Rate hikes from the Federal Reserve and European Central Bank at their July meetings look like done deals – it’s the messaging accompanying those decisions that may prove key to what the banks decide to do in September and beyond. Another increase also …
19th July 2023
The latest data suggest that the euro-zone remained in recession in Q2. We think that the economy will continue to contract in the second half of the year as the impact of tighter monetary policy feeds through. Construction data for May were published …
India's economy is showing signs of coming off the boil and, with inflation lodged within the RBI’s target range, a resumption of the tightening cycle looks unlikely. However, the onset of a severe El Niño is a looming threat and presents a key risk to …
Drop in inflation means SARB to stand pat tomorrow The larger-than-expected fall in South Africa’s headline inflation rate to 5.4% y/y in June brings it back within the Reserve Bank’s 3-6% target range for the first time since April 2022 and means that …
Mortgage rates have risen to a level that could cause costs on a fifth of rental homes to exceed the rent. That is likely to lead to a significant number of forced rental property sales, which will undermine the tight supply conditions that have limited …
Provisional data from the Australian Bureau of Statistics suggest that consumer spending slumped in Q2, as households sharply pared back discretionary expenditure. Faced with falling real incomes and depleted savings buffers, we think households will only …
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the UK inflation, growth and policy outlook in 20-minute online briefing at 9am BST today. Register here . Some good news, but we’re still raising our …
This page has been updated with additional analysis since first publication. Headline inflation moderates, but underlying inflation remains elevated Although price pressures are dissipating, they could prove stickier on the way down than we anticipate. As …
Rebound in sales spreads to pre-construction sector The pick-up in existing home sales this year has spread to the pre-construction market, with new home sales in Toronto rebounding strongly. Together with the surge in housing starts in June, that …
18th July 2023
All is well in the US economy – at least according to financial markets. But we think investors are underestimating the chance of an economic slowdown. The mixed news in the US retail sales and industrial production data, released today, didn’t seem to do …
The blow to Nigeria’s economy from a failed demonetisation exercise is fading but there are already signs that the inflationary effects of the devaluation of the naira and removal of fuel subsidies are weighing on activity. We expect near-term GDP growth …
Manufacturing malaise set to continue The further slump in industrial production in June illustrates that some parts of the economy are already struggling and, as global manufacturing demand continues to soften, we expect further weakness in the second …
Here are answers to some of the key questions that kept coming up during meetings with clients last week in New York and Chicago, and around my presentation to the NCREIF summer conference in Chicago . How bad will it get for offices? Our forecast for …
The widely-differing impact of El Niño across continents means that the net effect on global mining output is not clear cut. On balance, though, the likelihood is that it will lead to lower ore output, particularly of copper, and that it will be a factor …
Not as good as it looks This page has been updated with additional analysis since first publication. On the face of it, the sharper-than-expected fall in headline inflation to 2.8% in June and the only modest 0.1% m/m seasonally adjusted rise in the CPI …
Underlying sales better than muted headline gain suggests Despite the modest 0.2% m/m rise in headline retail sales in June, the bigger 0.6% m/m gain in underlying control group sales is a bit more encouraging, although second-quarter consumption growth …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19 th July. Register here to join that 20-minute online briefing. Splitting real GDP growth into the sectors most and least sensitive to …
Swiss inflation has fallen sharply this year to below 2% and we expect it to stay there for the foreseeable future. In contrast to the SNB’s view, we think second-round effects on wages will be quite limited. And as a result, we forecast the SNB to start …
RBA softens tone, but further rate hikes remain likely The minutes of the RBA’s July meeting showed that its decision to hit pause was far from a foregone conclusion. Indeed, the Board did consider the option of a 25bp hike alongside the option of leaving …
With yet more disappointing news about China’s economic rebound, it is worth taking stock of the headwinds facing the country’s equity market. For a start, the market reaction to the release of China’s Q2 GDP data has been fairly limited, both in Chinese …
17th July 2023
Stretched affordability and a weakening economy will weigh on housing market activity this year, causing home sales to remain low. While house prices have recovered in recent months, we expect declines to resume later this year. Even so, affordability …
The resurgence in female prime-age participation to a record high is helping to support labour force growth, but the recent rapid pace of improvement is likely to fade soon. Although the overall labour force participation rate continues to be held down by …
Out of town retail has been among the hardest hit commercial sectors since 2020, but with considerable variation among subsectors. While a weak consumer backdrop will drag on near term rent growth across the board, further out we expect this variation to …
