The progress made towards the development of a vaccine against COVID-19 has been remarkable. Most experts now believe that a vaccine may be available by the end of this year or the first quarter of 2021. Although Asia has contained the coronavirus better …
27th October 2020
The latest OPEC oil production figures continue to show that several countries are overproducing, which is making Saudi Arabia – which has borne the brunt of production cuts – increasingly frustrated. For now, at least, countries are making compensatory …
26th October 2020
The restrictions reimposed in Ontario and Quebec this month have weighed heavily on restaurant visits, but we think overall GDP will continue to recover so long as more draconian lockdowns are avoided. The OpenTable data show that visits to restaurants …
A faster deterioration in office rents meant that all-property rental values fell at a quicker pace in September. As a result, with yields stable, all-property capital values declined less steeply. But with the rental outlook worsening amidst further …
23rd October 2020
After rebounding by 30% annualised in the third quarter, we expect a more modest 4.5% gain in GDP in the fourth. But recent data suggest the risks to that forecast could lie to the upside, with investment rebounding rapidly and the September retail sales …
22nd October 2020
The growing risk of a second national UK lockdown has spooked equity markets over the last week. We already expect the recovery to stall in Q4 and additional COVID-19 restrictions could easily throw it into reverse, which would hammer UK corporate …
New COVID-19 cases in India have dropped significantly over the past month. (See Chart 1.) Encouragingly, the share of tests returning positive has also dropped, indicating that the improvement in test results reflects a genuine drop in infections. That …
21st October 2020
The slowdown in the pace of monthly GDP growth in Norway in August was driven in large part by a fall in consumer spending. The post-lockdown spending splurge on goods appears to have peaked before spending on services was strong enough to pick up the …
13th October 2020
While retail sales have rebounded rapidly and are now above pre-virus levels in most major DMs, overall consumer spending has failed to reach the levels seen at the end of last year. (See Chart 1.) That is largely because many of the consumer services …
12th October 2020
Inflation has held up better than we had anticipated in recent months. The surge in spare capacity suggests that it could weaken more sharply as social distancing measures are relaxed. But we only expect underlying inflation average -0.2% next year. One …
Record low mortgage rates have continued to support home sales, with the pending homes sales index reaching its highest level since the series began in 2001. (See Chart 1.) But a rise in the 10-year Treasury yield implies mortgage rates will now tick-up. …
9th October 2020
The reimposition of coronavirus restrictions has caused the recovery to stall – if not go into reverse in many countries – with France and Spain most affected. There are tentative signs that the number of new cases is beginning to slow again in Spain, but …
7th October 2020
Overview – Some energy commodities such as natural gas and coal benefitted from a seasonal uplift in demand in September, but oil prices fell. We think that oil and natural gas prices will make a little more ground this year, provided that demand …
6th October 2020
Overview – Industrial metals prices fell in September on the back of the appreciation in the US dollar and fears that the re-tightening of virus containment measures in Europe and elsewhere will dampen demand growth. However, we think that …
5th October 2020
Overview – An uptick in COVID-19 cases in India and in developed economies knocked back many commodity prices in September, with few left in positive territory for the month. And although September’s price action reminds us that downside risks to …
1st October 2020
The latest figures suggest that the number of COVID-19 infections in the region has passed its peak – new cases are down by 35-60% compared to their July/August peaks in most of the large Latin American countries. And strains in healthcare sectors have …
30th September 2020
The surge in case numbers due to the second wave in Melbourne has been brought under control with new daily cases falling back towards zero. Heavy restrictions on activity still remain in place in Melbourne, although they have been eased for rural …
Korea looks to have contained its “second wave” of the virus with minimum cost to the economy. There were just 38 newly confirmed cases in Korea today, which was the lowest since early August and down from a peak of 441. With cases falling, the government …
29th September 2020
Nigeria is facing an uphill battle to breathe life into its economic recovery. Following a sharp 6.1% y/y fall in GDP in Q2, more recent figures suggest that activity remains muted. Admittedly, Google mobility data suggest that visits to retail and …
The speed at which officials in China have pivoted from crisis response to another round of restrictions on property developers has caught many by surprise. Developers might have hoped that they would be enlisted again to help with stimulus, as happened …
28th September 2020
Though the slowdown in the pace of rental and capital value falls in recent months seems to suggest that pricing is stabilising, we expect there will be further upward pressure on yields this year. After all, the rental outlook has deteriorated. And with …
25th September 2020
London’s housing recovery is lagging the rest of the UK. The post-lockdown rise in housing demand has been weaker than elsewhere, while the latest evidence points to no resurgence in house price growth. This trend may reflect the rise in working from …
Despite the sell-off in most emerging market currencies over the past week, we continue to think that most will strengthen against the US dollar as the global economy recovers. In particular, we have recently revised up our forecasts for the Chinese …
24th September 2020
After an initial burst of growth following the lifting of national lockdowns, the latest activity data and mobility indicators point to a slower pace of recovery in most EMs in recent months. (See Chart 1.) This looks set to continue in the next few …
The speed and size of the rise in new coronavirus cases in parts of Central and Eastern Europe is now starting to challenge our optimism about the strength of the recovery. The Czech Republic, Hungary and Slovakia are experiencing among the worst …
