The rupee has fallen by around 4% so far this month, underperforming all other major currencies in Asia. Growing risk aversion amongst investors in recent weeks has resulted in broad losses in EM currencies, but the rupee has been further impacted by …
21st August 2019
Output per worker increased for the first time since 2017 last quarter. (See Chart 1.) GDP growth was stronger than expected at 1.1% y/y despite a sharp moderation in employment growth. Employment growth averaged only 0.7% y/y, down from over 2% late last …
The further inversion of the yield curve – with the 10-2 year spread briefly inverting last week – has heightened fears that a recession is coming soon, but the real economy shows few signs of any imminent capitulation. Aside from industrial production, …
19th August 2019
Slower growth in both developed and emerging economies has started to filter through into property occupier markets, with office demand generally lower than a year ago and fewer cities registering rental value increases in the retail and industrial …
There has been a gradual slowing in rental growth in the last couple of quarters, with a particularly large drop-off in retail rental growth. This has been echoed in the investment market, with all-property yields falling at marginal rates and retail …
The latest data suggest that GDP growth in the Gulf economies slowed in Q2, which is partly a result of cuts in oil production but also softer activity in non-oil sectors. The early data for July, such as the whole economy PMIs, point to even weaker …
15th August 2019
The pick-up in FX interventions by the Swiss National Bank (SNB) in recent weeks is likely to be the first step towards a rate cut. But predicting when the interventions will be dialled down and the policy rate will be cut is more art than science. It’s …
Sentiment regarding the near-term prospects for the global economy has soured over the past week or two, triggered in part by the escalation of the US-China trade war. Indeed, there are increasing signs – such as the slowdown in investment growth in many …
8th August 2019
The recent sell-off in global equity markets has hit the euro-zone harder than the US, but we doubt that this will continue. Equities in Germany have performed particularly poorly, which is unsurprising given that the economy is struggling – with GDP …
7th August 2019
Housing demand improved in June for the first time in over two years. But with the rise driven heavily by regions with the most expensive prices, and another Brexit deadline looming, that doesn’t signal an imminent housing market rebound. Indeed, we think …
Summary: The fall in mortgage interest rates gave mortgage applications for home purchase a boost earlier this year, but a lack of inventory meant that did not translate into home sales. (See Chart 1.) Total single-family sales declined by 0.5% m/m in …
6th August 2019
Despite sharp declines in recent days, we expect the prices of most industrial metals to fall further this year as demand falters in the wake of slower global economic growth. We are particularly negative on the outlook for Chinese steel and iron ore …
While it will probably be confirmed later this week that the economy didn’t grow at all in Q2, July’s PMIs provide some support to our view that GDP will rise in Q3. Admittedly, both the manufacturing and construction PMIs remained close to their …
Oil & Gasoline – The price of oil declined over the past month as US-China trade tensions escalated, adding to fears that the global economy will continue to slow. Looking ahead, we think that demand growth will be subdued as the Chinese economy remains …
2nd August 2019
Overview – With the exception of the precious metals, most commodity prices drifted lower in July on concerns about soft demand. Given our forecast of slower global economic growth in the second half of this year, we expect the prices of most energy and …
31st July 2019
News that South Africa’s government agreed to provide another 60bn rand (US$4.2bn) bailout to Eskom between now and 2021 caused the rand to weaken by 2.3% against the US dollar due to fears that this will result in the sovereign losing its last …
The slowdown in domestic economic activity along with global trade tensions is becoming more of a concern for businesses in both countries. That means that sentiment has not been bolstered by the stimulus that has been injected into each economy. Lower …
30th July 2019
The case for interest rate cuts across Latin America has strengthened in the past month, partly because of the dovish shift by the Fed, but also because of soft domestic inflation and growth. Policymakers at central banks in Chile and Mexico struck a …
25th July 2019
Saudi Arabia’s economy slowed at the start of this year and we think that further weakness lies in store. Figures released in the past month showed that economic growth slumped from 3.6% y/y in Q4 2018 to 1.7% y/y in Q1 2019. OPEC’s decision to extend its …
24th July 2019
The Bank of Canada’s latest Business Outlook Survey (BOS) suggests that firms have grown more confident in the outlook, with the future sales balance jumping to a two-year high. It seems to imply that annual GDP growth will accelerate from 1.3% in the …
The jump in the headline rate of inflation in Malaysia last month to 1.5% y/y from 0.2% in May, is unlikely to trouble the central bank (BNM). The rise was due to the effects of the elimination of the Goods and Services Tax (GST) in June 2018 dropping out …
With the pound having recently weakened to a two-year low of $1.24 and the markets seemingly no longer pricing in the possibility of official interest rate hikes if there’s a Brexit deal or delay, there may be more upside to the pound than is widely …
Our view that the commercial property downturn has further to run was backed up by a pickup in the pace of decline in all-property capital values in June. However, at the halfway point in the year, industrial returns continue to outperform returns on …
Russia ’s economy remained very soft in Q2, although it does at least seem to have dodged a technical recession – albeit by the skin of its teeth. Much of the weakness seems to be concentrated in the services sector, where slow household income growth and …
