We do not yet know which of the three PM hopefuls (Boris Johnson, Rishi Sunak, Penny Mordaunt who have attracted early backing from Conservative MPs) will replace Liz Truss. The candidates that gain more than 100 nominations from MPs will be whittled …
21st October 2022
Chile three years after the social uprising This week marked the third anniversary of a large wave of protests in Chile which, while ostensibly triggered by a rise in metro ticket prices, marked a watershed moment in Chile’s modern history and left …
Decent Q3 growth Korean GDP figures due on Thursday are likely to show that the economy held up reasonably well in the third quarter of the year. We have pencilled in growth of 0.4% q/q. While this would represent a slowdown compared with the 0.7% …
The continued decline in European natural gas prices this week is a positive development for economies in Central and Eastern Europe (CEE), but the energy crisis will not go away anytime soon and we still expect the region to enter recession this winter. …
This week’s data releases painted a mixed picture of activity: from the good, to the bad, and the just plain ugly. Manufacturing sector holding up well First the good; manufacturing output increased by 0.4% m/m in September, following decent monthly gains …
Unemployment still low in September Data for Sweden in September show the labour market remained tight. Admittedly, employment fell on the month and the unemployment rate edged up from 6.9% in August to 7.0%. (See Chart 1.) But the monthly numbers are …
The main message from our latest quarterly Euro-zone Economic Outlook , which we published this week, is that we now expect the euro-zone to experience an even more extreme case of stagflation. We now forecast both headline and core inflation to average …
German economy overtakes Japan’s With the yen weakening to 150 against the dollar this week, we estimate that Germany has overtaken Japan as the world’s third largest economy in dollar terms. (See Chart 1.) Chart 1: Nominal GDP (US$bn, 4Q Sum) Sources: …
Limited macro fallout from sliding rupee The rupee has this week continued its slide against the US dollar, dropping to a record low of 83/$ on Thursday. As has been the case over the past few months, this has been the trigger for a series of alarmist …
Minutes signal RBA not done yet The RBA this week signalled that even though it slowed the pace of tightening at its last meeting, it is not done yet. In a speech on Wednesday, Deputy Governor Bullock showed that the higher frequency of the RBA’s policy …
Tunisia still has work to do for IMF deal approval The IMF stated last weekend that Tunisia reached a staff-level agreement for a new deal, which (if approved) will reduce concerns that Tunisia might follow in Sri Lanka ’s footsteps towards a messy …
20th October 2022
“Dear, oh dear”. King Charles neatly summed up the thoughts of the nation with those three words when he greeted the Prime Minister, Liz Truss, on Wednesday for their weekly meeting. The big question is who will the King be greeting next week? Will it be …
14th October 2022
Nigeria: Buhari administration’s farewell budget The shelf life of Nigeria’s recently presented budget plans is likely to be short with elections due in early-2023 and no guarantee about policy continuity. In a budget speech late last week, …
Central banks bringing things to a close This week, Chile ’s central bank became the latest in the region to end its rate hiking cycle. The statement accompanying its 50bp policy rate hike, to 11.25%, on Wednesday mentioned that the policy rate “has …
Canada is unlikely to succumb to the same crisis currently afflicting UK markets, but those problems are a reminder that rapidly rising interest rates have a habit of breaking things. In Canada’s case, the biggest vulnerabilities are housing and household …
We still think it’s only a matter of time before the easing of inflationary pressure evident in the surveys and other private-sector data shows up in the official figures. But the September CPI report points to the Fed hiking by another 75bp not just in …
Governing Council members were out in force this week giving their euro cent’s worth on the monetary policy outlook. Sifting through the various comments, there are three main takeaways. First, even the most hawkish are not prepared, in public at least, …
Sweden: consumer prices vs house prices September’s consumer price data were very strong. But there has been a sharp slowdown in the housing market which could mean that the Riksbank’s tightening cycle comes to an end soon. The increase in headline …
Yen tumbles again after strong US inflation data Following another strong inflation reading from the US, the yen today weakened slightly past the 147.6 trough it hit in 1998, reaching its weakest against the dollar since 1990. It then rebounded, sparking …
The Party Congress begins on Sunday. We covered much of the agenda and economic implications in a Focus piece and at a Drop-In event (recording here ) this week. One element of both was a discussion of who might replace Li Keqiang as premier. But Li …
Zero-COVID to hold back tourism recovery China’s 20 th Party Congress gets underway on 16 th October. With General Secretary Xi’s continued dominance in little doubt, it is unlikely to result in any substantial change in policy direction. This …
Inflation & external pressures force the MNB’s hand The surprise decision by Hungary’s central bank (MNB) to tighten monetary policy further today underscores that the economy is facing much stronger inflation and external pressures than its regional …
Apple production shift boosts local manufacturing Regular readers of our India research will be (perhaps all-too-) familiar with our view that the key to India sustaining rapid economic growth over coming decades is the development of its manufacturing …
RBA flags higher neutral interest rate (sort of) This week’s speech by Reserve Bank of Australia Assistant Governor Luci Ellis on the neutral interest rate was an odd affair. The last time the Bank published an estimate of the neutral rate was in 2017, …
US-Saudi relationship dials back Developments since last week’s OPEC+ decision provide further evidence that the relationship between Saudi Arabia and the US has soured. (See our immediate take on it here .) Chair of the US Senate Foreign Relations …
13th October 2022
