This page has been updated with additional analysis since first publication. Germany still in recession at start of Q3 The bigger-than-expected fall in the German Ifo, together with the drop in the PMIs published yesterday, suggest that the German economy …
25th July 2023
Inflation back to target, rate cuts likely later this year Bank Indonesia (BI) today left interest rates unchanged at 5.75%, but with the economy struggling and inflation falling back, we think the central bank will cut interest rates before the end of …
Investment held up well in the first half of the year but the recent moderation in credit growth and the messages from the latest survey data suggest that it is going to enter a softer patch over the coming few quarters. Unperturbed by the cumulative …
GDP growth in Korea rebounded in the second quarter, but the data was far worse than it looks, with all of the major sub-components contracting. With weak global demand set to drag on exports and high interest rates weighing on domestic demand, we expect …
Headline GDP number masks underlying weakness in demand GDP growth in Korea picked up slightly in Q2 but the underlying data suggest that elevated interest rates and weak external demand are taking their toll on the economy. We expect the economy to …
China is not suffering a balance sheet recession: most private firms are not highly indebted and would borrow if they had more confidence in the economic outlook. But there are other parallels with Japan’s circumstances in the 1990s that point to …
24th July 2023
Euro-zone government bond yields have fallen further following the release of disappointing PMIs today. Given our pessimistic view of the economy, we suspect that they will generally end the year a bit lower still. As euro-zone PMIs for July came in …
While the Fed and the ECB are set to hike interest rates this week, subsiding inflation means that the upcoming EM central bank meetings will tilt towards monetary easing . And we expect that the EM rate cutting cycle will broaden out over the course of …
The region’s strong start to the year is unlikely to be sustained and we expect growth in 2024 to come in weaker than most expect. Inflation has come down a long way and price pressures should continue to ease over the coming months, paving the way for …
Italy has already accumulated so many delays in spending NextGenerationEU (NGEU) money that it will only be able to use a fraction of the funds and any boost to growth is likely to be much smaller than hoped. Meanwhile, timidness in implementing reforms …
July’s flash PMIs suggest that activity slowed further at the start of Q3. Industry remains the weak spot, but the outlook for the services sector has also deteriorated noticeably. And while this seems to be weighing somewhat on employment growth and …
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 avoided, a …
This page has been updated with additional analysis since first publication . Fresh rise in services inflation likely to raise concerns at Banxico Mexico’s headline inflation rate eased further in the first half of July but the fresh rise in services …
The end to the Black Sea grain deal has put Egypt’s vulnerability to rising global wheat prices back in the spotlight. Even if supply disruptions are avoided, higher wheat prices would add to strains in Egypt’s balance of payments, force the government to …
More support signalled but follow-through remains in question The readout of the Politburo’s quarterly meeting on economic affairs has just been published by state media. It struck a dovish tone but fell short of delivering any major new announcements. …
New home construction has been surprisingly resilient to weaker demand so far this year. But that partly reflects activity being brought forward before building standards were tightened in June. With that boost now over and survey data indicating a …
This page has been updated with additional analysis since first publication. Note: Join our special online briefing after the Fed and ECB’s July decisions, and previewing the BoE’s August meeting, at 10:00 EDT/15:00 BST on Thursday 27 th July . Register …
Japan bulls have proposed a range of explanations to justify the outperformance of the TOPIX relative to other equity indices over recent months. While there are some signs that firms are enjoying stronger pricing power, we aren’t convinced that a …
Another election likely after inconclusive poll The People’s Party (PP) won the most seats at yesterday’s general election but, even together with the far-right VOX, they achieved only 169 seats which leaves them seven short of a majority. And given that …
Occupier demand in Amsterdam has been more resilient than we expected so far this year. In tandem with supply constraints caused by construction delays, this suggests that prospects for rental growth are brighter than we had anticipated over the coming …
This page has been updated with additional analysis since first publication. Economy still in recession July’s euro-zone PMIs are consistent with our non-consensus view that the currency union’s economy will remain in recession. But they also suggest …
GDP growth looks set to remain weak over the coming quarters, as tight monetary policy at home and subdued activity abroad weigh on demand. Meanwhile, inflationary pressures should continue to ease, as below-trend growth, easing disruption from the …
Note: Join our Asia Drop-In on whether China is in a balance sheet recession, the July BOJ meeting and more at 09:00 BST/16:00 SGT on Thursday, 27 th July . Register here . This article has been updated with additional analysis and charts since it was …
Food supply concerns mount The near-term outlook for global food security and prices has continued to worsen. Following the recent news that we are entering El Niño, this week saw the collapse of the Black Sea Grain Deal as well as India ban the export of …
21st July 2023
In a week when the US dollar strengthened and the 2-year US Treasury yield rose, agricultural and energy commodity prices still climbed on the back of supply concerns. In the case of agriculturals, those relate to Russia pulling out of the Black Sea Grain …
