But they have also brought the poor performance of weaker markets to the fore. With those structural changes likely to continue to play out over the next few years, we expect metros such as Detroit, Indianapolis and Minneapolis to underperform in the coming years. 10th August 2022
Global trends point to a more difficult decade ahead Commercial property wasn’t initially hit by the worsening in economic conditions at the turn of the year, but there are now growing signs of anxiety. Not only that, but even if the economic gloom is short lived and any downturn is mild, we expect structural factors to make for a listless global real estate recovery. In view of the wider interest, we are also sending this UK Commercial Property Update to clients of our European and US Commercial Property Services. 12th August 2022
Emerging Europe Economics Update MNB ends rate hiking cycle, but risks remain After raising its base rate by a larger-than-expected 125bp, to 13.00%, Hungary’s central bank (MNB) announced today that it has now ended its rate hiking cycle and we now forecast the base rate to be... 27th September 2022 · 3 mins read
Emerging Europe Economics Update Energy crisis support won’t avert recessions across CEE Fiscal support to protect households and businesses from sky-high energy prices generally amounts to around 2-3% of GDP across Central and Eastern Europe (CEE). This will cushion, rather than fully... 14th September 2022 · 4 mins read
Emerging Europe Economics Update CEE economies hardest hit by Europe’s energy crisis In this Update, we analyse the impact of surging energy prices in Europe and show that the Central and Eastern European (CEE) economies are the most vulnerable. The share of household disposable... 12th September 2022 · 6 mins read
Emerging Europe Economics Update Poland’s central bank brings hiking cycle to an end The National Bank of Poland (NBP) slowed down the pace of its tightening cycle again today with a 25bp rate hike to 6.75%. There was no new guidance in the communications in terms of the central bank... 7th September 2022 · 3 mins read
Emerging Europe Economics Update Russia’s gas squeeze: the impact so far and next steps Russia’s squeeze on the gas market helped it to generate $50bn (6% of GDP) in total gas exports in the first half of this year, 2-3 times more than normal. Russia’s balance of payments is in such a... 25th August 2022 · 6 mins read
Emerging Europe Economics Update Bank of Israel steps up tightening with a 75bp hike The Bank of Israel stepped up its tightening cycle with a 75bp interest rate hike, to 2.00%, today as it became more concerned about the strength of inflation. Our previously-hawkish view for interest... 22nd August 2022 · 3 mins read
Emerging Europe Economics Update CBRT rate cut sowing the seeds of next currency crisis Turkey’s central bank stepped up its fight against economic orthodoxy by cutting its one-week repo rate by 100bp, to 13.00%, despite the backdrop of inflation at 80% and an extremely poor external... 18th August 2022 · 4 mins read
Emerging Europe Economics Update Central and Eastern Europe GDP (Q2 2022) GDP in Hungary and Romania continued to expand strongly in Q2 by 1-2% q/q, but the Czech and Slovakian economies barely grew at all and there was a shocking 2.3% q/q contraction in Poland. Looking... 17th August 2022 · 4 mins read
Emerging Europe Economics Update EU & the rule of law dispute: why do EU funds matter? EU funds will provide a key boost to economies in Central and Eastern Europe in the coming years as the region navigates a challenging macro environment and slowing global growth. Disputes with the... 10th August 2022 · 4 mins read
Emerging Europe Economics Update Qatar’s LNG boost still a few years away With Russia tightening its squeeze on supply of gas to Europe, governments are turning their attention to other major gas exporters such as Qatar to try to fill the gap. But Qatar’s gas sector is... 9th August 2022 · 6 mins read
Emerging Europe Economics Update CNB brings its tightening cycle to an end The Czech National Bank became the first major EM central bank to end its tightening cycle after it left its policy rate on hold at 7.00% today. The communications were not as dovish as we had... 4th August 2022 · 3 mins read
Emerging Europe Economics Update Russia’s economy is wounded, not screaming in pain Western sanctions have caused activity in certain sectors of Russia’s economy to collapse, but activity has held up reasonably well in key areas such as oil production and less import-dependent... 3rd August 2022 · 4 mins read
Emerging Europe Economics Update Europe’s energy crisis: the impact on Russia & CEE The decision by Gazprom to cut natural gas supplies to Europe to 20% of capacity has caused gas prices to surge and raised the risk of energy shortages during the winter. A full gas cut-off would... 27th July 2022 · 6 mins read
Emerging Europe Economics Update Weak leu not a silver bullet for Romania’s CA deficit Romania’s current account deficit is likely to rise to almost 9% of GDP this year. While a weaker currency would help to reduce this shortfall, structural reforms are needed to boost competitiveness... 21st July 2022 · 4 mins read
Emerging Europe Economics Update Hungary: policy tightening now a severe headwind The 200bp increase in the base rate (to 9.75%) by Hungary’s central bank (MNB) today has resulted in the most aggressive amount of monetary tightening in decades. With fiscal policy tightening too and... 12th July 2022 · 3 mins read
Emerging Europe Economics Update CEE current accounts now in worrying territory Surging global commodity prices have hit Central and Eastern European economies like a tsunami in recent months, causing a severe terms of trade shock and current account deficits to blow out. These... 6th July 2022 · 4 mins read
