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It is possible that equity prices will continue to struggle in the near term if central banks send more signals that they are willing to raise interest rates further in order to control inflation. But without a significant economic downturn or recession …
31st January 2022
Industry across Emerging Europe turned a corner in Q4 as auto production rebounded strongly. This comes amid signs that supply shortages are starting to ease; our proprietary shortages dashboard suggests that product shortages may have peaked. We think …
27th January 2022
The jump in transactions during the pandemic was larger in London than other regions as the market didn’t experience the same drop in supply as elsewhere. That reflected many existing homeowners adjusting to remote working by moving further afield, giving …
25th January 2022
#Commercial property ended last year strongly. Annual rental growth climbed to a five-year high, while annual total returns crossed the 20% level. This was largely the result of dynamism in industrial, though all sectors saw positive annual returns, even …
21st January 2022
The Riksbank has learnt from its past tendency to project rate hikes that never arrive. But the single repo rate rise by end-2024 that it currently projects is stretching the limits of plausibility in the other direction. Of course, policymakers will …
17th January 2022
The Omicron variant of COVID-19 is causing new virus cases to surge in the emerging world. (See Chart 1.) Many EMs are reporting record daily cases or that new infections are rising sharply. South Africa ’s experience offers some hope – cases are now …
14th January 2022
Euro-zone inflation reached 5.0% in December, which is likely to be the peak. Unless oil and gas prices surge again in 2022, which seems unlikely, energy inflation will plummet – we forecast the contribution of energy to headline inflation to drop from …
11th January 2022
The continued strength of the housing market after the end of the stamp duty holiday shows that it was far more than the tax break that kept prices surging in 2021. The three key drivers of demand - low mortgage rates, high household saving, and a …
23rd December 2021
While we have raised our end-22 and end-23 forecasts for the S&P 500, we still expect gains in the index to be smaller over the next two years than they have been in 2021 and on average over the past decade . After rising sharply in October, the S&P 500 …
21st December 2021
Inflation pressures have shown no signs of letting up across Emerging Europe, with headline inflation rates surging to multi-year highs in November. Producer price inflation has hit rates not seen in decades, food inflation continues to surge and strong …
20th December 2021
The Riksbank (along with the RBNZ) is one of the few major central banks not to have a scheduled meeting in December. But with the Fed having put its hawkish cards on the table, rate hikes by the Bank of England and Norges Bank , and a chance that even …
16th December 2021
The discovery of the Omicron COVID-19 variant in late November rattled UK markets. Equities tumbled, sterling weakened and corporate credit spreads jumped. And, while the initial reaction was not unique to the UK, it does seem that investors remain a bit …
15th December 2021
While the emergence of the Omicron COVID-19 variant has increased the downside risks to our GDP forecasts, it has arguably increased the upside risks to our CPI inflation forecasts. The transmissibility, severity and capacity for Omicron to escape …
7th December 2021
High frequency data show that travel to retail and recreation destinations, restaurant bookings and flights have all declined in the past few weeks as coronavirus restrictions have been tightened in the face of rising hospitalisations. (See Chart 1.) It …
6th December 2021
Commercial property’s recent good run continued in October. The annual rate of rental growth surged ahead after only breaching positive territory for the first time in almost two years during August. However, given the economy’s headwinds over the near …
3rd December 2021
Spillovers to other emerging markets (EMs) from Turkey’s ongoing currency crisis have been limited so far and we think this will remain the case even if Turkey’s financial markets remain under pressure . Turkey’s financial markets generally have taken a …
24th November 2021
The rebound in economic activity and robust investor demand paved the way for a continued improvement in Scandinavian and Swiss property markets in Q3. Office and industrial values rose further, as strong competition pushed down yields. (See Chart 1.) …
23rd November 2021
CEE property values completed the final leg of their recovery in Q3, fully reversing the nearly 5.5% peak-to-trough drop in 2020. With rents barely moving on the quarter, falls in yields did all the heavy lifting in driving capital values higher. CEE …
22nd November 2021
The dollar has risen to its strongest level in more than a year and, though it is not our central forecast, we think the risk of a more sustained dollar bull market is increasing. The incoming economic data – in particular, continued well-above-target …
19th November 2021
The end of the stamp duty holiday has had remarkably little impact on buyer demand. If anything, the imbalance between strong home purchase demand and limited supply is intensifying. Indeed, Rightmove reported that the average time to sell a home …
Germany and Austria are at the centre of the Covid storm in Europe, and the fact that vaccination coverage in Switzerland is even lower does not bode well. Vaccine take-up varies from about 60-80% in Switzerland, but is lowest in some of the …
16th November 2021
The recovery in euro-zone commercial property values picked up in Q3, supported by a small fall in yields and an improvement in the pace of rental growth. While retail rents held steady, the quarterly rise in both office and industrial rents was the …
We’ve been warning for a while that CPI inflation would rise further than most people expect and have recently pushed our own forecast even higher. We now think CPI inflation will rise from 3.1% in September to 4.0% in October and to almost 5.0% in April …
10th November 2021
Economic growth has slowed sharply as output approaches its pre-pandemic level. We think that GDP will probably increase by only around 0.5% q/q in the final quarter, down from 2.2% in Q3. Manufacturing firms in Germany are struggling more than most and a …
8th November 2021
COVID-19 outbreaks have surged across the region in the past month. Record high daily cases have been reported in Russia, Romania, Bulgaria and Latvia and infections are rising sharply elsewhere. Governments have tightened containment measures, including …
