The Bank of Korea today left interest rates unchanged (at 3.5%) and the accompanying statement and press conference were more hawkish than we had anticipated. Accordingly, we are pushing back the timing of when we think the central bank will start to …
13th July 2023
Demand falls at fastest rate since last October As we expected, the rise in the average quoted mortgage rate from 4.4% in May to 5.1% in June caused agreed sales and new buyer enquiries to slump. The deterioration in market conditions has left surveyors …
This page has been updated with additional analysis since first publication . Exports to shrink further before bottoming out Chinese exports contracted year-on-year in June by the most since March 2020, with export volumes falling to a 6-month low. And …
Last year’s sharp weakening of the yen hasn’t boosted goods exports, not least because most exports are invoiced in foreign currency and exporters haven’t slashed prices. Instead, it has lifted corporate profits which has encouraged firms to invest more …
BoK on hold again but conditions now in place for a cut The decision today by the Bank of Korea to leave interest rates unchanged (at 3.5%) for a fourth consecutive meeting came as no surprise. The central bank is due to hold a press conference and …
Bigger falls in US core inflation than in the euro-zone or UK might mean government bond yields decline a bit more quickly in the US over the rest of this year, but ultimately we expect yields to fall in all three economies over time. June’s US CPI data …
12th July 2023
Rate hike on the cards, odds (just) in favour of a 25bp move The rise in Russian inflation to 3.3% y/y last month means the central bank will almost certainly follow through on its recent hawkish rhetoric by hiking interest rates when it meets next month. …
The Bank of Canada’s 25bp hike today, taking the policy rate to 5.0%, is likely to be the last in this cycle. With the labour market loosening, core inflation falling and the survey indicators implying that inflation expectations are normalising, we …
Given our view that a big stock market rally fuelled by enthusiasm about AI is on the way, we expect equities in some IT and industrials subsectors to outperform, which would favour the US market. Equities in the US have fared markedly better than those …
Hike to 5.0% likely to be the last The Bank of Canada’s 25bp hike today, taking the policy rate to 5.0%, is likely to be the last in this cycle. With the labour market loosening, core inflation declining and the survey indicators implying that inflation …
This page has been updated with additional analysis since first publication. Core inflation has much further to fall The muted 0.2% m/m rise in core consumer prices in June won’t stop the Fed from hiking rates again later this month, but it supports our …
Our latest Chart Pack on the Middle East and North Africa is embedded below. Economic growth across the region will be much weaker this year than last and our forecasts are generally below the consensus. The latest round of OPEC+ oil output cuts will …
Industry now fully recovered from March drop The stronger-than-expected 1.0% m/m rise in Mexican industrial production in May means that the sector has now reversed all of the decline in output recorded in March. And more timely indicators point to a …
This page has been updated with additional analysis since first publication. June’s CPI data already old news Headline consumer price inflation came in at 4.8% y/y in June, comfortably within the RBI’s 2-6% tolerance range. But that’s already old news …
The spot price of Asia LNG should trade at a premium to Europe’s TTF gas at end-2023 given stronger demand growth in Asia and the fact that LNG is more costly to produce. The spot price of liquefied natural gas (LNG) in Asia has periodically moved …
The likelihood of an El Niño event in the second half of this year adds to upside risks to global inflation and downside risks to activity. For the advanced economies, higher prices of agricultural commodities could slow the decline in food inflation. But …
The decision by the Reserve Bank of New Zealand to leave rates on hold at 5.50% came as a surprise to no one. Indeed, the Committee noted that monetary policy in New Zealand had turned restrictive far sooner than in many other economies. Although the Bank …
RBNZ leaves rates unchanged The RBNZ’s decision to leave its official cash rate on hold at 5.50% was widely expected. In fact, all 25 analysts polled by Reuters, including ourselves, had anticipated the pause. The minutes of the July meeting reinforce our …
This article has been updated with additional analysis and charts since it was first published. Business investment probably still grew in Q2 The fall in “core” machinery orders in May points to a significant fall in spending on machinery and transport …
Enthusiasm around artificial intelligence (AI) seems to have waned a bit recently, and it may continue to do so if, as we expect, growth struggles later this year. But we think that it will resume sometime in 2024 and push the S&P 500 much higher. Over …
11th July 2023
The upcoming election in Spain may result in a change of government, but it is unlikely to change the country’s short-term economic fortunes. Low inflation and a rebound in tourism will help GDP growth in Spain to outperform the rest of the euro-zone this …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19th July . Register here to join that 20-minute online briefing. To the extent that economic conditions influence general elections, and of …
The latest economic and property market data support the view we’ve held since last year that there would be a growing differentiation between southern and western markets. We expect that to persist for the next few years thanks to the relatively high …
