The inversion of the yield curve and the deterioration in survey-based indicators have raised fears that the US is headed for a recession, but the hard economic data and other financial indicators suggest the risks remain low. To cut through the …
5th September 2019
The acquisition of reserve assets by the Swiss National Bank (SNB) has seen it take on a role more suited to fund managers than central bankers. Faced with the prospect of negative bond yields further and further along the curve, we think that …
21st August 2019
A lower cost of funding via foreign liabilities, a higher return on overseas assets and falling capital goods imports should all support Australia’s current account over the next couple of years. However, we think that those tailwinds will all be …
20th August 2019
OPEC the exception, not the rule Most commodity cartels have failed to manipulate prices for very long, and we think that any future cartels in commodity markets will be no different. Arguably, the Organization of Petroleum Exporting Countries (OPEC), the …
15th August 2019
Emerging Asia has not only been the fastest growing region since the global financial crisis, it has also been the most stable. Regional growth has also been less volatile compared with the period before the financial crisis. This “great moderation” is …
14th August 2019
The upcoming economic slowdown brings with it the risk of a rise in mortgage delinquencies. However, tighter mortgage lending standards since the financial crisis means borrowers today are more resilient to shocks. That will minimise payment problems from …
8th August 2019
Hopes that President Cyril Ramaphosa can quickly revive South Africa’s economy are fading. The real problems are all structural, so even if he does make bold policy changes – far from guaranteed, given political obstacles – these would take years to take …
7th August 2019
China is left with few good options to hit back at the US in ways that wouldn’t be self-defeating. Rather than direct retaliation, officials are therefore likely to focus their efforts on broader measures to offset the drag from US tariffs, including …
5th August 2019
Were the UK an emerging market the hedge fund vultures would already be circling following the rise in the current account deficit to 4% of GDP last year – the largest in the developed world. While the UK won’t have an emerging-markets style balance of …
22nd July 2019
In view of the wider interest, we are also published this Global Markets Focus to clients of our UK Economics Service. While we think that the twists and turns of the UK’s journey out of the European Union will have a bearing on Gilts and sterling, that …
17th July 2019
While we think that the twists and turns of the UK’s journey out of the European Union will have a bearing on Gilts and sterling, that won’t be the only factor driving them. What’s more, we doubt that Brexit will matter much for UK equities. There are …
Our central scenario is that cutting interest rates to 0.5% will be sufficient to restore growth and eventually return underlying inflation to the RBA’s target. If more stimulus were required, the government would probably remain reluctant to loosen …
The strength in consumer spending has been crucial to the economy’s resilience over the past year but there are three reasons why many people think that the consumer sector is living on borrowed time – namely an unfavourable outlook for incomes, low …
15th July 2019
Mounting geopolitical tensions between the US and Iran have prompted fears of a full-blown military war in the Gulf region. The most important impact would clearly be the loss of life. From the perspective of the energy market, if war were to break out, …
11th July 2019
We think that the all-property to bond yield spread will narrow from its current elevated levels, although this is not likely to happen before late 2020. But, structural changes mean that the property to bond yield spread won’t narrow to the early-1990s …
While it is recognised that political developments, such as a no deal Brexit and a Labour government, have the capacity to send the economy in different directions, it’s not as well known that three economic trends are in train regardless – looser fiscal …
The trade war between the US and China so far appears to have had a small negative impact on most of the region, although some countries, most notably Vietnam, look to be benefiting as US demand has shifted away from China towards alternative …
26th June 2019
Recent comments by Mario Draghi suggest that the ECB will loosen policy sooner than we had anticipated. We now expect the Bank to strengthen its forward guidance in July and cut its deposit rate in September. Mr Draghi is then likely to go out with a bang …
With productivity slowing and working age populations set to start falling across most of Asia, we expect regional growth to slow to just 3.5% in a decade’s time. This compares with average growth of 6.0% over the past 10 years. Our forecasts are much …
12th June 2019
The domestic headwinds that have caused China’s economy to slow over the past year are abating thanks to the policy support that has put a floor under credit growth and fuelled local government spending. But policymakers are still concerned about credit …
24th May 2019
Structural headwinds will weigh on China’s growth rate over the coming decade. If well managed, this slowdown will be gradual. But a more abrupt adjustment shouldn’t be ruled out. We see two main threats – political instability that disrupts economic …
16th May 2019
The key determinants of EM political risk premiums are the type of political shock and the strength of an economy’s external balance sheet. With this in mind, Ukraine and Argentina have the greatest potential to suffer large and long-lasting political …
1st May 2019
Contrary to the mainstream view that China will keep growing at fairly rapid rates, we expect GDP growth there to slow to 2% by 2030. This slowdown need not in itself be bad for the rest of the world, especially if slower growth continues to be …
2nd April 2019
China’s property sector is crucial to the economy’s performance and to China’s demand for many materials. In this updated and expanded Handbook, we discuss the drivers of the property cycle and answer key questions on affordability, over-investment, …
4th December 2018
Only one-quarter of Indian women of working age are in paid employment. If participation in the workforce could increase to the rates of other Asian countries such as Indonesia or the Philippines by 2025, the economy could be 15% larger than otherwise. …
7th August 2018
