The surplus in the zinc market will shrink a little this year, as recovering raw material supply and a pick-up in refined output is offset by a boost to demand from a cyclical recovery in China. That said, prices are likely to fall this year from their …
9th May 2024
The persistent strength in core services inflation in some EMs outside Asia raises the chances that central banks cut interest rates by less than the consensus expects this year, not least because it comes amid a strengthening of the US dollar and …
The South African government has turned to fiscal austerity in an effort to stabilise the public debt ratio and to keep investors on board, but this is likely to become harder to do post-election. While a lot depends on the form of coalition government …
South Africa election 2024 …
7th May 2024
The Italian industrial market made a strong start to 2024, with prime rent growth outpacing the rest of the euro-zone and beating our own forecasts. Rental gains are still expected to slow going forward, but with economic activity in Italy also holding up …
Extreme heat across parts of India could be particularly damaging to the agriculture sector through both a drop in crop yields and a fall in labour productivity. But industry and services aren’t immune; a surge in demand for electricity to power cooling …
The latest data are consistent with our view that the euro-zone will grow only slowly in the coming quarters. With the labour market softening and inflation continuing to fall, the ECB has signalled that it is likely to start cutting rates in June. We …
Rates on hold throughout 2024 Bank Negara Malaysia (BNM) left its overnight policy rate (OPR) on hold (at 3.00%) today, and the tone of its statement supports our view that rates will be left unchanged throughout 2024. The decision was correctly predicted …
This webpage has been updated with additional analysis, as well as a Chart and Table of key data. Inflation continues to tick down after orthodox shift Egypt’s headline inflation rate slowed from 33.3% y/y in March to 32.5% y/y in April and we think that …
Increasing supply points to softer price growth While sales volumes were robust in April according to the RICS Residential Market Survey, stalling demand and increasing supply suggests that prices will continue to stagnate over the coming months. The …
This page has been updated with additional analysis since first publication . Export volumes have further to fall Export values returned to growth last month after contracting in March, but this was mainly due to a lower base for comparison. Export …
GDP growth in the Philippines slowed in Q1 and we expect further weakness over the rest of the year as tight monetary policy, slower growth in remittances and weaker export demand weigh on activity. According to the data published today, GDP growth …
This page has been updated with additional analysis since first publication. Wage growth to gain further momentum While total wage growth slowed sharply in March, this was mostly driven by a plunge in volatile bonus payments. Regular wage growth held up …
All signs are that unit labour cost growth in New Zealand will plummet in the coming quarters. Coupled with subdued domestic demand, that should feed through to lower non-tradables inflation in short order. The upshot is that the RBNZ’s forthcoming easing …
Easing cycle set to enter a stop-start phase The Brazilian central bank’s decision to cut the Selic rate by 25bp to 10.50% (rather than opt for another 50bp step) and drop its forward guidance confirm that most of the rate cuts in this easing cycle are …
8th May 2024
While regular private sector wage growth in February and services CPI inflation in March were both a bit higher than the Bank of England had expected, we still think that the flatlining of the economy over the past two years will dampen price pressures …
China’s leadership argues that the country’s export success in industries like auto production is a reflection of its technological strength. It understandably doesn’t want to focus on another factor at play: the persistent weakness of domestic consumer …
The Mexican government’s pre-election spending spree means that the next administration will have its work cut out to put the country’s public finances back onto a stable footing. Claudia Sheinbaum, the frontrunner to be the next president, has so far …
We expect Japanese government bond (JGB) yields to rise a bit and the yen to come off the boil later this year, creating a headwind for equities there. The 10-year JGB yield has jumped 4bp and the TOPIX has dipped over 1% today following comments by Bank …
We think that oil prices have further to fall, as we expect OPEC+ to gradually increase output later this year. Prices have recently fallen as worries that the conflict in the Middle East could affect oil supply have eased. Natural gas prices in the US …
Rise in inflation shifts odds in favour of a 50bp cut The slightly larger-than-expected rise in Chile’s inflation to 4.0% y/y in April supports our view that the central bank will once again slow the pace of easing with a 50bp cut (to 6.00%) at its …
Rising mortgage rates extend the slump in demand The small rebound in mortgage demand in March proved short-lived, as higher borrowing costs caused home purchase mortgage applications to drop 2.3% m/m in April. But the 10-year Treasury yield’s recent …
The Riksbank is likely to follow today’s 25bp rate cut with three more cuts this year, which is one more than the central bank itself forecasts and more than investors are pricing in. The case for rate cuts in Sweden is stronger than for the euro-zone …
Riksbank likely to cut faster than it forecasts The Rikbsank’s decision to cut its key policy rate by 25bp today, to 3.75%, was only partly priced in by financial markets but was forecast by the majority of analysts including ourselves. Attention will now …
