Germany’s manufacturing sector has been in relative decline since around 2017. We think it will continue to shrink in the coming years and expect productivity growth in the sector to remain relatively low by past standards. As a result, the sector’s …
18th April 2024
The latest US CPI data may have dashed hopes of interest rate cuts as early as June, but looser monetary policy is still firmly on the cards late this year and over the course of next year. Lower rates should be positive for commodity prices but, …
16th April 2024
The ECB looks set to cut rates in June, reducing the deposit rate from 4% to 3.75%, and we think it will follow that up with rate reductions at every remaining meeting this year . The pace of cuts might slow next year as policymakers feel their way …
Residential has taken an increasing share of the professional investment universe over the last decade or more and we will be adding the sector to our next set of UK commercial property forecasts. Our in-depth analysis indicates residential’s recent …
11th April 2024
Taiwan will be one of the main beneficiaries of a lengthy global AI investment boom. We expect its economy to growth much faster over the rest of this decade than it did during the 2010s. It already appears that global excitement about the possibilities …
9th April 2024
We believe that the “narrow path” of returning inflation to target while keeping unemployment below pre-pandemic levels is wishful thinking. The Reserve Bank of Australia won’t bring domestic cost pressures under control unless the unemployment rate rises …
4th April 2024
Positivity surrounding India’s near and long-term economic outlook is arguably at its highest in a decade, with good reason. But amid the optimism, it is easy to become complacent to the downside risks. This Focus highlights five key risks that we think …
3rd April 2024
We think that it is now time for the curtains to close on the so-called ‘excess savings’ debate. While unusually high savings accumulated by households during the pandemic helped prevent recessions in advanced economies in 2023, they are likely to have …
One of the key problems for countries with ageing populations is how to tackle the associated fiscal costs. Those countries which have a good record for structural reform and/or scope to raise taxes should be able to mitigate or absorb those costs. But …
26th March 2024
While the Bank of Japan’s JGB holdings have started to shrink and will continue to do so now that Yield Curve Control is over, we think that the normalisation of the Bank’s balance sheet could take up to a decade. While shrinking central bank demand for …
Sub-Saharan Africa’s enormous demographic tailwind means the region will see the fastest GDP growth rates (4-5%) of any region between now and 2050. By the middle of the century, the region’s overall GDP will probably be larger than any single economy bar …
21st March 2024
We hosted a 25-minute online briefing on Wednesday 27 th March to discuss EM financial risks in more detail. Watch the recording here . The past few years have sharpened investors’ focus on assessing risks and vulnerabilities across the EM world. We have …
20th March 2024
The recent weakness of Germany’s economy is partly due to temporary factors which should ease this year. However, demographic and structural headwinds, partly driven by global fragmentation, mean the economy is likely to grow by little more than half a …
19th March 2024
Prime Minister Modi’s BJP appears on course to remain in power after India’s upcoming general election. But which party wins probably matters less for the economy and financial markets than whether the election delivers a stable government with a working …
This Global Markets Focus looks at whether Chinese equities’ recent rally heralds the start of something larger and more sustained. It argues that they could continue to do well over the next year or two, both in absolute terms and relative to many other …
15th March 2024
Reshoring still more myth than reality Although it has been a priority for the last three administrations, the reshoring of lost manufacturing jobs remains more myth than reality. There has been a significant boom in the construction of hi-tech …
12th March 2024
The impact of a second Trump presidency on Mexico’s economy would depend to a large extent on whether the USMCA deal remains intact or Mexico finds itself subject to US import tariffs. If the latter, Mexico would be one of the most affected EMs. And even …
Productivity in the euro-zone has been falling for well over a year. We think this is largely because it was unsustainably high in mid-2022 as many companies struggled to fill vacancies. Since then, it has fallen to more manageable levels. The decline in …
We discussed the implications of Russia’s election in a Drop-In on Tuesday, 12 th March. Click here to watch the 20-minute online briefing. The outcome of Russia’s presidential election taking place over 15-17 th March is not in doubt: Putin is all but …
7th March 2024
The surge in the terms of trade explains some of the resilience of Australia’s economy as it has probably encouraged the government to spend more money than it would have done without soaring mining tax revenues. The key point though is that Australia’s …
The net giveaway of £13.9bn (0.5% of GDP) in 2024/25 in the Budget may help end the recession before an election later this year. But fiscal policy is still being tightened in 2024/25 and that tightening will continue after the election and will probably …
6th March 2024
The drag from the unavoidable structural decline in China’s property sector has only just begun. Property sales and project starts have collapsed. But property construction activity has retreated only a little. It is likely to halve in the next few years, …
The policy agenda laid out at the National People’s Congress today is a reasonably pro-growth one. The new fiscal plans are supportive, monetary policy continues to have an easing bias, and the Premier reiterated recent welcome messages about …
5th March 2024
Note: Andrew Burrell will be answering questions and highlighting key issues around the size and scale of the recovery in commercial property in a Drop-In on Tuesday, 12th March . Register here for the 20-minute online briefing. Relatively high interest …
4th March 2024
The green transition will deal a significant blow to EM oil producers that have failed to save their windfalls (Nigeria, Colombia, Angola), but boost the export revenues of economies such as Chile and South Africa that are endowed with the raw materials …