The large macroeconomic imbalances that built up during Chile’s post-pandemic recovery have eased substantially, which is likely to prompt the central bank to deliver more rate cuts than almost any other EM central bank over the next couple of years. We …
The following is a presentation that Kiran Raichura gave to the NCREIF Summer Conference in Chicago on 12th July, 2023. … What does the new normal mean for real …
Sharp drop in residential turned total lending negative in June Net lending to commercial real estate (CRE) in June was negative for the first time in over two years, but this was driven by a large drop in residential lending as elevated mortgage rates …
This page has been updated with additional analysis and charts since first publication. Recovery shifts down a gear GDP slowed more than expected in Q2 due to a fizzling out of the reopening boost. Continued weakness in the property sector, possible …
In the wake of last week’s solid US payrolls report and this week’s below-expectation CPI data, which have strengthened hopes of a “soft-landing” in the US economy, short-term momentum has swung heavily against the dollar. Although it has rebounded a bit …
14th July 2023
The news that core CPI increased by a muted 0.16% m/m in June, which is less than 2% in annualised terms, has raised hopes that the Fed’s planned rate hike this month will be the last in this cycle, with the policy rate peaking at 5.25% to 5.50%. …
The Bank of Canada struck a hawkish tone at its meeting this week, emphasising persistent excess demand and sticky price inflation. Nonetheless, with the upgrades to the Bank’s GDP and inflation forecasts putting them above our own, we think the hike this …
Equity, bond, and FX investors seem to have shrugged off the recent rise in oil prices. We wouldn’t be surprised if that continued even if prices rose further. Although they’ve taken a breather today, oil prices have been on a tear lately. WTI, which had …
Colombia’s fiscal watchdog sounds the alarm bell Concerns about Colombia’s public finances have re-emerged this week after the country’s Autonomous Fiscal Rule Committee (CARF) warned that the government is unlikely to comply with the fiscal rule in the …
The stock market in the US has rarely rallied in recessions that have taken place there since the mid-1850s. Our forecast is that it will take a knock amid a recession in H2 2023 before powering ahead. We would point to five key examples of the stock …
For the most part, commodity prices rose this week. A weaker US dollar in the wake of a lower-than-expected June CPI reading in the US was a key factor boosting prices. Not surprisingly, the prices of the precious metals rose sharply (1) . Chart 1: US …
Stage 6 loadshedding returns with a vengeance Cold weather in South Africa prompted officials to return to Stage 6 loadshedding this week, threatening a fresh hit to the economy. We doubt that concerns about the inflationary impact of power cuts will …
Jump in confidence unlikely to last long The sharp rise in the University of Michigan consumer sentiment index to 72.6 in early July, from 64.4, leaves it close to a two-year high. That said, it remains fairly weak by historic standards, and the chances …
What next for Thailand The winner of Thailand’s election, Pita Limjaroenrat of the Move Forward Party, on Thursday failed to secure enough votes in parliament to become the country’s next prime minister. This raises the prospect of renewed political …
Easing supply shortages still supporting activity The 2.2% m/m jump in manufacturing sales volumes in May was better than we expected given the weakness of the survey evidence and shows that easing supply shortages are still supporting the sector. While …
Emerging markets (EM) currencies with high short-term yields – i.e., high “carry” – remain the strongest currencies against the US dollar this year, even if their gains over the past week have been relatively small. We think the conditions supporting …
Paying particular attention to pay growth 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. We know that the evolution of wage …
More signs of economic weakness Activity data released this week brought further evidence that euro-zone GDP contracted in Q2. While industrial production edged up by 0.2% m/m in May, it is still set to have fallen in Q2 as a whole, barring an increase of …
May data underscore Turkey’s vulnerabilities The raft of Turkish activity and balance of payments data for May published this week highlighted the precarious nature the economy was in prior to the shift back to orthodox economic policymaking. The …
Recent measures have been sector-specific Policymakers have been taking further steps to support the economy this week. But efforts are being directed at struggling sectors rather than the wider economy through broad stimulus measures. The PBOC and …
While the resilience in economic activity looks to have continued in May, the latest surveys point to GDP growth slowing in June. And in China, the post-reopening rebound appears to have already fizzled out. Meanwhile, the significant tightening in …
El Niño is coming but the picture is more nuanced than one of doom and gloom for global production of all crop types. For corn, soybeans, wheat and rice, larger harvests in some regions can outweigh declines in others. For prices, there are still upside …
The recent rise in gilt yields to levels above those seen in the aftermath of the mini-Budget has not triggered a similar rush to sell property assets. In part because past falls in capital values mean multi-asset funds are unlikely to become overexposed …
Rice export ban wouldn’t be unprecedented This week we explored the implications of a severe El Niño for India’s economy. A key point is that it could put upward pressure on rice prices, and a subsequent response by the government could be a ban on rice …
