Euro-zone wage data are published only quarterly, and with a long lag, and have been distorted by pandemic-related effects. So it will be another six months before we get a clearer idea of the underlying trend in earnings. For now, though, measures of …
31st August 2021
We think that the adoption rate of renewable electricity will accelerate in the decades ahead, which should contribute to a near-continuous decline in demand for coal. Demand for natural gas should still eke out some growth over the next decade or so …
26th August 2021
This Focus provides an overview of the concepts and models underpinning our new FX Markets Valuations Monitor . It is split into three sections. The first explains our framework for thinking about currency valuations. The second provides details on the …
20th August 2021
Korea has performed relatively well through the pandemic, and we expect the economy to emerge from the crisis with little lasting damage. However, the long-run outlook is less promising. Although productivity growth is likely to accelerate, it will not do …
17th August 2021
The housing market is highly cyclical, and the current price boom marks the fifth episode since 1970 where real house price growth has exceeded 5% y/y. But there are good reasons to think this will mark the last house price boom for next 30 years. …
12th August 2021
Cities are central to property performance. And the largest are seen as hugely important by investors. But the pandemic has turned many received ideas about real estate on their head and we think that performance in gateway markets will remain relatively …
10th August 2021
The pandemic appears to be accelerating a political trend towards populism in Latin America. While there is a lot of uncertainty about how this might play out, it generally points towards loose fiscal policy and greater state intervention across the …
5th August 2021
Less favourable demand fundamentals and less scope for yield compression mean that European residential returns are likely to be lower in the coming years than over the previous decade. An analysis of the relative outlook across selected western European …
27th July 2021
Productivity growth surged during the pandemic last year, but that was principally due to the disproportionate job losses in low-productivity sectors like leisure & hospitality, which raised the economy-wide average level. The pandemic also accelerated …
We think that euro-zone headline inflation will rise further than most expect in the second half of this year. But rather than reaching the levels of around 5% seen in the US, it is likely to top out at about 3% before falling back sharply in 2022. The …
This Focus has been updated to incorporate the latest publicly-available information on China’s eCNY project, including the PBOC White Paper published on 16 th July 2021. The original version of the Focus , published on 27 th May 2021, is here . In this …
21st July 2021
The widely reported labour shortages should mostly prove temporary. While it may take 6-12 months before some of the underlying causes unwind, recruitment difficulties probably won’t have a long-lasting upward impact on wage growth. As such, they …
8th July 2021
The sheer scale of the surge in residential investment since the pandemic means it now presents a key downside risk to the outlook. At best, the widely held assumption that residential investment will remain high for years looks too rosy. At worst, a …
6th July 2021
We expect some major central banks to issue digital currencies later this decade, with those in countries where cash is rarest proceeding the fastest. The first generation of central bank digital currencies (CBDCs) will be purposely designed not to shake …
The widespread labour shortages evident in the survey data and job opening & quit rates are only partly due to transitory factors, including enhanced unemployment benefits, childcare constraints, and virus fears. Limited international migration, the wave …
29th June 2021
Achieving net zero emissions in Japan in three decades is a difficult but achievable task. And while the most carbon-intensive sectors may face significant headwinds, overall we agree with PM Suga that economic growth wouldn’t have to be sacrificed to …
We think there’s a good chance that when the Bank of England’s Monetary Policy Committee (MPC) starts to tighten monetary policy it will do it by unwinding some quantitative easing (QE) before it raises interest rates. That would be consistent with the …
22nd June 2021
The Egyptian pound has appreciated significantly since the devaluation in 2016 and there are signs that the strength of the currency is weighing on the country’s external competitiveness. We forecast a gradual depreciation from around 15.6/$ now to 17/$ …
15th June 2021
Global migration has ground to a halt over the past year or so, but we doubt that the pandemic will have any major lasting impact. Moreover, there is potential for migration to get a fresh impetus from a big rise in the number of people leaving Africa …
Nigeria’s government has turned to the central bank to plug ever larger budget deficits in recent years and policymakers are unlikely to kick their deficit monetisation habit, particularly if the fiscal position worsens next year (as we expect). This will …
14th June 2021
Having fallen back to near its post-pandemic lows, we don’t think that the decline in the US dollar will continue. In this Focus, we explain why instead we expect the dollar to strengthen against most currencies over the next 12-18 months. In the early …
11th June 2021
We estimate that the spare capacity in the euro-zone’s labour market has increased by around four million people, or 2.5% of the labour force, since the start of the pandemic. This is likely to disappear over the next couple of years as the economy …
9th June 2021
India’s ferocious second wave of COVID infections is likely to have caused the economy to contract by about 5% over Q2 as a whole. The good news is that the outbreak is quickly subsiding and activity appears to have bottomed out. But the recovery is …
3rd June 2021
We expect inflation to rise to the mid-point of the RBA’s target band over the next couple of years. The main driver is a continued tightening of the labour market and a pick-up in wage growth. By contrast, we think that the goods supply shortages …
2nd June 2021
With the economy rebounding strongly from the crisis, the Bank of Korea (BoK) is starting to shift its attention away from supporting growth and towards containing financial risks. We expect the BoK to begin raising interest rates at its meeting in …
31st May 2021
