Improvement in core inflation not enough to appease ECB The drop in Italy’s headline and core inflation in June is encouraging. But the euro-zone core rate is unlikely to have declined significantly due to base effects related to the anniversary of the …
28th June 2023
The effects of tighter monetary policy are very clear in the money and credit data, reinforcing our view that the euro-zone economy will underperform the ECB and consensus forecasts. Data released this morning show that savers continue to tie up their …
Labour market still very tight and unit labour cost growth surging Inflation plunged in May but underlying measures moderating less rapidly Bank will deliver 25bp rate hikes at each of its next three meetings While headline inflation plunged in May, …
Slowdown in inflation not fast enough to prevent further rate hikes The sharp fall in inflation in May raises the risk that Reserve Bank of Australia will not raise any further at the upcoming meeting in July, but we still think that mounting upside risks …
Overview – Strong immigration and the turnaround in the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada back in hiking mode, we still judge that GDP will contract later this year. Even if recession is …
27th June 2023
Click here to read the full publication. Q2 looks set to go down as a decisive victory for “risky” assets over “safe” ones, thanks in large part to euphoria in the stock market over Artificial Intelligence (AI). But we suspect that the story over the …
Latin American equities have, in US dollar terms, fared even better than their US peers so far this year. We think that their outperformance will be interrupted by the global “risk-off” environment we anticipate over the rest of this year, but suspect the …
The removal of fuel subsidies and the devaluation of the naira are likely to push inflation in Nigeria towards 35% y/y, which will prompt further interest rate hikes by the central bank and weigh on GDP growth over the coming quarters. Our growth …
Central bank meetings this month suggest that we’re now on the brink of an EM monetary easing cycle. In China, the Loan Prime Rates were lowered in response to flagging growth. And elsewhere, some central banks whose tightening cycles were particularly …
New home sales soar New home sales increased for the third consecutive month in May, rising by a punchy 12.2% m/m to reach 763,000 annualised, the highest level since February 2022. This leaves them firmly above pre-pandemic levels and around 20% above …
House prices remain resilient House prices rose in April by the fastest pace in close to a year, reflecting constraints to supply as high mortgage rates have discouraged existing homeowners from moving. Although prices have shown resilience in recent …
It’s been a good month for Latin American currencies, particularly the Brazilian real and the Colombian peso, which should help the disinflation process across the region. This is one reason behind the recent dovish shift by the region’s central banks. …
Global Overview – Most advanced economies have so far dodged the recessions that we, and many others, had expected to start in the first half of this year. The relative resilience of activity can be pinned on several supply- and demand-side props to …
Some improvement, but core inflation pressures still a bit too strong for comfort This page has been updated with additional analysis since first publication . While the steep declines in both headline and core inflation in May were partly due to …
Equipment investment still set for further declines The 1.7% m/m rise in durable goods orders in May was stronger than we had expected, even accounting for a big rise in the volatile commercial aircraft component. But the wider evidence still suggests …
This page has been updated with additional analysis since first publication . Easing cycle to kick off in August The fall in Brazilian inflation to just 3.4% y/y in the first half of this month, coupled with the surprisingly dovish tilt on Copom shown in …
The hit to tourism in the region from the COVID-19 pandemic finally appears to be over. Receipts and arrivals are now back to, or even above, seasonal norms in almost all countries. This will be welcome news for Saudi Arabia as the annual Hajj pilgrimage …
While inflation plunged in May, we still think the Reserve Bank of Australia will raise interest rates again at its July meeting – and push the economy even closer towards recession. In this special, post-RBA briefing in which Marcel Thieliant, our Head …
The Bundesbank may make large losses in the coming years but these will be paper losses only, will have no impact on the government’s fiscal position, and are likely to fall over time. While the losses may fuel opposition to the ECB in some quarters, this …
26th June 2023
We continue to expect risky assets to struggle over the second half of this year, as major developed market (DM) economies slip into recessions. Meanwhile, we think DM sovereign bonds will rally; that’s partly due to safe-haven demand, and partly because …
Limited fallout from tensions in Russia, for now The Wagner mutiny in Russia this weekend seems to have ended as quickly as it escalated, having had far less impact on global financial and commodity markets than Russia’s invasion of Ukraine last year. …
Pakistan’s central bank (SBP) today raised its policy rate by a further 100bps (to 22%) at an unscheduled monetary policy meeting. We think interest rates will need to remain elevated over the coming year as the government seeks to impress the IMF and …
If you aren't already receiving our Climate Economics coverage and would like us to arrange access, click here . Getting serious about decarbonisation would be more costly for governments than many fiscal scenarios would have you believe. Of course, the …
EMs will account for over half of global GDP within the next decade and almost 60% by 2050. India will become the world’s third-largest economy before 2030. More generally, EMs with rapid population growth, with potential to develop into manufacturing …
We expect euro-zone food inflation to fall sharply over the coming year due to the large declines in agricultural and energy commodity prices. But history suggests that the level of food prices rarely falls very far or for very long. With labour costs …
