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
April’s inflation data provided little sign that underlying price pressures are easing. Admittedly, the core rate edged down from 5.7% y/y in March to 5.6%, which was the first decline in 15 months. But that was entirely due to a decline in core goods …
5th May 2023
We’ve been surprised that the rise in Bank Rate from 0.10% in November 2021 to 4.25% hasn’t triggered a contraction in GDP at the start of this year. Indeed, while higher interest rates were a further drag on net mortgage lending in March, the …
4th May 2023
Click here to read the full report. We think the economic recovery in China will support further gains in the country’s equity market. Despite some renewed evidence that China’s economy has been recovering more strongly than most anticipated in the first …
3rd May 2023
The MSCI USA Index has not made much further headway on net in April so far. But it has at least held on to its strong gains from earlier in 2023, returning about 8% YTD. Part of that strength presumably reflects the global economy proving more …
28th April 2023
All-property yields have stabilised since the start of the year and alongside continued rental growth, that means total returns were more-or-less flat during Q1. (See Chart 1.) But, while the worst is over, the economy is still set for a mild recession, …
Persistent and deepening electricity outages in South Africa are wreaking economic havoc. Almost half of generating capacity was offline this month, triggering severe “loadshedding”. Output in energy-intensive sectors – such as mining and manufacturing – …
27th April 2023
The renminbi surpassed the US dollar to become the most-commonly-used currency in China’s cross-border transactions for the first time last month. Part of the increase – the part that has received plenty of attention – is due to wider adoption of renminbi …
We think disappointing global growth will be a headwind for “risky” assets in developed markets (DMs) during the second half of this year. So far, this month has been a tale of two halves . Over the first part of the month, investors looked like they were …
The US dollar has weakened again over the past month or so, leaving it only somewhat higher in trade-weighted terms since the start of its rally at the start of 2022. In other words, the greenback has nearly reversed all of its gains from the Fed …
26th April 2023
The raft of inflation data over the past couple of weeks will have provided some relief for Latin American central banks, with headline rates in most countries now on a clear downward trajectory. In Mexico this means that a final rate hike in May now …
House prices edged up in March and the sharp rise in the sales-to-new listing ratio suggests there are further gains to come. (See Chart 1.) As the improvement has been driven mainly by a collapse in new listings, while buying power is still constrained …
Inflation has finally turned a corner. Headline inflation rates fell in March in all 14 economies that we cover, the first synchronised drop in more than a decade. This partly reflects base effects resulting from the sharp rise in prices after the war in …
In this new quarterly publication, the Capital Economics’ Climate and Commodities teams will track and analyse developments in the transition to a greener global economy. The sharp increases in the lifetime costs of wind and solar projects since 2021 …
Vietnam became the first country in the region to start loosening policy when it lowered its refinancing rate at the end of March. We don’t think it will be long before other central banks in Asia start to cut rates, with the Bank of Korea set to be next, …
Balance of payments strains have prompted Egypt, Morocco and Tunisia to turn to the IMF over the past six months or so, but agreements in Egypt and Tunisia are faltering. The IMF postponed its first review of Egypt’s deal amid the government’s slow …
EM central banks have, in general, remained in hawkish mood over recent weeks. Tightening cycles have continued in Mexico, Colombia and South Africa in response to high inflation, while policymakers in Egypt and Pakistan among others have raised …
24th April 2023
We expect rising interest rates and structural headwinds to trigger a deep rout in commercial real estate. The impacts on the real economy will be mostly indirect via the impact on small bank lending, however, rather than the direct impact on …
20th April 2023
India is benefitting from maintaining its historic unaligned stance in tensions between the US and Russia. Since the start of the war in Ukraine, India has been ramping up oil imports from Russia to take advantage of discounted prices. (See Chart 1.) And …
Central banks in Australia and New Zealand have taken starkly different approaches to managing the inflation-unemployment trade-off in their countries. Despite being behind the curve on interest-rate hikes relative to other advanced economy central …
17th April 2023
Recent data appear to confirm that economic activity held up better than feared at the start of 2023. Retail sales rose in most major economies over the first two months of the year, world industrial production was broadly stable and China’s zero-COVID …
13th April 2023
Japan has escaped the recent banking turmoil in the US and Switzerland relatively unscathed. While banks face some risks arising from their lending exposure overseas , there are no signs of liquidity stress. And unrealised losses on bonds are less of a …
12th April 2023
We think that the recent stress in the banking sector has had little impact on the outlook for monetary policy in the euro-zone. While there were significant outflows of bank deposits in the five months ending in February, that was due to higher …
11th April 2023
The Land Registry report that London house price growth slowed to 3.2% y/y in January and more timely data based on mortgage approvals show a 2.2% y/y fall in prices in Q1. The detail suggests that affordability is becoming the primary driver of pricing. …
6th April 2023
Recent data suggest the economy’s resilient end to 2022 was sustained at the start of this year. But while the worst of the falls in real household incomes are in the past, we still think around two-thirds of the drag on real activity from the rise in …
5th April 2023
