With the government still languishing far behind in the opinion polls and an election required before the end of January 2025, the Chancellor, Jeremy Hunt, is under more pressure than ever to pull something out of the bag at the Autumn Statement on …
15th November 2023
A lack of appropriate regulation may be one reason why ESG bond issuance has slowed over recent years, and why the premium that investors are willing to pay for ESG bonds over conventional bonds has all but evaporated. We think that improved regulations, …
14th November 2023
The past few years have seen Saudi Arabia continue to move away from the US orbit and, as part of our work on global fracturing, we no longer consider Saudi to be unaligned between the US and China. Instead, we now think that it leans more towards …
7th November 2023
The Riksbank’s request for a capital injection from the government is not a good look for an independent central bank. But its QE-related losses will be smaller than those of many other central banks: the “bailout” is required because of its accounting …
3rd November 2023
The AI revolution will make EM income convergence – or “catch-up growth” – harder as richer economies are better equipped to deploy the technology on a wide scale. It poses a particular headwind to the services-driven economic development path pursued by …
2nd November 2023
Although Treasury yields have fallen back in recent days, the big picture is that they are still much higher than they were when headline and core inflation peaked more than a year ago in the US. In this Focus , we examine the role of inflation in the …
The prospect of a long period of high bond yields and some signs of fiscal slippage by Prime Minister Meloni’s government have worsened the outlook for public finances in Italy. We now think the debt ratio is likely to increase rather than to fall in the …
1st November 2023
With wage growth set to strengthen further over the coming year, we think the Bank of Japan will soon have sufficient confidence in the sustainability of higher inflation to end negative interest rates . The Bank of Japan has been arguing that wage growth …
The war between Hamas and Israel – and the potential for escalation to the wider region – has increased the uncertainty around the economic and financial market outlook, but in most scenarios is unlikely to generate a sustained hit to major asset markets. …
26th October 2023
The full report is available to download from the button at the top right to Global Economics, Global Markets, Asset Allocation and The Long Run subscribers, as well as to CE Advance clients. If this is outside of your current subscription and you would …
17th October 2023
Chapter 4: Financial market implications …
Chapter 3: Where will inflation (and nominal rates) settle? …
Chapter 2: How will the savings/investment balance affect r*? …
Chapter 1: Will stronger potential growth boost r*? …
Introduction and framework …
r* and the end of the ultra-low rates era: executive summary …
In contrast to the past few years, when the risks to the euro-zone inflation outlook have been consistently skewed to the upside, those risks now look more balanced. So in this Focus , we explore the downside risks and how the ECB might respond to them. …
12th October 2023
Note: We previewed Poland’s election and the economic and financial market issues surrounding it in a Drop-In on Thursday, 12 th October . Watch the 20-minute recording here . The outcome of Poland’s parliamentary election this Sunday will likely have a …
11th October 2023
The government bond sell-off over the past three months raises uncomfortable questions around the risks of financial instability and the outlook for fiscal policy. This note takes stock of what has driven the rise in long-term sovereign bond yields and …
6th October 2023
Saudi Arabia’s labour market has strengthened markedly in its post-pandemic recovery and the headline figures mask a dramatic shift in the size and composition of the labour force. In particular, social reforms have helped the female participation rate to …
4th October 2023
Brazil’s monetary easing cycle will probably lead to higher spending in interest rate sensitive areas, such as furniture and appliances, autos and construction materials. But that won’t be enough to prevent overall GDP growth from slowing sharply – and by …
3rd October 2023
Capital Economics clients can download a complete pdf version of this report by clicking the download button top right. If you can't see a download option, please speak to your account manager. You can also explore the individual Spotlight chapters below: …
26th September 2023
Chapter 6: Blowing bubbles? AI's financial market implications …
Chapter 5: AI and the global economic order …
Chapter 4: The policy dilemmas from AI …
Chapter 3: AI, jobs and prices …
Chapter 2: AI's economic revolution …
Chapter 1: AI – What’s all the fuss about? …
AI, Economies and Markets: Executive summary …
We think emerging market (EM) equities in Asia will outperform those in EMEA and Latin America over the next couple of years, although we doubt they’ll do better than developed market (DM) equities. EM equities have struggled this year, at least judging …
15th September 2023