In contrast to many other economies, the 20% y/y slump in India’s services sector in Q2 was less pronounced than that in industry, which collapsed by almost 40% y/y. But we doubt that the “outperformance” of the services sector will last. Containment …
Oil prices suffered a fresh bout of weakness this month amid growing concerns over rising global coronavirus cases, which reinforces our view that economic recoveries in the Gulf will be slow. At the recent OPEC ministerial meeting, the cartel emphasised …
23rd September 2020
The concerns about the consequences for the economy from a second wave of COVID-19 and a no deal Brexit, which have reduced the FTSE 100 almost back to April’s level and weakened the pound from $1.35 to $1.27, seem justified. After all, the new guidance …
The labour market rebound slowed in August, with 246,000 jobs added, down from 419,000 in July, and the pace of gains is set to slow further. The initial phase of strong gains was driven by the return to work of those people that were only temporarily …
22nd September 2020
The pace of economic recovery has slowed in the last month, but that is arguably still an impressive result given the surge in coronavirus cases over the summer, and the more recent expiry of the enhanced unemployment benefits. The retail sales figures, …
17th September 2020
The government has issued ¥95tn in government securities since the start of the current fiscal year in April, equivalent to a huge 17% of pre-virus GDP. It intends to issue another ¥35tn by March 20201. (See Chart 1.) Most of those funds have been issued …
The housing market has so far seen a V shaped recovery. House purchase mortgage approvals have already recovered to their pre-virus level, while house prices have reversed the dip recorded earlier in the year. But as pent-up demand is expended and the …
16th September 2020
While we continue to forecast that developed market (DM) “risky” assets will make further ground over the next couple of years, the rapid increase in new coronavirus cases in Europe poses a downside risk to our generally optimistic forecasts. As we set …
Applications for home purchase have levelled off, but at a level 25% higher than a year ago. That is now feeding through to home sales, with the pending home sales index rising to a 15-year high in July. However, a lack of inventory will soon put a brake …
11th September 2020
Given Norway’s decision to re-open its economy comparatively early, its post-lockdown experience has been watched closely for clues as to how other economies could expect to fare. The latest monthly data showed that mainland GDP continued to expand in …
Economic activity rose sharply in most economies as lockdowns eased during May and June. But, outside China, GDP is still some way below pre-COVID levels and there are signs that renewed virus fears are already prompting a slowdown. Gains in industrial …
The two asset classes that we track which have seen by far the most action since the last edition of the Asset Allocation Chart Book on 5 th August are US equities and energy commodities. Not only have they been the best and worst performers respectively …
10th September 2020
Our Capital Economics BICS Indicator suggests that the rapid economic recovery has continued with some chunky gains in GDP in both July and August. (See Chart 1.) If so, then the economy may now be “only” 8% below its pre-crisis level and around 70% of …
8th September 2020
The rebound phase has now come to an end. Retail sales declined in July and both the business surveys and high frequency data suggest that economic activity levelled off in August. Of course, the initial rapid pace of recovery was never going to be …
4th September 2020
Overview – Industrial metals rallied strongly in August on the back of encouraging economic data out of China and some depreciation of the US dollar. By contrast, the price of gold eased back, after hitting an all-time high early in the month. However, …
Overview – Energy prices continued to recover in August, but they are still trailing other commodity asset classes as well as other risky assets, such as US equities. We expect that prices for the most part will hold steady for the rest of this year given …
3rd September 2020
Overview – Ongoing fiscal stimulus in China, coupled with the recent depreciation of the US dollar, is boosting commodity prices. China’s commodity imports are also growing strongly, but we suspect that the pace of purchases may slow soon as higher prices …
2nd September 2020
Local currency government bond markets in Latin America generally came under pressure this month, but we think that most will rally over the rest of the year. In Chile and Peru, while local currency sovereign yields have risen recently in response to the …
27th August 2020
Many African policymakers have further eased coronavirus -related restrictions in recent weeks, but there are signs that economic recoveries have stalled at the start of Q3. High-frequency data from South Africa, where Covid-19 cases surged in July, give …
Political instability in Belarus has prompted speculation about how President Putin will respond to calm the situation. Mr. Putin is working to maintain close ties with Belarus, but the more that the political situation deteriorates, the more likely that …
The consumption share of GDP had edged up in recent years, but that progress has been reversed by the COVID-19 stimulus response, which has focused on boosting investment. (See Chart 1.) The consumption share should start to rebound again soon as the …
Rents and capital values fell at a slower pace in July than was recorded in June. But, while values seem to be approaching a degree of stability, we expect a deterioration in the rental outlook will put renewed upward pressure on yields. Total returns …
In Australia, the lockdown in Melbourne in July was of similar intensity to the initial lockdown in April. Even so, retail sales only fell by 2% m/m in Victoria which still left them around 2% above pre-virus levels. Part of that strength may reflect …
The recovery in oil prices from their nadir in April has not prompted policymakers in the Gulf to row back on their plans to push through fiscal austerity. Saudi Arabia suspended the Cost of Living Allowance in June and also delayed or cancelled capital …
26th August 2020
Having been among the fastest in the world at controlling the initial outbreak, Hong Kong, Vietnam and Korea are all at different stages of a second wave of infections. With new infections in Hong Kong down from three-figures at their recent peak in late …
