All-property yields have stabilised since the start of the year and alongside continued rental growth, that means total returns were more-or-less flat during Q1. (See Chart 1.) But, while the worst is over, the economy is still set for a mild recession, …
28th April 2023
Today’s news on wages and inflation should have eradicated any remaining doubts that the Fed will hike interest rates by an additional 25bp next week. According to the Employment Cost Index (ECI), first-quarter private wages increased by 1.2% q/q, with …
Decent first quarter likely to be followed by contraction The small rise in GDP in February points to a healthy first-quarter growth rate but, with the preliminary estimate pointing to a contraction in March and activity set to suffer in April due to the …
Industry to continue facing headwinds Growth in India’s core infrastructure industries slowed in March, indicating that some of the resilience in the industrial sector at the start of the year may be fading. Domestic and external headwinds mean a …
Strength at start of 2023 unlikely to be sustained The 1.1% q/q rise in Mexican GDP in Q1 marked a pick-up from the end of last year, but a fresh slowdown is on the cards as a recession in the US and tight policy at home will take their toll. The outturn …
Inflation figures suggest 50bp ECB hike next week still likely National inflation figures released today suggest that euro-zone headline and core inflation edged up in April. That adds to the reasons for the ECB to opt for a 50bp hike at its meeting next …
The slowdown in European investment intensified in Q1 as transactions more than halved year-on-year. This was perhaps unsurprising given the ongoing price correction amid one of the sharpest tightenings of financial conditions on record. But, with …
Credit Suisse’s Q1 results, released this week, revealed the scale of the crisis that led to its demise. The two key pieces of data we learnt were that the bank saw deposit outflows of CHF67bn in the quarter and that, at its peak, it borrowed CHF168bn …
CEE edges closer towards monetary easing Central banks across Central and Eastern Europe (CEE) provided firmer signs this week that, with inflation now declining , monetary loosening may soon be on the cards. But there are still clearly big concerns that …
In our view, the role of UK pension funds in deterring firms from listing on the London Stock Exchange has been overstated of late. To the extent that higher valuations are the reason firms find a US listing more attractive, we think there is good reason …
CBR keeps rates on hold, hike still on the table Russia’s central bank maintained its hawkish tone today as it left interest rates unchanged at 7.50% and continued to emphasise pro-inflation risks in the economy. So far these risks do not seem to be …
Alongside the publication of our Q2 UK Housing Outlook this week, we held a series of roundtable meetings for clients in London. Here we sum up our thoughts on three key questions which recurred throughout the day: What is the biggest risk to our …
Economy expands marginally but domestic demand falling The very small increase in GDP in Q1 means a technical recession has been avoided by a whisker. However, the economy has essentially stalled as domestic demand has been hit hard by the energy shock …
Taiwan’s GDP contracted sharply in the first quarter of the year, as a slump in exports put the economy into a technical recession. We think the economy will struggle over the coming quarters as weak external demand and a fading reopening boost drag on …
Activity/emissions links to weaken over time The release of our latest China Activity Proxy (CAP) this week showed that the Chinese economy bounced back rapidly in Q1 following the ending of its zero-Covid strategy. Recall that the CAP is our attempt to …
Economy in recession, weak recovery ahead Taiwan’s GDP contracted sharply in the first quarter of the year, as a slump in exports put the economy into a technical recession. We think the economy will struggle over the coming quarters as weak external …
Germany disappoints, while Italy powers ahead National GDP data released so far suggest that it is touch and go whether the euro-zone economy expanded in Q1, though it did avoid a contraction. We expect economic growth to remain very weak in the coming …
Fall in the rupee this year likely to be limited The rupee is up by around 1% against the US dollar so far this year, leaving it in the middle of the pack among other EM currencies. (See Chart 1.) Chart 1: Currencies vs. US$ (% change, YTD) Sources: …
Positive growth in Q1 despite slumping domestic demand The increases in GDP in France and Spain in Q1 bode well for the euro-zone aggregate data to be released later this morning. We suspect that activity in both countries will lose some momentum later …
The Bank of Japan predicted that inflation will fall well below its 2% target in FY2025 when it kept policy settings unchanged today. And while it pledged to conduct a review into its policy measures, the results will only be unveiled next year. The …
RBNZ to relax lending rules On Wednesday, the RBNZ unveiled its proposal to ease Loan-to-Value Ratio (LVR) restrictions on mortgage lending by banks. With house prices now 18% below their January 2022 peak, the RBNZ has judged that threats to financial …
Yield Curve Control here to stay for now The B ank of Japan predicted that inflation will fall well below its 2% target in FY2025 when it kept policy settings unchanged today. And while it pledged to conduct a review into the Bank’s policy measures, the …
Export downturn not over yet Export volumes rose for the second consecutive month in March and with PMIs in Japan’s main trading partners rebounding, the further fall in export volumes we had pencilled in for Q2 looks increasingly unlikely. We’ve now …
Economy may not have shrunk in Q1 The end-month data rush only adds to the dilemma the Bank of Japan is facing. While labour market conditions are now easing in earnest, underlying inflation is set to surpass 4% at the national level. On balance though, …
Resilience in activity won’t last The further rise in industrial production and retail sales in March means that the economy may not have shrunk in Q1 after all, but with recessions in major trading partners looming we still expect GDP growth to be weaker …
