Several EM central banks have continued to tighten monetary policy over the past month or so in response to strong reopening rebounds ( Chile , Czech Republic , Hungary ) and/or rising inflation concerns ( Brazil , Mexico, Peru , Russia ). A few others, …
18th August 2021
After a period of strong economic growth in H1 2021, with high inflation squeezing incomes and the spread of the Delta variant, the outlook for H2 is less positive. That said, we don’t expect this to have a major effect on occupier markets, which will …
The 1.1% m/m fall in retail sales last month illustrates the worsening drag from the sharp slowdown in real income growth, as earlier fiscal support fades and surging prices erode purchasing power. This suggests real consumption growth could be even …
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 …
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
We expect several of the trends that have tentatively (re-)emerged in financial markets recently to persist. First, developed market (DM) sovereign bonds have come under pressure again, and have underperformed risky assets. We have been arguing that the …
12th August 2021
Slowdowns in China and the US should not be taken as evidence that the global recovery is stalling. Admittedly, it is not just some high-profile data from the US and China that have weakened recently. Recoveries in retail sales, industrial output, and …
The share of households seeing now as a good time to buy a home has fallen to 39-years lows, as booming house prices, tight credit conditions and record low inventory have weighed on sentiment (See Chart 1.) But the share actually planning to buy has not …
11th 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 …
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
With new virus cases hitting fresh highs this week, Sydney’s lockdown has been extended until end-August and looks set to last for months given the high transmissibility of the Delta variant. Melbourne also briefly re-entered lockdown this month, though …
30th July 2021
Questions about the strength of China’s post-lockdown rebound have become louder since the People’s Bank cut the required reserve ratio three weeks ago. But the trigger for this week’s sharp equity market sell-off was instead growing disquiet about the …
The highly contagious Delta variant of COVID-19 seems to be dominant now across much of Sub-Saharan Africa and is driving new waves in many of the large economies. South Africa appears to be over the worst of its latest outbreak, although it now has to …
29th July 2021
The wildfires in British Columbia appear to have been more disruptive than we first thought, but GDP should still rise this month thanks to the easing of the coronavirus restrictions. The volume of rail freight carloads carried across the country …
The end of the impasse within OPEC+ this month will result in higher oil output and boost recoveries in the Gulf over the second half of this year and in 2022 . Output quotas will rise by 400,000bpd each month after the UAE backed down in return for …
28th July 2021
The region’s economies have continued to rebound strongly over the past month as virus outbreaks have largely been contained and restrictions have been lifted. Surveys of sentiment in the services sector have surged and high-frequency mobility data have …
In a bold move that will be closely watched across the region, Singapore is set to drop its implicit target of pursuing zero local COVID-19 cases, with restrictions set to be eased gradually from August. In other words, Singapore will learn to live with …
We continue to think that the US dollar will rise further in the second half of the year as the divergence between the US and other major economies in terms of growth and, especially, inflation persists. The US dollar’s initial sharp rise after the June …
27th July 2021
While the regional economic recovery stuttered in Q2, it appears to be gathering pace in Q3. New COVID-19 cases have dropped back, particularly in Chile and Uruguay suggesting that their rapid vaccination programmes are proving effective. Restrictions …
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
While infections are now rising sharply nationwide – particularly in Tokyo where the Delta variant has the strongest hold – most of the vulnerable population are now fully vaccinated so we doubt restrictions will have to be tightened any further. …
Amid the ongoing debate over inflation in a post-pandemic world, one thing that does appear clear is that near-term price pressures in India have peaked. Consumer price inflation held steady in June at 6.3% y/y, while wholesale price inflation dropped for …
21st July 2021
Although 60% of American adults are now fully vaccinated, the uptick in coronavirus infections linked to the Delta variant has been accompanied by a slight rebound in fears over the spread of the virus. (See Chart 1.) While most states appear unlikely to …
20th 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
Global economic activity looks to have perked up recently, despite a slowdown in China and a slightly weaker re-opening bounce in the US than most had anticipated. The hard economic data have revealed further improvements in global industrial output and …
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
Despite mortgage rates seeing little movement in recent months, mortgage applications for home purchase have dropped to their lowest level since April last year. That implies home sales have further to fall. (See Chart 1.) Booming house prices, which …
