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Strong immigration is unlikely to be enough to prevent a mild recession, with GDP contracting recently and the business surveys consistent with further declines. As house prices are falling again, household debt is elevated and high interest rates are …
25th October 2023
Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5% and 6% until mid-2024. While transactions volumes have only seen a modest decline so far, very weak …
23rd October 2023
The renewed surge in long-term Treasury yields illustrates that the full impact of Fed tightening is still feeding through, and we continue to expect economic growth to slow sharply over the coming quarters. With core inflation still looking on course to …
20th October 2023
After a brief respite earlier this year, property yields are once again on the rise, driven by a further increase in gilt yields. We don’t expect a repeat of the surge seen last year, but we also think any compression beyond this year will be minimal as …
19th October 2023
The latest activity and survey data have provided even more evidence that the resilience in activity in advanced economies over the first half of 2023 is now fading. High interest rates are clearly weighing on credit growth, and a further rise in debt …
13th October 2023
Surging Treasury yields have pushed mortgage rates above 7.5%, higher than we had anticipated. If these borrowing rates persist, lending and sales volumes could fall even further in the near term creating a risk that house prices fall rather than stagnate …
10th October 2023
Central banks in both Australia and New Zealand are likely to retain their hawkish bias in the near term, given that inflation is far from tamed in either country. While we think the RBNZ's tightening cycle is over, we expect RBA to hand down one final …
Our latest Chart Pack on Japan's economy is embedded below. With the economy growing at an above-trend pace, the labour market should soon start to tighten again. There are mounting signs that a virtuous cycle between wages and prices is starting to form …
9th October 2023
We expect the euro-zone economy to struggle over the next 18 months, and a mild recession in the coming quarters looks more likely than not. Headline and core inflation should keep falling, but the labour market will remain tight, keeping wage growth …
6th October 2023
Slowing momentum in activity, the recent decline in employment, and the sharp falls in core CPI and services inflation in August are clear signs that higher interest rates are weighing more heavily on the economy. This strengthens our view that the mild …
4th October 2023
We suspect the pound will fall from $1.22 now to $1.20 by the end of this year. That’s not due to lower interest rate expectations in the UK compared to the US or the euro-zone, as we think the UK will be the last to cut rates. Instead, it’s due to the …
28th September 2023
Strong immigration and the resilience of the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada keeping further rate hikes on the table, we still judge that GDP will contract later this year. Even if …
27th September 2023
Despite the recent rebound in energy prices, the downward trend in core inflation remains firmly intact. And with a growing number of indicators suggesting the labour market is not much tighter than it was in 2019, we expect wage and price inflation to …
20th September 2023
Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5.5% and 6.0% until mid-2024. While transactions volumes have only seen a modest decline so far, we …
19th September 2023
While economic activity was generally more resilient than feared in the first half of 2023, there are growing signs that many major economies are losing momentum. We expect most advanced economies to experience mild recessions in the quarters ahead as …
14th September 2023
Although central banks in both Australia and New Zealand are unlikely to drop their hawkish bias anytime soon, we suspect that their tightening cycles are now over. The RBNZ has already succeeded in sending New Zealand into a recession, which is likely to …
We no longer expect the economy to enter a recession. But with real disposable incomes falling, we expect domestic demand to remain sluggish. Meanwhile, falling import prices and extension of energy subsidies should bring inflation down before long. While …
11th September 2023
With affordability stretched and the economy slowing, housing market activity is expected to remain weak over the coming quarters. While we expect house prices to lose some of their recent momentum, the worst of the correction appears to have passed and …
7th September 2023
We’ve become a bit more confident in our forecast that the Bank of England will raise interest rates from 5.25% now to a peak of 5.50%, rather than much further, as higher interest rates appear to be weighing more heavily on activity. The peak in UK …
31st August 2023
Strong immigration and the turnaround in the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada keeping further rate hikes on the table, we still judge that GDP will contract later this year. Even if …
25th August 2023
Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5.5% and 6.0% for the next 12 months. While transactions volumes have only seen a modest decline so far, …
All-property values are down by 10% from their mid-2022 peaks, but we think there is still another 15% to come by the end of 2024. Much of that price fall will be driven by a rise in cap rates in response to higher interest rates. But, due to the …
23rd August 2023
Growth in the real economy appears to be gathering momentum, but with survey-based indicators still weak and credit conditions continuing to tighten, we expect that rebound to be short-lived. In contrast, labour market conditions continue to ease. Nominal …
16th August 2023
We no longer expect the economy to enter a recession across the second half of the year. But with external demand set to remain soft and real household incomes declining for a while yet, the recent strength in activity won’t last. And with plunging import …
While economic activity was generally more resilient than feared in the first half of 2023, we expect global growth to disappoint in the coming quarters. We doubt that another bout of policy stimulus will radically improve the outlook for China’s economy, …
