After a dreadful 2019, a combination of policy loosening and more decisive measures to deal with problems in the shadow banking sector will push economic growth in India back up to a healthier pace in 2020. And with core inflation set to rise, we think …
17th December 2019
Against the CFPB’s expectations, use of the qualified mortgage patch has not declined since it was introduced in 2013. If it is not replaced before it expires in early 2021, we therefore anticipate significant market disruption, and house prices are …
13th December 2019
Our new oil demand proxy provides a timely indication of the health of global oil demand, and lends insight into whether it is demand, or other factors, that is driving prices at any given time. We find that expectations for future oil demand and supply …
The UK general election has provided a clearer path towards a resolution to Brexit and looser fiscal policy, which should boost economic activity and push up sterling, UK equities, and Gilt yields. That said, as long as there remains the possibility of …
China’s property sector is central to its economic performance, its demand for many materials and the stability of its financial system. In this updated and expanded Handbook, we discuss the drivers of the property cycle and answer key questions on …
9th December 2019
There is little evidence that negative interest rates have succeeded in boosting economic growth or inflation expectations. But equally, they do not seem to have done much harm either – many of the criticisms levelled at them have been wide of the mark. …
Set against other asset classes, European commercial property looks fairly valued. Our returns forecasts for 2020-23 of around 5% p.a. on an MSCI all-property basis will look relatively attractive in a multi-asset context. However, comparative total …
Relative to past norms, returns on residential property will underperform over the next few years. But with commercial capital values dragged down by the retail sector, institutional investment in the residential private rented sector will nonetheless …
5th December 2019
In view of the wider interest, this UK Housing Market Focus is made available to clients of the UK Commercial Property service as well. Relative to past norms, returns on residential property will underperform over the next few years. But with commercial …
We do not believe that there has to be a trade-off between preventing global warming and achieving economic growth. Even so, there is a clear risk that the world fails to prevent a significant further rise in global temperatures. Although it is only in …
3rd December 2019
After a sustained upturn in commercial property, yields are well below their historic lows and there are concerns that the current cycle could end as badly as previous ones. But we don’t think a crash is likely yet. Nonetheless, while we expect a rare …
2nd December 2019
In view of the wider interest, this UK Commercial Property Focus is made available to clients of the European Commercial Property service as well. After a sustained upturn in commercial property, yields are well below their historic lows and there are …
The recent strong performance of Central and Eastern Europe (CEE) will probably continue for a few more years as fiscal and monetary policy remain loose. But this is likely to cause some of the pressures and imbalances that have started to build up during …
28th November 2019
The election on 12 th December is likely to mark the beginning of a new phase for the UK economy, determining not only the type of Brexit (or if Brexit happens at all) but also the size and shape of the state. The theme that comes up the most is that …
26th November 2019
The recent weakness in productivity is largely cyclical and reflects the slump in homebuilding. While Australia probably won’t be a frontrunner in the digital revolution, we expect labour productivity growth to pick up from 0.8% over the past decade to …
25th November 2019
South Africa’s public debt burden is not too high, but the direction of travel is very worrying. While the structure of the country’s debts and its deep local capital markets make an acute crisis unlikely, the growing debt pile is another factor pushing …
21st November 2019
In our view, claims that the ECB’s negative deposit rate is weighing heavily on bank lending in the euro-zone are wide of the mark. In fact, we suspect that policymakers will cut the deposit rate even further below zero next year without having major …
19th November 2019
Indonesia’s GDP figures lack credibility – economic growth has been far too stable over the past few years to be believable. We think a better guide to the health of the economy is our own Indonesia Activity Tracker (IAT). This shows that economic growth …
11th November 2019
Although the Office for Budget Responsibility (OBR) won’t expose the full deterioration in the public finances when it updates its forecasts on Thursday, it’s clear that it is only a matter of time before borrowing smashes through the targeted level. That …
6th November 2019
Our central scenario is that cutting interest rates to 0.5% will be enough to weather the economic slowdown in 2020. And if required, fiscal policy and macroprudential tools could be used to help stimulate demand. However, if the global economy slows more …
5th November 2019
The September attacks on oil facilities in Saudi Arabia re-ignited discussion of the “risk premium” in the oil price. Since the risk premium is not directly observable, we have created a methodology to estimate it indirectly . Our model found that, based …
31st October 2019
Three years after the shock announcement that the bulk of India’s bank notes were being withdrawn, any benefits from “demonetisation” should be evident by now. But the promised gains haven’t materialised and the inadvertent economic positives that have …
30th October 2019