When the ECB Governing Council announces the results of its operational review later this year, it is likely to say it will continue to use the deposit rate as its key policy tool . We also expect the ECB to establish a new framework for lending reserves …
12th September 2023
A “soft landing” for the economy in the US seems increasingly possible, so we look back at previous similar episodes to get an idea of what might be ahead for equities there. Despite the Fed’s aggressive tightening cycle over the past year and a half, it …
7th September 2023
South Africa’s economy has one of the weakest growth records of any EM over the past decade and its post-pandemic recovery has been particularly disappointing. At the heart of the problem are major structural impediments to growth that stretch far beyond …
6th September 2023
Sharp falls in inflation mean that the economies of Central and Eastern Europe (CEE) are on the cusp of a broad-based monetary loosening cycle. That said, we think that the legacy of the inflation shock over the past two years will be more persistent …
5th September 2023
History suggests that dollarisation, which is at the heart of Argentine presidential candidate Javier Milei’s policy platform, is a surefire way to get inflation under control. But whether this translates into broader macro stability would hinge on …
30th August 2023
Absent major fiscal stimulus in China, global steel demand growth will be weak in the next few months. Accordingly, we forecast price declines in major steel markets towards year-end. Only when economic growth recovers and interest rates fall do we see …
29th August 2023
The government’s ambition of developing a globally-competitive manufacturing sector, combined with relatively slow progress on shifting away from using coal for electricity production, means India will become the world’s biggest polluter in the …
23rd August 2023
The outlook for global agricultural supply has deteriorated since the start of the year as a result of extreme weather, the end of the Black Sea Grain Initiative, the prospect of an El Niño weather event and rising agricultural protectionism. We have …
4th August 2023
One key lesson from the bouts of inflation in the 1970s and 1980s is that core inflation faded only once a loosening in the labour market drove down the job vacancy rate to more normal levels. We estimate that a fall in the job vacancy rate from 3.0% in …
2nd August 2023
The latest Pemex capital injection underscores that Mexico’s President López Obrador is more likely to lean towards providing a sovereign debt guarantee (either implicit or explicit) to deal with the company’s financial problems. But with a less …
1st August 2023
The message from electric vehicle sales data is now clear: the EV revolution is alive and kicking and poses important implications for oil demand. We are slightly more optimistic on the pace of EV adoption than other forecasters and suspect the drag on …
31st July 2023
Tighter monetary policy has had a big impact on financial conditions in the euro-zone, but we think its effect on activity is still in its early stages . Even if the region falls into a mild recession, it will be some time before policymakers are …
26th July 2023
Japan bulls have proposed a range of explanations to justify the outperformance of the TOPIX relative to other equity indices over recent months. While there are some signs that firms are enjoying stronger pricing power, we aren’t convinced that a …
24th July 2023
While the wholesale European natural gas price is now close to pre-energy crisis levels again, we don’t expect EU gas consumption to rise in response. Rather, we think that EU gas consumption has structurally fallen. This is the main reason why we think …
20th July 2023
Egyptian policymakers’ commitment (or lack of) to economic orthodoxy continues to provide cause for concern and, while we don’t share the view that sovereign default is a serious risk, the near-term economic outlook is challenging. Over a longer …
The large macroeconomic imbalances that built up during Chile’s post-pandemic recovery have eased substantially, which is likely to prompt the central bank to deliver more rate cuts than almost any other EM central bank over the next couple of years. We …
17th July 2023
Russia’s economy has adapted to Western sanctions better than had been expected so far, but maintaining macroeconomic stability is now becoming more challenging and depends in large part on the outlook for energy exports and the extent to which additional …
13th July 2023
House prices in the euro-zone have fallen sharply and further declines seem quite likely. This will weigh on construction activity and household consumption, both of which are already weak, and contribute to the euro-zone remaining in recession over the …
5th July 2023
Note: We discussed the economic and policy risks around the ‘greedflation’ debate in a 20-minute online briefing on Thursday, 6 th July. Watch the recording here . The surge in inflation in advanced economies has not been driven by a widening of firms’ …
29th June 2023
The removal of fuel subsidies and the devaluation of the naira are likely to push inflation in Nigeria towards 35% y/y, which will prompt further interest rate hikes by the central bank and weigh on GDP growth over the coming quarters. Our growth …
27th June 2023