The armed uprising by Yevgeny Prigozhin’s Wagner mercenary group against the Russian military over the weekend has dealt a heavy blow to President Putin and exposed cracks in the regime. There are a lot of unknowns about how things will play out at this …
After several disruptive quarters, we are making few changes to our near-term euro-zone real estate forecasts. Nonetheless, a higher profile for 10-year rates has led us to push back yield reductions until after 2025 and we have also downgraded our office …
Our China Activity Proxy (CAP) suggests that China’s economy stagnated in May as the tailwind from reopening fizzled out. We think officials will roll out sufficient policy support to keep the recovery alive but not enough to prevent subdued …
One of the truisms of macro investing is that central banks in emerging markets “follow the Fed”. Yet on the evidence of the past week, it is policymakers in the emerging world that are charting a course for their counterparts in developed markets. This …
This page has been updated with additional analysis since first publication. More bad news on the German economy The slump in the German Ifo, together with the drop in the PMIs, released on Friday, suggests that German GDP probably contracted for the …
At first glance, there’s little sign of friend-shoring among Japanese firms as they have directed a rising share of their outward foreign direct investment at China. However, this largely reflects China’s rising economic heft and firms are reducing their …
Recent data fan Bank of Canada's fears The latest Summary of Deliberations gave no hint about whether the Bank of Canada will raise interest rates again at the July meeting but, with little progress yet on any of the key factors that the Bank is watching, …
23rd June 2023
The US dollar has rebounded a bit this week on renewed signs that a global slowdown is underway and a growing sense that, like the Fed, most other central banks are also at, or near, the end of their tightening cycles. Although the summer doldrums are …
With the Fed still hinting at more interest rate increases, the dollar strengthened and contributed to declines across most commodity prices this week. One of the few prices that did increase was the Asia LNG price, which rose by 7% (1) . This seems …
Lower-than-expected euro-zone PMIs in June support our view that economic activity will disappoint, which we think will push the euro and government bond yields down by the end of 2023. Underwhelming PMIs in the euro-zone have put some pressure on the …
June’s flash PMIs suggest that not only has activity in advanced economies slowed at the end of Q2, but the outlook has also deteriorated further. This is particularly true in the manufacturing sector, where orders have fallen sharply. Meanwhile, …
BRL rally for real? The Brazilian real’s recent rich vein of form has continued this week, with the currency appreciating by a further 1.5% against the dollar, to 4.8/$. Several factors have supported this, including improvements in Brazil’s trade balance …
It’s been an extremely tough week for the Bank of England and its Governor, Andrew Bailey. Wednesday’s CPI release revealed the second shocking surge in core inflation in a row and appeared to confirm our view that the inflation problem is bigger in the …
Indian manufacturing to benefit by leaning to US The sweeping agreements on trade and defence announced during Narendra Modi’s state visit to the US this week underline that India’s government and firms increasingly see their interests as favouring …
In a quiet week for economic data, the biggest news was further evidence of a turnaround in housing activity, with housing starts jumping by 22% m/m in May to their highest level in a year. The sheer scale of that move did look a little suspicious and …
A cut, a hold .... and an underwhelming hike The three central bank meetings that took place across the region this week all produced different outcomes, and policymakers’ communications suggest interest rates in these countries will continue to move in …
Zambia secures deal with official creditors This week saw Zambia edge closer to getting a debt restructuring over the line, but an agreement with official creditors suggested that there remain sticking points when it comes to negotiations with China. …
With interest rates now set to be higher for longer, we are sticking with our view the UK will enter a recession later this year. That will hit occupier demand across all property sectors, but industrial should weather the downturn relatively well. After …
Inflation continues to fall Inflation in Malaysia fell back for a ninth consecutive month in May according to figures published today. At 2.8% y/y, inflation is now well below last August’s peak of 4.7%. We expect price pressures to ease further over the …
This week, we published our latest Europe Economic Outlook . Three key points are worth highlighting. First, the euro-zone economy is likely to remain in recession for the rest of 2023. Admittedly, this year’s fall in gas prices will support demand and …
Support measures could take time to draw up Hopes for more policy easing intensified last week after the surprise cut to the PBOC’s reverse repo rate and the release of weak activity data for May. Late last Friday, the State Council said that it was …
Swiss offices have already seen the second sharpest price correction across the major European markets. And with stretched valuations set to face renewed pressure from rising bond yields, we think office yields will edge higher and that sluggish rent …
If the weather forecasters are right, El Niño conditions have arrived in the Pacific and are set to build over the next few months. The negative impact on agricultural production will depend upon the strength and duration of these conditions but sugar, …
The Central Bank of Egypt (CBE) decided to leave interest rates unchanged at 18.25% at Thursday evening’s MPC meeting, but with the lingering threat of another fall in the pound and the slightly more hawkish tone from the accompanying statement, we think …