23rd July 2019
Indian equities have dropped by over 3% so far in July (see Chart 1), even as most other Asian equities have held up reasonably well this month. The drop appears to have been triggered by proposals in this month’s union budget for FY19/20 which would …
Early signs suggest that aggregate EM growth strengthened in Q2. (See Chart 1.) Our GDP trackers point to a recoveries across most of the emerging world. The rebound seems to have strongest in Emerging Europe where Turkey’s recession probably eased in …
19th July 2019
Emerging market (EM) equities have continued to recover from their sharp falls in May, but we do not think that they are out of the woods this year. Expectations for EM corporate earnings seem to be based on assumptions about the outlook for the global …
17th July 2019
The Fed is almost certain to cut interest rates at the FOMC meeting later this month, despite some better news on the real economy. Payroll employment growth was much stronger than expected in June, the resurgence in underlying retail sales suggests that …
The Bank of Japan’s annual purchases of JGBs have dropped to less than half of the official target of “about 80 trillion yen.” (See Chart 1.) Since the launch of yield curve control in September 2016 the Bank has slowed its JGB purchases as higher …
Nominal GDP growth and credit growth almost converged at the end of 2018, but the gap between them has widened again this year as growth has slowed and policymakers have shifted their focus away from deleveraging and towards supporting growth. (See Chart …
We think that there is very little, or no, scope for rate expectations and bond yields to renew their downward trend in most economies, given how far they had already tumbled before their recent rebound. The dark blue bars in Chart 1 show how investors …
12th July 2019
Given the parallels with Brexit, the recent escalation in the spat between the EU and Switzerland has filled many column inches over the past month. (To re-cap, after the Swiss government refused to sign off on the proposed new treaty, the EC followed …
Summary: Lower mortgage rates are not expected to bring an upturn in housing activity. True, there was a strong rise in mortgage approvals last month as borrowers took advantage of falling rates. But this was mainly due to refinancing, and house purchase …
9th July 2019
The past month has brought evidence of a continued slowdown in global growth and this weakness now seems to be spreading to labour markets. While advanced economy employment growth held up very well during the initial stages of the slowdown, it has now …
5th July 2019
The latest economic data, together with the nomination of Christine Lagarde for ECB president, make us more confident in our view that the ECB will cut interest rates and re-launch QE before the year is out. All of the activity data point to a slowdown in …
4th July 2019
Oil & Gasoline – Oil prices rose a little in June on a combination of escalating US-Iran tensions, signs of a truce in the US-China trade war and the expectation that OPEC+ would extend its production cuts. However, prices have already eased back. In our …
The key themes last month were a marked decline in expectations for global growth and a dash for safe-haven assets by investors. Even the recent easing of tensions in the US-China trade dispute has done little to perk markets up. That said, lower supply …
Overview – While June was a relatively positive month for commodity prices, we think that a combination of slower global growth and waning risk appetite will lead to lower prices for energy and industrial metals later in the year. Energy – Oil prices …
3rd July 2019
The subdued global outlook and weakness in domestic economic activity has caused us to revise down our forecasts for interest rates in Australia and New Zealand. In Australia, annual GDP growth slowed to just 1.8% in the first quarter of 2019 and the …
1st July 2019
A rebound in government spending is likely to provide a boost to GDP growth in the Philippines over the next few quarters. Fiscal data published earlier this week from the Bureau of the Treasury show that government spending is starting to recover. In May …
27th June 2019
Recent economic news from Africa has been pretty poor. Figures released this month confirmed that South African GDP contracted in Q1. And while things probably improved more recently, sharp divides within the government suggest that President Cyril …
Investors have reassessed the outlook for UK monetary policy over the last month and have gone from expecting rate hikes at the start of May to expecting cuts now. This is partly because of a weakening global outlook and mounting expectations of rate cuts …
26th June 2019
The past month has been dominated by the escalation of tensions between the US and Iran and the risk of an outright conflict is rising. Admittedly, President Trump decided to call off airstrikes on Iran in response to the downing of a US drone by Iranian …
The downside risks to economic growth and property returns this year appear to be rising. Political and economic developments in May have increased the chance of a deterioration in global conditions and a no deal Brexit. Further, the falls in retail …
Investors have rapidly come round to our dovish view on Latin American monetary policy but, if anything, they have probably now gone too far in anticipating large rate cuts across the region over the next year or so. Brazil’s Copom is likely to trim the …
25th June 2019
We expect an average of the Bank’s core inflation measures to remain close to 2% this year, before declining in 2020, as GDP growth falls below potential. An average of the Bank of Canada’s three core inflation measures reached a seven-year high of 2.1% …
Recent activity data suggest that recoveries in Emerging Europe’s two largest economies – Russia and Turkey – have been disappointing. In Russia, where the economy expanded by a meagre 0.5% y/y in Q1, growth hasn’t been much quicker in Q2. And after …
Tariffs have weighed heavily on China’s exports to the US in recent months. Shipments of goods in the $50bn list were almost 30% lower in the first four months of 2019 than they were a year before. Exports of goods in the $200bn list, which had been …
