Italy from leader to laggard The drop in GDP in Italy in Q2 means euro-zone output probably rose by 0.3% q/q in Q2, and just 0.1% if Ireland is excluded. Italy is no longer outperforming its peers and we think it will experience a sharper drop in output …
31st July 2023
This webpage has been updated with an additional chart and table of key figures. Kingdom enters a recession on back of oil production cuts Saudi Arabia’s flash GDP estimate showed that the economy fell into a technical recession on the back of oil output …
Climate change is expected to intensify the scale and frequency of flooding over the coming years. Housing markets in the US have yet to fully price in these risks, leaving many properties significantly overvalued. But as these risks begin to manifest, …
Recession over, but recovery likely to be weak The 0.1% q/q expansion in Czech GDP in Q2 took the economy out of technical recession last quarter, but we expect the recovery over the coming quarters to be weak. With inflation likely to continue falling …
This page was first published on Monday 31st July, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Tuesday 1st August, and the Caixin services and composite PMI on Thursday 3rd August. Construction downturn deepens The …
This article has been updated with additional charts and analysis since it was first published. Firms downbeat about output in Q3 June’s activity data were broadly positive for Q2, with both the industrial production and capital goods shipments data …
Central Bank of Nigeria’s reluctance to hike This week, the CBN’s policy rate hike of 25bp underwhelmed markets, presenting further evidence that Nigerian policymakers are trading off growth concerns with their inflation mandate. The MPC chose to hike …
28th July 2023
The Fed’s emphasis on data dependency amid even more evidence of resilience in the US economy pushed US Treasury yields up and the greenback higher against most major G10 currencies this week. Taken together with mixed activity data out of Europe and …
Europe benefitted less than the US from information-communications technology between the mid-1990s and mid-2000s because most of the innovative tech firms were based in the US and structural factors slowed the diffusion of new technology through the …
The Bank of Canada’s Summary of Deliberations highlighted the Bank’s concern that inflation could become stuck above the 2% target. Although headline inflation faces a bumpy downward path over the coming months, we think a faster easing in core inflation …
The Bank of Japan (BoJ) seems to have effectively ended yield curve control (YCC) without making a big splash in financial markets, but we wouldn’t rule out further effects – on Japan’s markets and those around the world – just yet. For a start, we …
Fitch gives Haddad a gift The upgrade by Fitch to Brazil’s long-term foreign currency sovereign debt rating this week, from BB- to BB, provides another sign that fiscal concerns in the country are easing. Fitch justified the move on the …
Most commodity prices rose this week on hopes of Chinese fiscal stimulus and a “soft landing” in developed markets. That said, a stronger US dollar later in the week meant that the prices of precious metals fell w/w. The star performer, however, was the …
This week’s FOMC meeting brought hints that Fed officials are no longer wedded to previous plans for further policy tightening. Even if activity growth continues to hold up a bit better than expected, we think a run of weaker inflation readings will …
Our View : We still expect the US and other advanced economies to tip into recession later this year. We think that will cause risk appetite to sour, putting pressure on ‘risky’ assets and favouring ‘safe’ ones. We expect central banks, in general, to cut …
The BoJ’s decision earlier today to, in effect, end its long-standing Yield Curve Control (YCC) policy means that long-term government bond yields in Japan will become more responsive to economic conditions and developments in global markets. While that …
Our View : Growth in most advanced economies will disappoint later this year, putting pressure on “risky” assets and favouring “safe” ones. Developed markets (DM) government bond yields will therefore decrease further, helped by central banks shifting …
Erkan delivers, but lingering doubts remain All eyes were on Turkey’s central bank governor on Thursday and she delivered a convincing message during the Inflation Report briefing. The priority is clearly for a more rounded policy shift than one that …
Weaker labour market Singapore’s labour market remains very tight, but there are growing signs that it is starting to loosen. According to figures published on Thursday, employment growth eased from 1.0% q/q in Q1 to 0.7% in Q2, while the unemployment …
This page has been updated with additional analysis since first publication. Sharp slowdown in second quarter growth Despite the rebound in GDP in May, growth in the second quarter looks set to be weaker than expected. With some of the factors supporting …
Slowdown in wage & price inflation despite resilience in activity The slowdown in both the employment cost index of wage growth and core PCE inflation to their lowest levels in nearly two years suggests that resilient activity growth won’t be enough to …
GDP data released this week suggest that the euro-zone economy held up better than we expected in Q2. Output rose in France and Spain and stagnated in Germany . Together, the national data point to euro-zone GDP rising by 0.4% in Q2 rather than falling …
China’s leadership promises more support The highlight of the week was Monday’s Politburo meeting. Although light on specifics, the readout was dovish in tone and made clear that more policy easing is on its way. While substantial direct support for …
One consequence of higher interest rates is an increase in the losses that the Bank of England will make via the bonds it bought during its quantitative easing (QE) programme. This week, the Bank published an estimate that it could make a huge £150bn …
H1 2023 was the weakest six months for European investment in over 10 years. And the difficult financing conditions and stretched valuations that have sapped investor sentiment are unlikely to relent much over the rest of the year. Further ahead, even as …