This page has been updated with additional analysis since first publication. German industrial recovery halts in March The renewed contraction in industrial production in March after two months of expansion, is a reminder that the German economy is still …
Europe will raise barriers to trade and investment with China in the coming months and years. But policymakers will try to balance conflicting objectives so the result may well be a gradual rather than sudden increase in protectionism with measures …
The fall in oil prices since Iran and Israel’s back-and-forth attacks suggests that some of the risk premium in prices has now unwound. Prices continue to be supported by OPEC+ production cuts but we suspect that members will gradually unwind these cuts …
The near-relentless narrowing in US credit spreads over the past year or so has left them at their lowest levels since late 2021. This echoes similarly upbeat pricing in the stock market. But, while we think that equities still have plenty of room to …
The strong rally in industrial metals prices seems stretched and, as a result, we expect prices to ease lower by end-year. After all, while industrial metals demand will recover this year, boosted by a combination of interest rate cuts, a recovery in …
The decision by Turkey last week to suspend all goods trade with Israel until there is a permanent ceasefire in the war in Gaza is unlikely to have a major macroeconomic impact in either country, although Israel’s construction sector appears vulnerable …
Saudi Arabia’s budget deficit widened further at the start of this year and, for now at least, the government seems comfortable with maintaining the loose fiscal stance and issuing more debt. If oil prices fall back further as we expect, however, a return …
The rebound in prime retail rents is set to wane this year. But we think prime rents on luxury high streets will continue to outperform those of mass markets in the coming years. The return to rental growth on high streets in 2023 after three years of …
The sharp rise in the price of carbon under China’s Emission Trading Scheme (ETS) this year, to a record high, underlines that Beijing sees carbon pricing as a key part of its emissions-reduction toolkit. Although the price of polluting in China is likely …
Commercial activity rebounds, but housing still subdued The headline CIPS construction PMI rose for the fifth consecutive month to 53.0 in April, a 14-month high. The rise was driven by improvements to the commercial and civil engineering components, …
The RBA’s decision to leave rates on hold at its meeting today suggests that there is a high bar for any further tightening of monetary policy. Indeed, the Board seems keen on minimising the collateral damage to the economy from its war on inflation. On …
RBA content to stay put for a while The RBA’s decision to leave rates unchanged at 4.35%, despite the material upside surprise in the CPI data last quarter, suggests that the bar for a resumption of rate hikes is high. However, the other side of that coin …
Banks easing credit conditions amid soft demand The second-quarter Senior Loan Officer Opinion Survey revealed that, a year after the regional banking crisis, only a modest net share of banks are still tightening lending standards. The Net percentage of …
6th May 2024
The national accounts data released today suggest that economic growth in Indonesia remained broadly stable last quarter, but we don’t have much faith in the official data. With economic activity likely to remain weak and concerns about inflation and the …
In the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing unpacks a tumultuous week in markets that ended on a high. April's soft payrolls report may have given investors much-needed evidence that US …
4th May 2024
An eventful week in financial markets is ending with the dollar down, but mounting a comeback in the wake of today’s worryingly weak US non-manufacturing ISM survey . Between the earlier softer-than-expected US non-farm payrolls , the cautious message …
3rd May 2024
After 12 long years, the Trans Mountain oil pipeline expansion finally entered commercial service this week. The pipeline has the potential to raise oil exports significantly, but the full boost is unlikely to be felt for some time. The project increases …
Fundamentals point to slower wage growth Powell leaves all options open Fed Chair Jerome Powell argued in his post-FOMC press conference this week that, despite the stickiness of inflation in recent months, additional interest rate hikes were still …
Today’s favourable reaction in the US stock market to April's softer-than-expected Employment Report has coincided with renewed hopes of interest rate cuts, judging by the initial plunge in the 2-year Treasury yield towards 4.7%. (See Chart 1.) …
SA’s growth pick-up coming too late for the ANC This week, South Africa manufacturing PMI release reinforced our view that an easing drag from electricity outages will support a pick-up in growth over the coming quarters. But stronger growth is coming …
Encouraging start to the year Growth in the region came to a standstill in Q4 of last year, but data released over the past week add to the evidence of a strong rebound in Q1. Admittedly, the flash GDP data from Mexico released on Tuesday showed that, …
Rise in prices paid not yet a concern The fall in the ISM services index to 49.4 in April, from 51.4 in March, suggests that services spending could slow from the 4% annualised in the first quarter. The prices paid index rebounded but, for now, it is …
Trump’s return could benefit India With Donald Trump’s protectionist approach to trade on full display in an interview with the Time magazine this week, what might the implications of a second Trump presidency be for India? India is not as dependent on US …