The US dollar has rebounded over the past two days and looks set to unwind much of last week’s fall. (See Chart 1.) With US data somewhat mixed, much of this rebound in the greenback seems to have been driven by a reassessment of the outlook for other …
We expect the fortunes of the Japanese yen and Mexican peso – which have both been outliers in different ways lately – to soon reverse, as souring risk appetite unwinds some “carry trade” and their relative valuations provide scope for adjustment. Amid …
Headline inflation fell to 2.8% in June and, excluding mortgage interest costs, was in line with the 2.0% target. While the Bank’s preferred core measures are still higher, the weakness of retail sales in May and June suggests demand is easing and is …
The Fed is almost certain to hike its policy rate by 25bp to between 5.25% and 5.50% at next week’s FOMC meeting, but we increasingly believe that will prove to be the peak. Despite the ‘higher for longer’ rhetoric from officials, a more marked decline …
Despite the fall in CPI inflation from 8.7% in May to 7.9% in June (see here ), the UK is still lumbered with an inflation rate that is 1.4 percentage points (ppts) higher than in the euro-zone. And at 4.8ppt, the gap between UK and US CPI inflation …
Russian FinMin throwing in the towel? A raft of comments from senior policymakers at the Russian Ministry of Finance this week highlight the pressures that the public finances are under and how policymakers are likely to tighten fiscal policy in response …
Demand not looking so excessive after all Retail sales volumes were little changed in May and the preliminary estimate implies that they dropped back in June. That calls into question the Bank of Canada’s recent claim about “persistent excess demand” and …
China’s stock market has underperformed over recent months and investors once again seem to be discounting a lot of bad news. We think this pessimism is slightly overdone and that Chinese equities will fare better than those elsewhere over the rest of …
Argentina continues to dodge exchange rate issue An Argentine delegation travelled to Washington this week in a bid to close negotiations with the IMF on the fifth review of the country’s $44bn Extended Fund Facility (and, according to local media, to …
In a relatively quiet week for euro-zone economists, the most important release was the final inflation data for June. Unusually, these were revised slightly from the flash release as core HICP inflation is now estimated to have edged up to 5.5% rather …
After trailing the rest of Europe last year, the Dublin industrial market has had a change of fortune in 2023 as rent growth continued to improve. With industrial demand set to benefit from a relatively strong domestic economy, greater trade with Northern …
While recent data suggest the US in on a path towards disinflation and a less aggressive monetary policy stance from the Fed, we continue to think that the dollar will rebound in the second half of 2023. Short-term momentum has swung against the dollar as …
While the US dollar has fallen against most currencies since the start of the year, our estimates of the greenback’s “fair value” are broadly unchanged, leaving it only somewhat overvalued in our assessment. The valuations of most G10 currencies …
Inflation worries trigger bumper hike The much larger-than-expected 100bp interest rate hike (to 8.50%) by the Russian central bank underscores policymakers’ concerns about inflation risks. And while we don’t think monetary tightening will continue quite …
Limited impact from ban on trade and inflation We warned last week of a potential ban on rice exports in response to rising prices in some parts of the country and as a pre-emptive measure ahead of a potentially severe El Niño weather event. This week, …
Regulatory environment is only part of the problem After making life more difficult for many private firms in recent years, officials are shifting course. On Wednesday, a document aimed at promoting the development of the private sector was jointly issued …
The Treasury yield curve has been inverted for a long time by past standards, but we think it could remain so until next year even if there’s a recession in the interim. At the start of this month, it briefly looked as though the beginning of the end of …
Below trend growth in Q2 A few places have already published second quarter GDP figures, and the rest of the region will follow over the coming weeks. Although the data are likely to show GDP growth picked up in around half of the region (see Chart 1), …
Given our view that economic growth will disappoint, we doubt that the positive mood accompanying US banks’ earnings reports will endure over the rest of 2023. But when the outlook brightens, we suspect that bank stocks will recover, helped by lower but …
This page has been updated with additional analysis since first publication. Resilience in June, but Q2 was still weak June’s retail sales and industrial production data out of Poland suggest that the economy held up relatively well last month, but we …
This page has been updated with additional analysis since first publication. Unexpected borrowing undershoot as receipts rise sharply Note: Join our special online briefing after the Fed and ECB’s July decisions, and previewing the BoE’s August meeting, …
New Zealand inflation looks sticky CPI data published on Wednesday revealed that New Zealand’s consumer prices rose by 1.1% q/q in Q2, only slightly below the 1.2% quarterly rise in Q1. Nonetheless, favourable base effects meant that annual inflation fell …
Note: Join our Asia Drop-In on whether China is in a balance sheet recession, the July BOJ meeting and more at 09:00 BST/16:00 SGT on Thursday, 27 th July . Register here . Tax revenue disappoints According to the Bank of Japan’s flow of funds accounts, …
Bank will revise up 2023 inflation forecast Early signs that virtuous cycle between wages and prices has finally arrived However, widening of tolerance band would risk renewed bond market sell-off At the upcoming meeting, the Bank of Japan will revise …