Overview – We still think a mild recession over the coming quarters is more likely than not. As the economy weakens and the downward trend in core inflation gathers pace, we think interest rates will eventually be cut more quickly than markets are pricing …
Achieving the shipping industry’s new decarbonisation ambitions would inevitably make the cost of sea freight more expensive. However, it would probably have a negligible impact on consumer prices. As expected, the high-level meeting at the International …
Inflows into EM financial markets saw a further pick-up in the past month and are now at their highest level since late last year, driven by inflows into Turkey and India. Inflows to Turkey could be sustained if policymakers take further steps towards …
This page has been updated with additional analysis since first publication. Inflation plunge seals the deal on an August rate cut The sharp fall in Brazilian inflation to just 3.2% y/y last month makes it almost certain that the central bank will kick …
Our Long Run Returns Monitor provides our updated long-term projected returns for major asset classes. All projections in this publication are as of 7th July 2023. We publish more detailed explanation of our views in our annual Long Run Asset Allocation …
This page has been updated with additional analysis since first publication . Stronger than expected but still relatively weak Although stronger than most had expected, bank loan growth still fell to its lowest in five months in June, while broad credit …
We think that the huge expansion of the Italian construction sector over the past two years has run its course, as the reduction in construction subsidies and tighter financial conditions will reduce demand and output. That said, the high backlog of work …
Underlying inflation is set to fall through the coming quarters as the price shock from the war in Ukraine and the yen selloff last year dissipates. What’s more, the economy is set to enter a mild recession in the second half of the year, dragged down by …
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19th July. Register here to join that 20-minute online briefing. …
The further increase in mortgage rates to around 6% has left affordability particularly stretched in London. On top of the shift to remote working, which has allowed buyers to consider more affordable areas, that is likely to mean that buyer demand in …
10th July 2023
There were two intriguing developments in bond markets last week, as the 10-year Treasury yield surged above 4% to its highest level since March. The first was a similar-sized increase in the 10-year Bund yield, to more than 2.6%. Th e second was an ~20bp …
The surge in immigration and improvement in labour supply has helped ease wage growth moderately. But, with limited scope for a further rapid recovery in the labour force, we think a sustained period of weaker labour demand is required to pull wage …
A severe El Niño event could be the harbinger of weak monsoon rains in India. This wouldn’t have as big an economic impact as it would have had a couple of decades ago. But it would harm employment and energy production. What’s more, it would push up …
The UK CPI report for June will provide fresh evidence of whether the economy has a persistent inflation problem – and whether the Bank of England will need to do more in response. Chief UK Economist Paul Dales, Deputy Chief UK Economist Ruth Gregory and …
The recent US experience seems to suggest that the household saving rate could fall further as Canadians draw down the savings they built up during the pandemic, supporting consumption. A closer look suggests that the saving rate overstates the health of …
The Bank of Israel (BoI) kept its policy rate on hold at 4.75% today, but its communications acknowledged the risk of having to hike rates again in the coming months if inflation data warrant it. We think they will and we expect the central bank to …
After a lacklustre 2022, the Brussels prime office market has had a brighter start to 2023, as rent growth accelerated while it slowed elsewhere in the euro-zone. But with a cooling jobs market set to weigh on net absorption and tight supply due to give …
There are circumstances in which the Bundesbank’s losses over the next few years could require it to be recapitalised by the German government. However, we think these are unlikely to occur and the Bundesbank will be able to “carry forward” losses and …
Towards the end of June, we raised our two-year forecasts for the S&P 500, advising clients that we now expect the benchmark to rise by around 50% between now and the end of 2025. It’s a bullish call – and one that takes into account a US recession later …
Further pressure on the CBE as inflation accelerates to an all-time high This webpage has been updated with additional analysis, as well as a Chart and Table of key data. Egypt’s inflation rate rose from 32.7% y/y in May to a record high of 35.7% y/y in …
This page has been updated with additional analysis since first publication. Core inflation again stronger than expected In June, Norway’s inflation data were much stronger than expected for the second month running. While the Norges Bank has signalled a …
We expect the RBA to lift rates to 4.85% by November, while the RBNZ's tightening cycle is likely already over with its cash rate now at 5.50%. With house prices now 18% below their January 2022 peak, we think New Zealand's housing downturn has run its …
This page has been updated with additional analysis since first publication . Price pressures set to remain subdued this year Producer price deflation deepened further last month to its lowest in more than seven years, and consumer price inflation dropped …