14th August 2023
Although central banks in both Australia and New Zealand are unlikely to drop their hawkish bias anytime soon, we suspect that their tightening cycles are now over. The RBNZ has already succeeded in sending New Zealand into a recession, which is only set …
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3 rd August . (Register here .) Despite the easing in CPI inflation from 8.7% in …
1st August 2023
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 …
24th July 2023
We still think the economy is more likely than not to fall into a mild recession later this year, as higher interest rates remain a drag and credit conditions continue to tighten. With the labour market proving resilient and core inflation still much too …
19th July 2023
Stretched affordability and a weakening economy will weigh on housing market activity this year, causing home sales to remain low. While house prices have recovered in recent months, we expect declines to resume later this year. Even so, affordability …
17th July 2023
The following is a presentation that Kiran Raichura gave to the NCREIF Summer Conference in Chicago on 12th July, 2023. … What does the new normal mean for real …
While the resilience in economic activity looks to have continued in May, the latest surveys point to GDP growth slowing in June. And in China, the post-reopening rebound appears to have already fizzled out. Meanwhile, the significant tightening in …
14th July 2023
Underlying inflation is set to fall through the coming quarters as the price shock from the war in Ukraine and the yen selloff last year dissipates. What’s more, the economy is set to enter a mild recession in the second half of the year, dragged down by …
11th July 2023
The further increase in mortgage rates to around 6% has left affordability particularly stretched in London. On top of the shift to remote working, which has allowed buyers to consider more affordable areas, that is likely to mean that buyer demand in …
10th July 2023
We expect the RBA to lift rates to 4.85% by November, while the RBNZ's tightening cycle is likely already over with its cash rate now at 5.50%. With house prices now 18% below their January 2022 peak, we think New Zealand's housing downturn has run its …
The acceleration in core CPI inflation in May combined with the reacceleration in wage growth in April shows that domestic inflationary pressures are still strengthening and interest rates will need to rise further. Admittedly, higher interest rates were …
6th July 2023
The risk is that interest rates rise above our current peak forecast of 5.25%. Persistent core inflation has driven up UK market interest rate expectations and has lifted the 2-year gilt yield above its peak after the “mini-budget”. But we think there is …
3rd July 2023
Higher mortgage rates have not only priced many buyers out of the market altogether, but also reduced the size of mortgage those still able to buy can take out. (See Chart 1.) The latest surge in mortgage rates to almost 6% means that, for the same …
28th June 2023
The investment boom in new hi-tech manufacturing plants is unprecedented, but that boom still hasn’t fed through into higher output or employment in hi-tech manufacturing and investment in IT equipment has been muted in recent quarters. Software …
20th June 2023
The seven-month run of house price declines recently ground to a halt, with the Case-Shiller index showing an increase in prices in both February and March. This was partly driven by the temporary boost to demand at the start of the year from declining …
9th June 2023
The euro-zone has fallen into recession, albeit only by the finest of margins – the economy contracted by 0.1% q/q in both Q4 last year and Q1 this year. The consensus view is that the worst is now behind us and that growth will accelerate, presumably in …
Growing evidence that UK price pressures are becoming increasingly domestically generated has driven up market interest rate expectations and at one point pushed the 10-year gilt yield up to 4.38% in late May, close to its peak seen after the …
1st June 2023
Metro level data for Q1 2023 showed the slowdown in occupier demand was widespread, with no market consistently outperforming across the sectors in terms of absorption. While office and industrial asking rents continued to grow, they did so at a slower …
24th May 2023
The turnaround in the housing market, with sales and prices rebounding in April, has raised hopes that construction will hold up despite elevated borrowing costs. Media reports suggest that buyer enquiries for pre-construction projects have rebounded, …
The resilience of the April activity data and apparent stabilisation in housing have raised hopes that a recession may yet be avoided this year. That said, forward-looking indicators suggest that the huge rise in interest rates and tightening of bank …
23rd May 2023
The economy has been relatively resilient so far, but with the banking turmoil set to weigh on activity, we continue to expect a recession this year. Slower growth has already translated to softer occupier demand across all property sectors. This will …
19th May 2023
The larger than anticipated rebound in mortgage approvals in March and a slowdown (or even partial reversal) of house price falls suggested that the housing market downturn may have ended much earlier than we anticipated. The unwinding of some of the …
Australia’s house prices have rebounded over the last couple of months and most leading indicators suggest that the recovery has legs. However, we doubt that a sustained recovery is on the cards. While false dawns in the housing market are rare, they did …
15th May 2023
Governor Ueda presided over his first policy meeting late last month and opted to keep all monetary policy settings, including Yield Curve Control (YCC), completely unchanged. To be sure, Mr Ueda also announced that the Bank will conduct a thorough review …
11th May 2023
The US housing market has been largely unaffected by the banking sector turmoil. Indeed, buyer sentiment rose to an 11-month high in April and activity appears to have bottomed out. Tighter credit conditions could yet weigh on the market, but the latest …
10th May 2023