Labour market loosening in earnest Labour market conditions loosened visibly in March and there’s room for it to loosen further given the recession we’re expecting in the second half. Meanwhile inflation reversed course and increased in April. Our …
Persistent and deepening electricity outages in South Africa are wreaking economic havoc. Almost half of generating capacity was offline this month, triggering severe “loadshedding”. Output in energy-intensive sectors – such as mining and manufacturing – …
27th April 2023
The renminbi surpassed the US dollar to become the most-commonly-used currency in China’s cross-border transactions for the first time last month. Part of the increase – the part that has received plenty of attention – is due to wider adoption of renminbi …
Resilience in much of the global economic data of late has raised questions over whether the recessions we expect in most developed markets (DMs) will materialise later than we had initially thought. As such, we now forecast most “risky” assets will reach …
We think the Bank of Japan will abandon Yield Curve Control at Friday’s meeting Euro-zone GDP probably rose slightly in Q1 (10.00 BST) We expect the Central Bank of Colombia to raise its key policy rate by 25bp (19.00 BST) Key Market Themes We think the …
The housing market will face growing headwinds from tighter credit conditions, slowing income growth and rising unemployment as the economy enters a recession this year. That will offset some of the impact of lower mortgage rates, and means housing market …
The global energy market is in the early days of a radical redesign due to the need to cut greenhouse gas emissions. In this Focus , we introduce our long-term energy market forecasts, which are characterised by continued growth in energy consumption and …
We estimate that employment growth continued to trend lower in April, with non-farm payrolls increasing by a more moderate 180,000. That would be the smallest monthly gain in more than two years, but still a healthy enough increase when compared with the …
Inflows into EM bond and equity markets have picked up sharply in the past month, with flows into Asian equity markets looking particularly strong. That said, if we right that the dollar will rebound, we suspect that these inflows will drop back. That’s …
We think disappointing global growth will be a headwind for “risky” assets in developed markets (DMs) during the second half of this year. So far, this month has been a tale of two halves . Over the first part of the month, investors looked like they were …
Economy starts the year on a weaker footing The disappointing 1.1% annualised rise in first-quarter GDP indicates that the economy had less forward momentum at the start of this year than previously thought. We continue to expect the drag from higher …
Sentiment fell further in Q1 The RICS Q1 survey indicated confidence fell further in the opening months of the year but remains substantially above the lows seen during the height of the pandemic. However, we expect sentiment to drop further in the coming …
With Egyptian policymakers dawdling on the IMF’s reform demand, pressure is growing for another devaluation of the pound and investors are increasingly fearing that a sovereign default could follow. For now at least, there is still a path out of the …
Calm before the storm? Turkey’s central bank (CBRT) left its key policy rate on hold at 8.50% again today, but all eyes are now firmly on next month’s election for a possible change in the stance of monetary policy. Polls are close, but an opposition …
ECB most likely to raise its deposit rate by 50bp next week. Hawks can point to strong activity, high core inflation and tight labour market. We forecast the deposit rate to hit 4% and stay there for over a year. While it is not a done deal, we think the …
We expect the Norges Bank to follow through on its plan to raise its policy rate by 25bp next week, to 3.25%. We have pencilled in a peak of 3.5% in June but the risks are skewed towards it reaching a higher level, particularly if the krone keeps falling …
Business surveys signal resilience in activity The EC’s economic sentiment indicator for April remained consistent with the economy expanding at the beginning of Q2. It also suggests that price pressures (though easing) remain high and that labour …
The replacement of Colombia’s market-friendly finance minister José Antonio Ocampo with a close ally of President Petro is likely to lead to a sell-off in Colombia’s financial assets when markets open later today. This is especially worrying given the …
Fall in sentiment points to tepid growth The EC’s Economic Sentiment Indicators (ESIs) for Central and Eastern Europe generally fell slightly in April, with our regional measure declining for the first time in six months. On past form, the ESIs suggest …
Wage growth in the euro-zone is likely to remain above the level compatible with 2% core inflation this year and only gradually return to a more sustainable level thereafter. For the past year, wage growth has run well above the 3% y/y or so compatible …
Occupier demand ticks up, but further falls in rents and capital values likely After a weak end to 2022, surveyors reported that occupier demand was essentially flat in Q1. All sectors saw an improvement and that suggests take-up will pick-up in Q2. That …
The turmoil in the US banking system is likely to set off the worst decline in Japan’s commercial real estate prices since the Global Financial Crisis by prompting foreign investors to stop buying Japanese assets. In the worst-case scenario, GDP will …
Sweden dodges recession for now News that the Swedish economy expanded slightly in Q1, and thereby narrowly avoided a recession, adds to the evidence that economic activity in Europe as a whole has held up well in Q1. That said, we still think Sweden is a …
The US dollar has weakened again over the past month or so, leaving it only somewhat higher in trade-weighted terms since the start of its rally at the start of 2022. In other words, the greenback has nearly reversed all of its gains from the Fed …
26th April 2023