The bi-annual Monetary Policy Review (MPR) released this week by the South African Reserve Bank (SARB) bolsters our view that the monetary tightening cycle will continue to take on a distinct path to most other EM central banks. In many ways, the SARB has …
7th October 2022
Our annual Spotlight series this year looks at the implications of the “fracturing” of the global economy that we believe is being caused by the re-emergence of geopolitics as a driver of policy. The key divide is between China and the West. Events at the …
The hawkish speech from Governor Tiff Macklem this week suggests that the Bank of Canada has no intention of following the Reserve Bank of Australia in dropping down to a 25 bp hike at its next meeting, despite the growing downside risks to the economy, …
Bolsonaro strong, but Lula still the front-runner The main story in Brazil’s general election on Sunday was the stronger-than-expected performance of Jair Bolsonaro and his right-wing allies, which buoyed the country’s financial markets. The real is up by …
What could the Fed "break"? The recent liquidity issues faced by UK pensions funds and problems at a few European banks have led to speculation that the Fed’s interest rate hikes will trigger some form of financial instability which, via an adverse …
Russia under more strain after Ukraine annexation The macroeconomic fallout from Russia’s call-up of military reservists and its formal annexation of Ukrainian territory has continued to mount, resulting in tighter Western sanctions, a mass fleeing of …
BoK to take cautious approach The consensus is expecting the Bank of Korea (BoK) to increase its policy rate by 50bp at its scheduled meeting on Wednesday. But with the economy slowing sharply, we think a 25bp hike is more likely. A weakening currency …
The Prime Minister, the Chancellor and investors will probably all be breathing a huge sigh of relief today as there was no guarantee that they would end the week in the same positions as they started it. But the lesson from the past couple of weeks is …
A raft of economic data for Sweden published this week added to the evidence that its economy is slowing and, like most of Europe, heading for a recession this winter. The 1.3% fall in Statistics Sweden’s monthly GDP indicator in August was the biggest …
Strong case for even bigger rate increase The case is growing for the ECB to step up the pace of tightening further at its meeting in three weeks. The account of last month’s ECB meeting, published on Thursday, showed that policymakers expect to keep …
JP Morgan announcement won’t impact inflows After weeks of media speculation over an imminent addition, it was announced on Wednesday that India’s local-currency bonds will not be included in JP Morgan’s GBI-EM Global Diversified Index for the time …
Regular pay rising at the fastest rate in 25 years The preliminary estimate of labour cash earnings released today showed a 1.6% annual rise in regular pay in August, the largest rise in 25 years. We wouldn’t be surprised if that figure was revised …
Bank not done tightening yet Following the RBA’s surprise decision to hike the cash rate by 25bp instead of the 50bp widely anticipated, the financial markets now price in a peak of 3.6% by mid-2023 instead of 4.2% just before the meeting. Some …
OPEC+ cut to hit Gulf GDP growth; irks US The decision by OPEC+ to cut its oil output quotas by 2mn bpd on Wednesday poses a clear downside risk to our Gulf GDP growth forecasts, and it has also raised tensions between Saudi Arabia and the US. The oil …
6th October 2022
Central banks in Central Europe are attempting to draw their tightening cycles to a close, but with inflation very high and currencies under pressure, there is a clear risk that this could be premature. This week Hungary’s central bank sprung a surprise …
30th September 2022
Political considerations ahead of key elections in South Africa and Nigeria are likely to add to reasons to loosen fiscal policy over the coming quarters. Severe power cuts continued in South Africa this week, which past experience shows will have weighed …
Annual revisions show a weak real economy The big gap that had opened recently between the real GDP and real GDI (gross domestic income) data was partly resolved in the annual revision released this week, but not in the way the Fed would have liked, …
The government-induced turmoil in the markets this week has altered our thinking in five key ways. First, we have raised our forecast for the peak in interest rates from 4.00% to 5.00%. At the end of last week, we had thought that the tax cuts announced …
The accepted wisdom is that strong immigration reduces the pressure on the Bank of Canada to raise interest rates, as it will eventually help to ease labour shortages. But the immediate impact has been to boost rental growth at a time when the Bank is …
Ugly trade data, about to get worse The most recent trade data out of Asia have been very weak, and with the global economy heading for recession, we think the worst is still to come. There has been no shortage of bad news recently for the region’s …
While we don’t expect euro-zone governments to engage in UK-style large discretionary fiscal loosening, Italy’s weak public finances and/or the ECB’s likely reluctance to intervene in government bond markets may well turn out to be the source of turmoil …
This week we got yet more data showing that economies in the region are slowing. Sweden’s Economic Tendency Indicator for September, published on Wednesday, plummeted and suggested that growth has abruptly stalled. (See Chart 1.) And other indicators …
Mortgage rate floor relaxed, LPR cuts now less likely After being slashed this year, mortgage rates in most cities are now at the regulatory floor which, for first-time buyers, is currently set at 20 basis points below the five-year loan prime rate …
All eyes will be on Brazil’s general election on Sunday. Among other things, we’ve written about the implications of the vote for the economy, what lessons to draw from Lula’s previous presidency, and the future of Brazil’s fiscal rules. All of our …
C/A deficit widens to multi-year high Data released this week show that India’s current account deficit widened to 2.8% of GDP in Q2, its largest since 2013. The data can however be volatile, so we prefer to take a longer perspective. In the year to Q2, …