As part of its forthcoming review under Christine Lagarde, the ECB is likely to change its inflation target and make its voting system more transparent. Further ahead, it will have bigger issues to resolve, including deciding which tools it could use in a …
29th October 2019
In the near-term, we think that the ongoing consequences of CVAs and the large share of over-rented property will exacerbate the structural reduction in demand for retail property, causing rental values to fall sharply. But, with consumer demand expected …
25th October 2019
Globalisation has probably peaked and could be partly reversed as a result of technological change and protectionist policies. This would have significant implications for asset markets, which have generally benefitted from increased economic and …
24th October 2019
One way or another, the UK is destined for looser fiscal policy. How much and in what form is unclear, but the one thing that is clear is that it will require a new set of fiscal rules. There are many options and we do not know for sure what the …
The recent protests in Lebanon highlight that it is politically impossible to push through the fiscal austerity needed to stabilise the government’s debt-to-GDP ratio. A debt restructuring is inevitable. There are lots of ways that this could play out. …
23rd October 2019
Brazil’s pension reform bill should help to stabilise the public finances and lift a dark cloud over the outlook. The government has a long to-do list of further fiscal reforms, although the political situation suggests that some of these will be delayed, …
22nd October 2019
While the downside risks of a global trade war are often overstated, we think the bigger concern is that the world splits into competing regional blocs that do not cooperate on trade or investment. This could cause global supply chains to splinter and …
Underlying inflation was moored well below the lower end of the RBA’s 2-3% target band even as the housing market was booming and the labour market was tightening. With the unemployment rate set to rise to 5.5% next year and interest rate cuts …
21st October 2019
The rift that has widened between China and the US was caused by China’s emergence as a geopolitical competitor to the US, rather than the personality of Donald Trump. Decoupling will continue whether or not the two reach a deal on tariffs. This may spur …
17th October 2019
The two key economic challenges facing President Joko Widodo in his second term are boosting GDP growth and reducing Indonesia’s external vulnerabilities. We don’t think he will succeed in either. Following his decisive election victory in April, Joko …
15th October 2019
Globalisation has peaked, with any further major integration unlikely. In fact, a policy-driven period of de-globalisation is increasingly likely. Flows of trade and foreign direct investment have flattened off as a share of nominal GDP over the past …
Globalisation has peaked, with any further major integration is unlikely. In fact, a policy-driven period of de-globalisation is increasingly likely. Flows of trade and foreign direct investment have flattened off as a share of nominal GDP over the past …
Upcoming state elections could help determine the pace of economic reform in India over the coming years. A win for the BJP in Haryana could provide reassurance for state assemblies elsewhere that contentious reforms need not be electorally unpopular. …
The Polish Law and Justice Party’s second term in power is likely to be much less impressive than its first, marked by slower economic growth, higher inflation and a poor financial market performance. Law and Justice went into Sunday’s election with a …
14th October 2019
We estimate that the current wave of globalisation is responsible for around a third of the pick-up in global per capita income growth since 1990. Almost all of that reflects an improvement in productivity growth in emerging economies. For advanced …
10th October 2019
History shows that waves of globalisation are driven by both technology and policy, but protectionist shifts alone tend to end them. In some cases, like in the 1970s, a moderate pushback by policymakers can cause globalisation to stall. But the experience …
8th October 2019
A continued decline in the natural rate of unemployment over the past 15 years means that there is probably a little bit more slack in the labour market than indicated by the near-record low unemployment rate. As a result, wage growth is unlikely to …
2nd October 2019
With question marks hanging over the outlook for global economic growth, it has become increasingly difficult to get a handle on the true state of physical copper demand. Therefore, we have turned to the Capital Economics Copper Demand Proxy for answers. …
This short Focus is a primer on our Asset Allocation Service , which we launched in September 2019. It is split into three sections. Section 1 provides an overview of the service. Section 2 outlines our methodology for projecting returns. Section 3 …
27th September 2019
War with the US would cause a collapse in Iran’s economy that would directly knock around 0.3%-pts off global GDP – equal to the damage from the US-China trade war so far. More important to the rest of the world, though, would be the resulting surge in …
20th September 2019
Weak economic growth and low inflation mean Emerging Asia’s rate cutting cycle has further to run. In contrast, the consensus and financial markets think the easing cycle will soon end in many countries. Having raised interest rates steadily throughout …
18th September 2019
Since securing re-election this year, the Modi government has made it a formal aim to almost double the size of India’s economy to US$5trn by March 2025. In our view, the government is likely to fall short of this lofty ambition. Even so, we think that …
17th September 2019
Negative policy rates have had some positive effects in the economies where they apply and the direct adverse consequences have been small. But the policy has contributed to a fall in long-term interest rates which is doing greater damage to banks’ …
5th September 2019