Assessing the damage from a global trade war is tricky because there are few historical precedents and the costs would depend on the nature of the conflict. But our best guess is that, if all governments imposed blanket tariffs of around 25% on all …
9th July 2018
Slowing population growth and population ageing will weigh heavily on economic growth in the coming decade or two, particularly in Europe and Asia. These forces will be only partly offset by increased participation in the workforce by women and older …
24th May 2018
China has had a stellar run during the past few decades, achieving sustained rates of growth only ever previously seen in a handful of emerging economies. Most major forecasters expect this outperformance to continue for the foreseeable future. By …
14th May 2018
China’s low-key response to last week’s tariff announcement by President Trump reflects in part a desire not to exacerbate tensions further. But Chinese officials will also be aware that, while they have a number of options for retaliation, restrictions …
28th March 2018
The Trump fiscal stimulus, which has turned out to be larger than seemed likely a few months ago, should boost economic growth in the US a little, and encourage the Fed to press on with six rate hikes between now and mid-2019. But at a global level, any …
9th March 2018
It looks increasingly likely that President Trump’s plan to impose tariffs on imports of steel and aluminium on grounds of national security will be implemented in some form. If so, other governments including the European Union, will respond with …
7th March 2018
Talk of India’s potential to become the “next China” is inevitable given their enormous populations, and will intensify as China’s economy slows. Those hoping that India can match China’s former rates of economic growth are likely to be disappointed. …
If the long-running skirmishes between the US and China were to escalate into a trade war, China would try to occupy the moral high ground by portraying itself as a defender of free trade. At the time though, officials would use a variety of means that US …
30th January 2018
With the People’s Bank last week tweaking the interest rates on its open market operations, it seems timely to highlight some of the peculiarities of China’s monetary policy framework. One key one is that, as the People’s Bank has still not made a full …
21st December 2017
The recapitalisation package recently announced by the government is the most significant measure yet to tidy up India’s beleaguered banking system and should all but enable India’s banks to meet global capital requirements over the coming years. Further …
11th December 2017
China’s property sector is crucial to the economy’s performance and to China’s demand for many materials. In this Focus, we discuss the drivers of the property cycle and answer the key questions on affordability, over-investment, demographics and …
30th November 2017
Pessimism about the potential for future productivity growth and hence increases in living standards, based on recent poor productivity performance, is not well-founded. It provides no good reason to believe that the world is now incapable of technical …
1st November 2017
The upcoming Party Congress will deliver a major reshuffle of China’s leadership and determine President Xi Jinping’s ability to implement his policy priorities over the next five years. In this report, we provide an overview of how the Congress will …
11th October 2017
The recent elevation of Saudi Arabia’s Mohammed bin Salman to crown prince has raised hopes of a renewed impetus to push through his Vision 2030 reform programme. But, while the scope of the programme is impressive, it will face numerous implementation …
27th June 2017
1st July marks the 20th anniversary of Hong Kong’s return to China. The city’s economy has continued to prosper over the last two decades, defying gloomy predictions made by some before the handover. But politically the relationship between China and Hong …
23rd June 2017
The outlook for China’s banks is going from bad to worse. Pressure on the banking system has increased during the past year even though economic activity has recovered. And with a renewed slowdown now on the cards, the health of China’s banks looks set to …
1st June 2017
Evidence of a sharp turnaround in growth and policymakers’ success in preventing a destabilising slide in the renminbi have underpinned a dramatic shift in sentiment towards China. But there are good reasons to expect growth to slow again soon and for the …
28th March 2017
We estimate that sectors responsible for two-thirds of China’s industrial output now suffer from overcapacity. Despite this, policymakers continue to drag their feet on reform due to fears that deep capacity cuts would cause a rise in lay-offs and an …
1st March 2017
India is often heralded for demonstrating a new path to middle income by focusing on the development of its services sector rather than on significant industrialisation. It is true that India’s services sector has grown more rapidly than in most other …
28th November 2016
Widespread expectations for a sustained rebound in emerging market growth after the slowdown of recent years will be disappointed. The 2000s were a transient “Golden Age” for the emerging world, with a number of one-off supports for rapid growth that …
13th October 2016
The People’s Bank has taken a major step towards a more orthodox approach to monetary policy by adopting a de facto target for the interbank rate. Although this shift has taken place with little fanfare, it has important implications for how monetary …
10th October 2016
An across-the-board 45% tariff on imports from China may end up raising retail prices in the US by only 10%, and less still if Chinese policymakers responded by allowing the renminbi to weaken. With exports to the US driving only 3% of China’s GDP and few …
29th September 2016
A number of voices have begun loosely using the term “liquidity trap” to argue that stronger credit growth in China has failed to provide a greater boost to output because firms are hoarding cash rather than spending it. But the money supply data being …
2nd September 2016
A year after tumbling equity prices in China triggered fears about a collapse in the economy, the crisis many feared has not materialised. While more jitters are possible, a slump in growth over the months ahead remains unlikely. But slow progress in …
28th June 2016
The latest survey on migrant workers, who are often the first to suffer when economic and labour market conditions deteriorate, confirms evidence elsewhere of weakness in key parts of the economy. And although the gains from rural to urban migration won’t …
3rd June 2016