Overview – Oil prices were rising in June even before the July OPEC+ meeting ended in disarray, without agreement. Strong growth in demand as economies lift virus-related restrictions is expected to continue to support the prices of all energy commodities …
6th July 2021
London house prices have underperformed the national average over the past year as the pandemic has led to a shift in demand away from inner cities. Arguably London was due a period of weaker price growth even before the pandemic hit, following the …
2nd July 2021
The virus situation in Emerging Asia has improved compared with a month ago. Although cases are rising sharply in Indonesia, daily numbers have come down in Taiwan, Singapore, India and Malaysia, and appear to have stabilised in the Philippines. That …
30th June 2021
With the more contagious delta variant spreading in Australia, half of the population is now in lockdown. This highlights the Achilles heel of both countries’ virus management: their slow vaccine rollout. Just 8% of New Zealanders and 5% of Australians …
Some believe that China is adding to global inflationary pressure. The opposite is closer to the truth: the large increase in China’s trade surplus over the past year signals that supply from China has risen far more than demand. Global consumer goods …
Latin America is once again the global epicentre of COVID-19 but, from an economic perspective, the region has built up significant immunity to the virus. Indeed, despite the surge in new virus cases at the start of Q2, the latest activity data show that …
29th June 2021
We think investors may be overestimating how much monetary policy tightening is on the way in emerging markets (EMs), but still expect long-dated EM government bond yields to rise a bit from here. Over the past month the tightening cycle among EM central …
The latest CFIB Business Barometer shows that, as the re-opening process got underway, firms’ selling price expectations surged in June. Firms now expect to raise their prices by an average of 4.7% over the next 12 months, which is by far a record high. …
25th June 2021
The sharp rise in the US dollar following last week’s FOMC meeting reinforces our view that the greenback will appreciate further against most currencies this year. After a period of remarkable stability, the US dollar rose sharply after the June FOMC …
24th June 2021
Economic activity across Emerging Europe is rebounding strongly now that virus waves have passed and restrictions have been lifted. High-frequency data show that mobility has surpassed its pre-pandemic level in most countries and vaccination programmes …
Worries about a third wave of COVID-19 in the region have intensified in the past month and the tightening of lockdown measures in some countries – most notably South Africa – will weigh on recoveries. As things stand, surges in cases appear concentrated …
The price of oil has continued to rise and will help to improve balance sheets in the Gulf. With oil prices at $75pb, all Gulf economies with the exceptions of Bahrain and Oman are likely to be running current account surpluses, having run deficits in …
The hawkish surprise delivered by the Fed at its latest meeting and the subsequent market reaction have not changed our view that the 10-year US Treasury yield will end the year higher and that the “rotation trade” in equity markets will resume before …
The combination of the Fed’s more hawkish tone and the larger-than-expected rise in UK CPI inflation in May to 2.1% has led the financial markets to bring forward their expectations of when the Bank of England will raise interest rates from around the end …
23rd June 2021
India’s 10-year government bond yields have remained stable at around 6% over the past month, taking the unexpectedly large jump in inflation in May and a more hawkish turn by the US Fed in their stride. That reinforces our long-held view that borrowing …
The improvements in all-property rents and capital values continued in May, supporting our view that we are at the start of a slow recovery in property. Looking ahead, with non-essential retail and most of leisure now open, and the final restrictions …
18th June 2021
Inflation has risen sharply across the emerging world in the last few months, prompting much more cautious words from central banks (mainly in Latin America and Emerging Europe), but we expect that EM price pressures will ease in the coming months. (See …
The housing market has had its busiest start to the year for 14 years as changing preferences due to the pandemic, forced saving, low mortgage rates, and the stamp duty holiday have led swathes of existing homeowners to enter the market. We estimate that …
17th June 2021
The further jump in CPI inflation in May was again driven by a handful of categories most affected by the lifting of pandemic restrictions. But there were also clear signs that inflationary pressures are becoming more widespread, with rent of shelter …
16th June 2021
Japan’s now fast-moving vaccine rollout is set to gather more speed. PM Suga’s one-million-a-day goal could be hit on a 7-day average basis as soon as tomorrow. 18-to-64-year-olds have from today been able to fill vacant slots at large-scale vaccination …
Global GDP growth slowed sharply in Q1 as most parts of the world grappled with renewed waves of coronavirus. The US and Korea were among the few exceptions where recoveries accelerated. But with global infection numbers now falling, activity seems to be …
11th June 2021
We are still anticipating an extremely rapid recovery in the global economy over the rest of this year. But even so, it has become more difficult to make the case that returns from risky assets across the board will remain very strong, at least in the …
10th June 2021