26th October 2021
September was another good month for commercial property, with the first year-on-year rental growth recorded since the onset of COVID-19. But as clouds gather over the economic upturn, we suspect that the real estate recovery will also struggle to …
22nd October 2021
The extent of the shift in investors’ expectations of interest rates over the past month has been staggering. Investors are now pricing in an 80% chance of a hike to Bank Rate, from 0.10% to 0.25%, at the Monetary Policy Committee (MPC) meeting on 4 th …
The supply shortages that have affected many DMs have also intensified in emerging economies over the past couple of months. The automotive sector has been hit hard by global semiconductor shortages, weighing on recoveries in Mexico, Czechia and Hungary …
18th October 2021
While the UK has seen house prices boom over the past year, central London has not joined in as increased remote working led buyers to shun the capital for more space in the suburbs and further afield. (See Chart 1.) But indicators of demand show that it …
Supply shortages and rising energy prices are becoming stronger headwinds to the euro-zone recovery. The latest data from Germany showed sharp falls in industrial orders and production (see Chart 1), with manufacturers citing supply bottlenecks as a …
7th October 2021
Overview – Natural gas and coal prices soared in September. In turn, this has raised the output costs of industrial metals, most notably those which are especially energy intensive such as aluminium and steel. At the same time, reports suggest that some …
5th October 2021
The recovery in UK commercial property continued into August, despite a backdrop of more equivocal economic data. But, while the economic softness should be short-lived and returns for 2021 are likely to remain healthy, we suspect that the real estate …
24th September 2021
Even if the current concerns around Evergrande abate, we think China’s stock market will continue to underperform many of those elsewhere over the next couple of years. Worries about Evergrande have continued to weigh on stock markets in China and …
22nd September 2021
Problems at Evergrande in China have dominated the headlines recently, but (sovereign) debt risks are brewing in other EMs too. Concerns about higher government spending and rising public debt levels are building in parts of Latin America . Meanwhile, …
21st September 2021
There is no doubt that demand cooled after the stamp duty discount was reduced. But a collapse in new listings has eclipsed the decline in new buyer demand, suggesting that prices will at least hold their ground in Q4 when stamp duty returns to normal. …
The recent rises in 2-year and 10-year gilt yields to their highest levels since the “dash for cash” at the start of the pandemic have entirely been driven by the investors revising up their expectations for inflation. Indeed, 10-year break-even inflation …
We don’t expect the recent surge in Japan’s stock market to last, and think it will make much smaller gains over the next couple of years . The remarkable rally in Japan’s stock market over the past couple of weeks, following the resignation of the …
17th September 2021
The broadening of the recent product and labour shortages appears to be holding back activity and adding to the upward pressure on inflation. The risk is twofold. First, these shortages may prevent GDP from returning to its pre-pandemic peak until next …
9th September 2021
Headline inflation came in higher than our above-consensus forecast in August and, at 3.0%, reached its highest level for a decade. It is likely to rise a bit further in the coming months: producer price inflation has risen recently and the price …
6th September 2021
We think slower growth in China will continue to weigh on the country’s stock market, as well as those of some other emerging markets (EMs). This month’s activity data out of China emphasised how the country’s economy has continued to slow. The latest …
27th August 2021
Recoveries across Emerging Europe accelerated in Q2 as the easing of virus restrictions pushed GDP to, or above, pre-pandemic levels in most countries and we think this momentum will continue in Q3. However, the recovery has been accompanied by a marked …
26th August 2021
In line with the economic recovery, there were growing signs that property markets have turned a corner in Q2. All-property rents rose on the quarter, while the all-property yield dipped on the back of lower industrial yields. On an annual basis, …
24th August 2021
All-property capital values rose for the third consecutive quarter in Q2, leaving them less than 1% below their pre-virus level. The improvement was driven by a decline in all-property yields, though rents also rose slightly on a quarterly basis for the …
18th August 2021
The SNB and the Riksbank will leave interest rates on hold throughout 2022 and 2023 and probably beyond, but the start of rate hikes by the Norges Bank is edging ever closer. (See here .) Once the tightening cycle in Norway begins, attention will …
16th August 2021
With a whopping 1.0 million people on average having been asked by the NHS App or Test & Trace system to self-isolate in July, the “pingdemic” is likely to have stifled the economic recovery in recent months. (See here .) In July, our Capital Economics …
11th August 2021
The surge in spending as coronavirus restrictions have been lifted will bring the euro-zone economy close to its pre-pandemic level in the coming months. After expanding by 2% q/q in Q2, we expect a similar increase in Q3. Both business and consumer …
4th August 2021
The acceleration in all-property capital growth in June reflected a sharp fall in yields and strong rental growth. But, even as a fast economic rebound boosts occupier demand in the coming months, we think this rate of growth in values will not be …
23rd July 2021
While the resurgence in COVID-19 cases that has recently weighted on UK equities, the pound and 10-year gilt yields (see Chart 1) is clearly a downside risk, our view that it won’t deal a big blow to the global or domestic economic recoveries suggests …
22nd July 2021
Falling virus cases, strong economic recoveries and/or inflation worries prompted several more EM central banks – those of Czechia , Chile , Hungary and Mexico – to tighten monetary policy in the past month, joining Russia and Brazil. And a few others, …
15th July 2021
The economy has continued to rebound strongly as governments have lifted almost all restrictions on retail and restaurants and eased rules on foreign travel. Restaurant bookings are back above pre-pandemic levels and the number of flights is rising …
7th July 2021
