Recent indicators confirm that the global recovery has continued, but also that it has entered a slower and more difficult phase. US GDP growth slowed sharply in Q3, and our China Activity Proxy suggests that there was a large contraction there. (See …
11th November 2021
The homeowner and rental markets are starting to swap places, with home sales and prices cooling as rental demand and rents take off. Rising mortgage rates have started to bring housing demand down, and we expect they will rise further over the next …
10th November 2021
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 …
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
Trimmed mean inflation rose to 2.1% in Australia in Q3, the first time it has entered the RBA’s 2-3% target band since 2015. Even more strikingly, trimmed mean inflation in New Zealand rose to 4.4%, way above the top end of the RBNZ’s 1-3% target. One …
29th October 2021
Despite a flurry of media reports in September hinting at widespread disruption, the data suggest that China’s recent power shortages have not been too severe. Electricity output actually rose 0.6% in seasonally-adjusted m/m terms last month, the fastest …
COVID-19 vaccine coverage remains pitifully low across much of Sub-Saharan Africa, with less than 10% of populations having received at least a first dose in most countries. But there are signs that things may be slowly turning a corner. The rate of …
28th October 2021
The Gulf countries will be among the biggest winners globally from the recent rally in energy prices but most other parts of the Middle East and North Africa are net oil importers and are likely to be negatively affected. Higher energy prices will push up …
27th October 2021
The near-term outlook for South East Asia has improved dramatically over the past month or so. Daily cases of COVID-19 have collapsed and are now less than one-third of the level they were at in August. With vaccination rollouts also making good progress …
The growing likelihood that Brazil’s government will circumvent its spending cap adds to broader signs that austerity is becoming politically difficult to implement across the region. For instance, Ecuadorian President Lasso recently U-turned on a plan to …
26th October 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 …
Wage growth remained moderate over the summer but, with labour shortages intensifying, it seems likely to accelerate sharply soon. The Bank of Canada’s third-quarter Business Outlook Survey (BOS) added to the evidence of widespread labour shortages, which …
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 …
We are confident in our new forecasts that GDP growth will be a disappointing 2.7% in 2022 and 2.0% in 2023, while core inflation remains elevated at close to 3%, but we are less confident in our predictions of how the Fed will react to that particular …
21st October 2021
The latest activity data suggest that India's recovery has entered a slower phase, with global supply shortages starting to weigh on the economy too. In addition, India’s vaccination coverage remains low, leaving the economy exposed to the threat of …
20th October 2021
While parts of Japan’s manufacturing sector remain under severe pressure from global supply chain shortages, domestic headwinds to the recovery have dissipated further in recent weeks. That supports our view that a strong rebound is brewing. Breaking …
19th October 2021
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 …
Mortgage rates are on the rise and we expect they will see further gains to end the year at around 3.5%. That, alongside relatively tight credit conditions, will help cool rampant house price inflation. From close to 20% y/y in July, we expect a slowdown …
15th October 2021
The Norges Bank’s tightening cycle began at the end of last month and we suspect that investors are underestimating the pace of rate hikes to come. By contrast, the Riskbank looks set to leave interest rates unchanged for some time, instead adjusting its …
With shortages of goods and labour still dominating the news, and following our Focus research into global shortages, we have added a new page to the Global Economics Chart Book to monitor their evolution. While the global economy has continued to grow at …
14th October 2021
The US dollar has rallied to its strongest level since November 2020, and we think it will remain strong on the back of the Fed’s hawkish shift and ongoing uncertainty around the global recovery. While it has fallen back a little this week, on a …
11th October 2021
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
We still don’t have enough data to judge the extent of the disruption to China’s factory output from power rationing with much certainty. But with supply chains already stretched, even a modest hit to output, which producers downstream might normally …
30th September 2021
The threat of messy outcomes to Sub-Saharan Africa’s debt problems seems to have diminished recently. In Zambia, the new administration vowed to tackle debt problems and press on with restructuring talks under the G20’s Common Framework. And Ethiopia, …
The RBA expects headline inflation to drop back from 3.8% in Q2 to 1.5% by mid-2022. By contrast, we now only expect it to fall to 2.5% over this period, reflecting the pass-through from soaring coal, gas and food prices. We also expect the recent …
Over the past month or so, the central banks of Korea, Pakistan and Sri Lanka have all raised interest rates, but we don’t think other countries will be in any rush to follow suit. There is certainly little to worry about on the inflation front. …
29th September 2021
Economies across Emerging Europe enjoyed a rapid rebound in Q2, but all the signs suggest that the recovery has come off the boil in Q3. Surveys of sentiment in services sectors have started to flatline and, in some cases, fall. What’s more, hard activity …
Inflation in many economies in the region has risen to multi-year highs in recent months. In general, this has been driven higher by a combination of unfavourable base effects from the pandemic, as well as some re-opening inflation and the effects of …
28th September 2021
Falling new virus cases and the lifting of restrictions have boosted economies across the region in Q3, but the deteriorating external backdrop will put a lid on growth from here. Even with an orderly resolution to the Evergrande saga , a slowdown in …
Labour shortages have intensified in recent months, which could both act as a brake on the recovery and lead to a stronger acceleration in wage growth. According to the CFIB Business Barometer, the share of small firms suffering from labour shortages …
27th September 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
Speculation is building that India will be included in major global bond indices over the next year or so. If that happens, it would highlight the local bond market’s growing maturity and be cast as a coup by the government, for which bond index inclusion …
The latest data provide mixed signals on the impact that the Delta variant is having on the economy. The high frequency indicators for high contact services suggest that activity levelled out in August and weakened a little in early September (See Chart …
21st 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, …
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 …
There have been growing signs of a slowdown in the pace of the global recovery in recent months. World industrial production fell in July and retail sales declined in almost all major economies, while the business surveys suggest that activity softened …
20th September 2021
The race to become the new LDP leader – and with it PM – formally began on Friday. With Delta cases plunging and the vaccination rate having caught up with many other advanced economies, whoever wins should be able to lift domestic restrictions and ride a …
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
Three key developments in China over the past month or so are worth highlighting, as they feed into our broader asset allocation forecasts for the next couple of years. First, what started as a regulatory crackdown on a handful of sectors seems to have …
16th September 2021
Mortgage rates have been stable at close to record lows since mid-July, but that hasn’t prevented a decline in housing demand. New home sales are down 28% from their peak last year and while existing home sales surprised on the upside in July, the pending …
9th 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 …
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
Overview – After sharp falls in the middle of the month, most commodity prices ended August broadly flat. However, we doubt it will be long before the downward pressure on prices intensifies again. After all, economic growth in most major economies now …
3rd September 2021
Q2 GDP data released over the past month or so did not show a repeat of the across-the-board rises in exports seen in previous quarters, but the external sector still proved an important prop to GDP in many places. Thailand’s economy unexpectedly grew …
31st August 2021
A WeChat post by a prominent blogger voicing support for Xi Jinping’s “ common prosperity ” campaign has been widely re-published by state media, giving it a rare seal of Party approval. The post argues that the recent regulatory crackdown is just the …