Consumer spending jumped during the first two months of the year as virus disruptions faded. The March retail sales data won’t be published for another couple of weeks. But the data we have so far suggest that the consumer recovery remained uneven last …
3rd April 2023
Even though equity prices in the UK have fallen further than in the US and the euro-zone since the US bank SVB failed and the European bank Credit Swisse was taken over, the pound has strengthened from $1.20 to $1.23. That is probably partly because of …
30th March 2023
Canada’s banks do not face the same immediate risks as those elsewhere. The bank sector is far more concentrated than in the US, limiting the chance that problems at small lenders will trigger a broader crisis of confidence. But the latest area of …
Yields have stabilised since the start of the year, with the 8bps rise in equivalent yields over January and February much smaller than the 64bps increase over the final two months of 2022. (See Chart 1.) And with the UK not as exposed to the banking …
Note: Join our 6 th April online briefing all about the risks to EMs from banking turmoil. Register now . The turmoil in the global banking system over the past month has had a limited impact on Asia – currencies have held up well and outflows of capital …
The partial reversal of the spike in mortgage rates following the “mini” budget has helped to stem the deterioration in housing market demand. Our measure of the average quoted mortgage rate has fallen from a peak of 5.7% in October to 4.7% in February, …
EM Drop-In (6th Apr.): Our latest EM online briefing is all about the risks around the recent bank turmoil, including potential economic spill-overs and the state of EM bank balance sheets. Register now . Spill-overs to EMs from the turmoil in the global …
29th March 2023
One of the main channels through which the Gulf countries are exposed to worries about the health of the global banking system in through energy markets, with the price of Brent crude falling by 13% so far this month. If prices were to stay at current …
24th March 2023
Financial markets across Sub-Saharan Africa have struggled – and have underperformed their EM peers – since the global banking sector turmoil erupted. Amid broad risk-off sentiment, African sovereign dollar bonds have sold off nearly across the board and …
23rd March 2023
The turmoil in the global banking sector has not spread to Emerging Europe, but the focus is back on the health of the region’s banks given the not-so-distant memory of the 2008/09 banking crises that swept across the region. The good news is that banks …
Recent data suggest the economy’s strong start to the year was mostly sustained in February, with consumption growth set to accelerate in the first quarter, payroll employment growth robust and, partly reflecting that strength, core inflation still much …
22nd March 2023
Spill-overs from the turmoil in the global banking system to India have been limited so far, but the big unknown is whether difficulties will flare up at home. Bank problems can arise via multiple channels. There may be banks that have not adequately …
Strains in the global banking sector have flared up at a time when Latin America was in the midst of a period of economic weakness. Regional GDP fell in the final quarter of last year and surveys for early 2023 have been soft. Latin America’s banks have …
Even before SVB’s collapse prompted a reassessment of the health of the global banking system, bank credit conditions were already tightening in response to higher interest rates. (See Chart 1.) We have written many notes to help navigate the …
17th March 2023
Stronger-than-expected economic data in January led to a rebound in market interest rate expectations and a jump in mortgage rates from 6.2% at the start of February to 6.8% in March. That drove mortgage applications for home purchase lower and means …
14th March 2023
Recent evidence about the health of the euro-zone economy has been mixed. National figures released so far suggest industrial production rebounded in January but retail sales remained very weak. And while activity surveys now point to a small expansion …
8th March 2023
Overview – We think prices will drop a little further in the coming months as economic slowdowns in advanced economies weigh on commodities demand, even as China’s economic recovery takes hold. However, the prospect of a higher for longer Federal Funds …
2nd March 2023
We think even if some of the recent headwinds that have buffeted emerging market (EM) assets fade, a slowdown in global growth might keep them under pressure in the near term. EM assets have had a fairly tough month . Local-currency and …
28th February 2023
While the ~0.3% return from US dollar cash between 31 st January and 24 th February was hardly impressive, cash nonetheless outperformed all of the other eighteen headline indices that we track. As data pointing to a still-hot US economy and stubborn …
Local governments have stepped up their borrowing since the start of the year. They issued RMB860bn in special bonds over the course of January and February, up from an average of RMB105bn per month during the second half of 2022. Special bonds are …
Asian currencies have dropped back over the past few weeks against the US dollar, with the two worst hit currencies (the Thai baht and the Korean won) down around 6% against the greenback since the start of the month. Renewed concern about inflation in …
27th February 2023
Sub-Saharan Africa’s two biggest economies, Nigeria and South Africa, are both facing slow-burning debt problems. In Nigeria at least, elections on Saturday offer an opportunity to shift towards greater fiscal discipline – especially if opposition …
24th February 2023
The rise in prime property yields accelerated in Q4. Despite gains in all-property rents in most markets, this meant capital values fell across all sectors. Declines were particularly sharp in offices and industrial in Scandinavia and retail in …
Investors seem to have become more worried about inflation recently, with evidence that the global economy is holding up better than expected suggesting underlying price pressures might prove more persistent than hoped. That’s taken a toll on both “safe” …
23rd February 2023
CEE yields continued to rise in Q4, but very strong rental growth prevented all-property capital values from falling for a second successive quarter. (See Chart 1.) This turnaround was driven by retail and industrial performance, while office rents …