The purpose of this Focus is to introduce our new FX Markets service, which we launched in May 2021. It is split into three sections. The first provides an overview of the new service. The second explains our approach to forecasting currencies. The third …
27th May 2021
In this Focus we detail what is known about how China’s central bank digital currency (CBDC) will operate, when it will launch, what the People’s Bank is trying to achieve, and whether it will succeed. One conclusion is that the launch of eCNY will do …
Over the next few years, there is potential for increased “green” investment to more than offset the negative economic effects of measures such as further carbon tax hikes. But given the economy’s reliance on fossil fuel extraction, it is hard to take …
26th May 2021
Price pressures are building in the US and we think they will be longer-lasting than the Fed expects, but it is a very different story in the euro-zone. A weaker economic recovery and a flat Phillips curve suggest that after a brief period of above-target …
20th May 2021
The ECB will make a big splash about climate change when it concludes its monetary strategy review this autumn. In practice, it is likely to make progress in addressing climate-related risks in the banking sector and it may also announce some limited …
18th May 2021
The downward trend in average working hours in advanced economies has slowed or stalled in the past few decades. Yet there are reasons to think that the decline will resume, at least in some sectors and some countries. Other things equal, fewer hours …
13th May 2021
Fed Chair Jerome Powell is resolute in his belief that the burst of stronger inflation we are about to see will prove temporary, with underlying inflation dropping back to the 2% target next year. We are not convinced. Given the breadth of the upward …
6th May 2021
The closure of the border will reduce Australia’s potential output by around 2.5%. But this will be partly offset by higher productivity growth due to increased usage of technology and more employees working from home. And the usual red flags that have …
Stimulus cheques and a lack of opportunity to spend money pushed the saving rate to a record high last year. Some of that saving made its way into down payments, with the average first-time buyer putting down an extra 30% in November compared to a year …
4th May 2021
Policy stimulus and tolerance of inflation by central banks may lead to higher inflation in some G7 countries in the coming years. Given the parallels with the run-up to the high-inflation era of the 1970s, it is natural to be worried about history …
29th April 2021
The surge in house prices and very high transaction volumes have led to concerns that the housing market is entering a bubble. After all, the house-price-to-earnings ratio has risen to a fresh all-time high. But because interest rates have continued to …
22nd April 2021
Israel has been the world leader in the vaccination race and the early evidence is that the rapid re-opening of the economy has driven a strong rebound in activity, particularly in services sectors. In this Focus , we launch our coverage of Israel and …
There is evidence that the pandemic has accelerated technology use, partly through increased equipment investment but mainly through a change in the way that people work. The effects on productivity might not be immediate or huge, but they will be …
16th April 2021
Ongoing disruption to global auto production has highlighted the extent to which semiconductors have become an essential input in products that aren’t traditionally considered electronics and also how dependent the world is on Taiwan to produce them. This …
13th April 2021
A rise in US Treasury yields and tightening of external financial conditions could cause vulnerabilities in Turkey and a handful of smaller frontier markets to crystallise. However, most major EMs’ dependence on capital inflows looks limited. Instead, in …
12th April 2021
We suspect that Argentina’s government and the IMF will thrash out a new deal, the 22 nd in their history, but we doubt that this will lead to the sustained turnaround in policymaking that is needed to put public debt onto a sustainable path. The upshot …
7th April 2021
In a world where the Phillips curve is flat, inflation expectations become the key driver of actual inflation over the medium term. But getting a true handle on inflation expectations is difficult because of the large number of diverse measures that are …
31st March 2021
The economic recovery from the COVID-19 crisis may not push CPI inflation above 2.0% for a prolonged period until 2023, although there is a risk that it happens sooner. And further ahead, the government’s desire to use fiscal policy to achieve its …
22nd March 2021
The Brazilian central bank’s 75bp hike in the Selic rate (to 2.75%) and hawkish statement point to a front-loaded tightening cycle in the coming months. We now expect a further 200bp of hikes (to 4.75%) over the next three meetings. But we think the cycle …
18th March 2021
Tunisia’s public finances have deteriorated further during the COVID-19 crisis and, with the government unlikely to be able to push through much-needed fiscal austerity, a debt restructuring looks increasingly likely in the coming years. Tunisia has been …
History shows that supercycles are usually demand-driven, and that the performance of individual commodity prices has varied hugely both within and between past supercycles. In addition, supercycles can temporarily give way to shorter-run boom/bust …
17th March 2021
China’s new policy blueprint seeks above all to promote a large and hi-tech manufacturing sector, both as a defence against decoupling by the West and as a source of productivity gains. Policymakers are pinning their hopes on rapid domestic innovation to …
15th March 2021
Given that the natural vacancy rate (NVR) provides a better gauge of office market conditions than the absolute vacancy rate, we set out to estimate the NVR across European office markets. Future market conditions implied by our NVR estimates are broadly …
11th March 2021
The upcoming state elections in India will have an important bearing on economic policy at the local level. But perhaps more significant, the outcome of the state elections could be important in determining whether Prime Minister Modi’s BJP will be able …
10th March 2021
While most governments are focussed squarely on maintaining or increasing fiscal support for their economies, in today’s Budget the Chancellor, Rishi Sunak, adopted a different two-staged plan for the UK – spend big for the next two years and tax big for …
3rd March 2021