Donald Trump’s previous tariffs did surprisingly little damage to China’s economy, but China may find it harder to shrug off the damage in a rematch. Mr Trump is threatening larger tariff increases if he is elected again. And the factors that cushioned …
23rd February 2024
We think victory for Donald Trump in this year’s US presidential election would lead to higher Treasury yields than if incumbent Joe Biden (or another candidate) won. In our view, another Trump term would also be a headwind for equities – especially …
22nd February 2024
This report is the third of a three-part mini-series that establishes a framework for assessing the outlook for the EU carbon price. It takes an in-depth look at the various factors that typically drive the EU carbon price in the short term. While supply …
This report is the second of a three-part mini-series that establishes a framework for assessing the outlook for the EU carbon price. It sets out our approach for modelling the fundamental price of an EU carbon permit [1] over the rest of this decade. In …
This report is the first of a three-part mini-series that establishes a framework for assessing the outlook for the EU carbon price. It starts by explaining what an emissions trading scheme (ETS) is and how the ETS has evolved since its introduction in …
We will be discussing what the policies announced in the Budget mean for the economy and the financial markets in a 20-minute online briefing shortly after the Budget at 3pm GMT on Wednesday 6 th March. (Register here .) Using most of the fiscal headroom …
20th February 2024
We survey 12 major advanced economy housing markets to understand why house price falls have been small despite high starting points and sharp increases in mortgage rates. We then use this information to ascertain whether the correction in house prices is …
14th February 2024
We will be discussing whether the next government will move the dial on the economy in a 20-minute online briefing at 3pm GMT on Wednesday 13th March. (Register here .) The next general election won’t be as pivotal for the economy or the markets as the …
13th February 2024
The surge in labour costs across Central and Eastern Europe (CEE) in recent years has led to a sharp loss of competitiveness and raised concern about the impact on the region. We remain relatively optimistic on the medium-term outlook and still think that …
9th February 2024
Although the recent transition to a higher interest rate climate has not caused any lasting or systemic financial flare ups, it is probably too soon to sound the all-clear. And while a higher interest rate climate in the medium-term will reduce …
8th February 2024
The resurgence in productivity growth is mainly a cyclical response to the tightness of the labour market rather than a sign that the AI revolution is already bearing fruit. Nevertheless, that still implies scope for productivity growth to remain …
7th February 2024
Are European and UK commercial real estate markets facing the same level of distress as the US? We held a Property Drop-In on Wednesday, 14th February , A recording of the session can be viewed here . Falling interest rates will not prevent a rise in …
Indonesia has some of the best long-term growth prospects of any economy. Key to whether it realises them is whether Indonesia maintains the progress President Joko Widodo (better known as Jokowi) has made on productivity-boosting structural reform. …
Remittances are often an underappreciated source of foreign currency for India. While growth in remittances will slow in the next few years, they should remain an important source of external funding for the economy and help to keep the current account …
Chile is frequently identified as one of the main beneficiaries of global efforts to put economies on a greener footing, but we doubt that the country will reap the full benefits of this trend. Chile is likely to struggle to substantially raise copper and …
6th February 2024
After years of fiscal largesse, austerity is back. We suspect that budget cuts will reduce euro-zone GDP growth by only around 0.1 or 0.2 percentage points per year over the next five years. But the EU’s budget rules will require some countries to tighten …
1st February 2024
The recent acceleration in the Labour Force Survey measure of wage growth seems to be overstating wage pressures. The other wage indicators, which are normally more reliable, show far lower rates of growth. With labour market slack increasing, it is …
The priority for whoever wins Pakistan’s general election on 8 th February will be to agree a new deal with the IMF, which should help put the struggling economy on a more stable footing. But thereafter the country’s dysfunctional political system will …
Trump’s new tariffs would accelerate global fracturing If he wins this year’s presidential election, Donald Trump’s plans for a universal 10% tariff on all imports and tariffs of up to 60% on imports from China specifically would subtract up to 1.5% from …
31st January 2024
We forecast that global lithium demand will roughly double by 2025 (from 2022). But supply will increase at a slower pace, which is why we forecast that prices will rise. Demand for lithium has surged in recent years, from 50,000 tonnes per year in …
The drop in inflation across advanced economies has caused real interest rates to rise by even more than nominal rates. While there are various ways to measure real interest rates, they all confirm that policy is now in very restrictive territory, …
Inflation: Mission accomplished? We maintain a high conviction that core PCE inflation will be back to the 2% target by mid-2024. Despite claims that “the last mile will be the hardest”, core PCE prices have already been running at a 2% annualised pace or …
26th January 2024
We think the current backdrop is not as favourable for the greenback as the one that prevailed during the dot com era, so we doubt the bubble in US equities we expect would be accompanied by renewed strength in the dollar over the next couple of years. …
25th January 2024
Turkey’s policy U-turn underway since the election last year has been relatively encouraging so far and policymakers’ commitment to orthodoxy has given us reason for optimism. While the scale of the challenge of achieving macroeconomic stability is …
Brazil’s economy and financial markets have provided a positive surprise over the past 12-18 months. This Focus answers five key questions that will determine whether 2024 will be chalked up as a success too. The short point is that we think sentiment now …
24th January 2024
