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
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