Egypt’s shift back toward economic orthodoxy will result in near-term economic pain, but it could also pave the way for faster economic growth over a longer horizon. Part of that will rest on Egypt capitalising on its improved external competitiveness, …
15th May 2024
Forecasts for prime office rental growth have generally proven too pessimistic over the past couple of years, but there is again broad agreement that a slowdown is on the way this year. However, we think the risks are still to the downside and that the …
Spending on hotels and overseas visits to the UK are still not back to their pre-COVID-19 levels. But with cost-of-living pressures set to ease around the world and consumer spending likely to outpace overall GDP growth in the UK, demand will recover over …
We expect total returns from both US dollar-denominated, and especially local-currency (LC), emerging market (EM) sovereign bonds to trump, in general, those from US Treasuries in the next couple of years. Dollar-denominated and LC EM sovereign bond …
Treasurer Jim Chalmers has sought to present the 2024/25 Budget as one that strikes a balance between providing support to an ailing economy and keeping pressure off inflation. In our view, that’s disingenuous: the combination of increased government …
The tariffs announced today on US imports from China won’t cause much direct economic damage since trade in the affected goods is already low. But US economic sanctions on China seem to act like a ratchet: they only ever get tighter. In many areas that …
14th May 2024
The impact of the US tariffs announced today will barely register on the paltry flows of solar panels and electric vehicles that China directly exports to the US. However, the new tariffs could have a bigger impact on imports of Chinese-made batteries, …
Increased immigration would be the easiest way for Singapore to offset a decline in the working age population. However, such a move would be politically controversial, and deciding how many foreign workers to allow into the country will be one of the …
Note: We’re holding special Drop-Ins around the policy easing cycle, including an online briefing on the UK’s April CPI release on Wednesday 22 nd May ( click here to register) and a session on the ECB June meeting on Thursday 6 th June ( click here to …
We expect the RBNZ to leave policy settings unchanged at its meeting next week. Although the domestic economic backdrop is clearly weak, lingering risks around inflation persistence means policy loosening is unlikely to come onto the agenda before Q4. …
The dissolution of Kuwait’s parliament for the fourth time in two years highlights political infighting that has held back the economy for years. While much remains uncertain, there is now a clear path for fiscal policy to be loosened and help to unlock …
13th May 2024
High net migration has led to a big jump in demand for rental properties that has pushed up the cost of rent compared to the average salary. But comparing rents to average pay is not as accurate a guide to tenant affordability as it used to be. Our …
An increase in support for populist parties in European parliamentary elections in June will have little bearing on economic policy in the near term because the more centrist parties should still win a majority of seats. Nonetheless, rising populist …
The fiscal tightening steps announced by Turkey’s finance ministry today, which include a freeze on most public construction projects, will help to prevent the large budget deficit from widening even further this year and contribute to the rebalancing …
Capital flows into EM bonds and equities have fallen to their lowest in six months as investors have pared back expectations for Fed interest rate cuts. However, even with these moves, we remain more dovish than the market on the Fed and so believe there …
Rebound in inflation set to be limited due to overcapacity PPI deflation eased and CPI inflation rose in March, but they remained relatively subdued compared with pre-pandemic norms. We think inflation will continue to edge up in the near term. But …
Credit downturn threatens the recovery Broad credit growth slowed sharply to its weakest pace on record last month. This threatens to derail the ongoing economic recovery and is likely to trigger additional policy easing. Increased fiscal support may help …
The blowout in the pipeline of unfinished houses during the pandemic will reverse by the end of this year. With building approvals very low, dwellings investment will therefore fall further. While this will only exacerbate the acute shortage of rental …
We held an online Drop-In session last week to discuss geopolitical risk and the commodities price outlook. ( View a recording here .) This Update answers several of the questions that we received. Q1: What Middle East escalation scenario do you consider …
10th May 2024
Although Japan’s equities and currency have generally moved in tandem in recent weeks, we think the historical inverse relationship between the two will reassert itself before long. We expect a stronger yen to become a headwind for Japan’s equities in the …
After a prolonged period of weakness, the West Coast ports have seen an improvement in trade volumes recently. However, industrial demand in these markets remains very weak and growing headwinds – most notably the threat of greater tariffs on Chinese …
The shares of the very biggest, ‘mega-cap’, firms have generally outperformed those of smaller ones by less in Europe than they have in the US on net so far this decade. We expect that to remain the case through the end of 2025, as bond yields drop back …
Although the recent weakness in exports from China suggest that a sharp rebound in global goods trade probably isn’t on the cards, we still expect global trade to rise this year after a very weak 2023. And while conflict in the Red Sea has caused some …
The scale of the economic impact of the floods that have affected much of the southern state of Rio Grande do Sul will depend on how long it takes for the waters to recede and for reconstruction efforts to get underway. Given the region’s importance to …
9th May 2024
Although the monetary easing cycle in Brazil is entering a much slower phase, we think the Brazilian real will remain under pressure against the dollar over the coming quarters. Emerging market (EM) currencies have generally struggled against the …
Private sector savings surged in Israel during the pandemic and jumped again last year amid the war in Gaza. We estimate that those built up due to the war are equivalent to around 3.0% of GDP and could be used to fund consumption, particularly if …
Lawmakers' current efforts to restrict institutional buying of single-family homes won't put downward pressure on house prices if enacted, as their market share is minimal. Investors ramped up buying of homes in 2021-22, a trend that has raised concerns …
We’ll be discussing the outlook for Bank of England policy in a 20-minute online briefing at 3pm today. (Register here .) While leaving interest rates at 5.25% today as widely expected, the Bank of England gave the impression that it is close to cutting …
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 …
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 …
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 …
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 …
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 …
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 …
8th May 2024
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 …
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 …
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 …
7th May 2024
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 …
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 …
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
Despite the correction in equity markets over the past month, risk premia generally remain low across financial markets. While we expect this to continue as an AI-driven bubble inflates in equity markets, this Update explores four areas that could …
3rd May 2024
Inflation in Norway has been falling faster than Norges Bank expected for some time, but with the core rate still a long way above target, today’s communications show that policymakers are not counting their chickens. While they now seem to envisage …
The latest manufacturing PMIs suggest that global industry continued to recover at the start of Q2, but that this was entirely due to higher output in emerging markets, while activity remained much weaker in advanced economies. Meanwhile, the increase in …
2nd May 2024
The EM manufacturing PMI for April showed that industry continued its strong start to the year through to the beginning of Q2. At a regional level, the narrative was largely unchanged: India remains the star performer, while industry in Central Europe …
Many central banks are concerned about the fact that services inflation has remained too high. But we think the risks in Switzerland are skewed to the downside and, in our view, outweigh the upside risks from goods prices. This leaves us comfortable with …