This page has been updated with additional analysis since first publication. Business surveys point to stagnation The small fall in the EC Economic Sentiment Indicator (ESI) in July leaves it consistent on past form with output stagnating and suggests …
Risks to EM food supply have increased amid the likelihood of an El Niño, the end to the Black Sea grain deal and India’s rice export ban. Countries in the Middle East and Africa are the most vulnerable to lower grain supplies and many EMs (particularly …
Sentiment improves, but is still depressed The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally ticked up in July, but our regional measure still points to weak GDP growth at the start of Q3. Economic …
Reforms to take a back seat for now In an otherwise quiet week, the big news from the past few days is that India’s parliament has approved a no-confidence vote lodged by opposition parties against Prime Minister Modi’s BJP-led government. The motion has …
Germany still the weak link National data released so far suggest that the euro-zone economy held up better than we had anticipated in Q2, with Germany still the laggard among major economies. We continue to think that monetary tightening will take an …
This article has been updated with additional analysis and charts since it was first published. Taiwan GDP (Q2) Taiwan’s economy rebounded strongly in the second quarter of the year, driven by a jump in exports and strong consumer spending. However, we …
Global goods trade rose slightly in May, but timelier data point to a renewed fall in June. And as spending patterns continue to normalise away from goods towards services at the same time as higher interest rates start to bite, it will probably be …
The Bank of Japan announced today that it will allow 10-year yields to rise above the 0.5% ceiling – which it says it is retaining – to a new “just-in-case” cap of 1.0%. With signs mounting of a virtuous cycle between inflation and wages, the chances of …
In the latest of our monthly EM Drop-Ins, Shilan Shah le a team of economists from across our EM and Markets services to answer client questions on what’s happening in EM macro while addressing key issues including: Which EMs are benefitting from the …
Strong economic growth in France and Spain The big increases in Q2 GDP in Spain and particularly France suggest that the euro-zone has so far coped with policy tightening much better than feared. However, the France data were flattered by temporary …
Real household incomes falling at rapid pace Data released last week underline that Japanese households are struggling to cope with rising living costs. While labour income rose at a robust pace, a slump in government transfer payments resulted in a 1.6% …
The Bank of Japan announced today that it will allow 10-year yields to rise to 1.0% instead of the current ceiling of 0.5%. We still think that a slowdown in inflation will convince the Bank to keep its short-term policy rate unchanged over the coming …
The big news out of Australia this week was that both headline and trimmed-mean inflation in Q2 were lower than most had anticipated. However, we still think it’s too soon for the RBA to declare victory in the war on inflation. After all, services …
This page has been updated with additional analysis since first publication. Retail sales soften anew The sharp decline in retail sales in June suggests that sales volumes fell for a third consecutive quarter in Q2. With the RBA sounding increasingly …
This article has been updated with additional charts and analysis since it was first published. Upside risks to our services inflation forecasts Headline inflation was unchanged in Tokyo this month, but a jump in services inflation helped power a renewed …
While both the Fed and ECB appear to be nearing the end of their tightening cycles, the strength of the US economy relative to the euro-zone suggests to us the euro is likely to fall further against the greenback over the coming months . Today’s …
27th July 2023
Mbappé or not, Saudi gov’t focussed on sports The Saudi Pro League went from the back pages to the front pages this week as Al-Hilal (a football club recently acquired by the Kingdom’s sovereign wealth fund) made a world record $335mn bid for PSG’s Kylian …
The ECB’s decision to raise rates by 25bp today and Christine Lagarde’s guidance that another hike was a “decisive maybe” will not have surprised anybody. On balance, we think the Bank will probably nudge rates up to 4% in September or October and keep …
The latest RICS survey signalled a slight improvement in occupier and investment sentiment in Q2, but confidence remained low by historic standards. Tight credit conditions and a poor economic backdrop in the second half of this year suggest sentiment …
We expect the July employment report to show a continued gradual slowdown in employment growth and a decline in wage growth to a two-year low. That should give Fed officials a little more confidence that the moderation in core inflation will continue. The …
Economy shrugs off impact of higher rates The 2.4% annualised gain in second-quarter real GDP growth, which means the economy expanded at close to its potential pace over the first half of the year, suggests that higher interest rates are having …
Our China Activity Proxy (CAP) suggests that China’s economy contracted in June as the service sector spluttered. Policy support means the economy should return to growth before long. But the pace of future expansion will be more modest than in the past. …
ECB hikes and leaves options open As was universally expected, the ECB raised interest rates by a further 25bp today and indicated that further hikes are possible but not certain. At the press conference we expect the main message to be that policy will …
“The Boy” is back Much ink has been spilled – not least by ourselves – on the potential impacts of the return of El Niño conditions on commodities and economies. It’s fair to say that some of the analysis we have stumbled across has been towards the …
25bps hike and peak in sight Reverting to a 25bps hike rather than 50bps Rate hikes may come to a halt a bit sooner than most analysts and investors expect After a lengthy pause, rates to fall further than investors expect in late 2024 and in 2025 We’ll …
