Tentative signs of a recovery Local media has been awash this week with headlines about “stagflation” – a disquieting mix of stagnant or slowing economic growth and rising inflation. On the face of it, these concerns are justified in India today. …
17th January 2020
Lebanon: debt swap proposal fails to take off The unravelling this week of a proposed debt swap by the Lebanese authorities suggests that, even once a government is formed, debt restructuring will be a drawn-out process. On Sunday, Lebanon’s central bank …
16th January 2020
Chilean peso weakens, will gain later this year While most EM currencies tumbled this week following the assassination of Iranian General Qassem Soleimani, the Chilean peso fell furthest. Having strengthened from a trough of 837/$ to 750/$ over the course …
10th January 2020
This week brought another round of, on the whole, positive economic data, while the signing of the phase one US-China trade deal next week should further bolster confidence. With tensions in the Middle East easing, those developments support our view that …
Despite the further deterioration in the latest activity data, in his latest ‘fireside chat’ on Thursday Bank of Canada Governor Stephen Poloz seemed cautiously upbeat about the current state of the economy. We will echo the Governor’s message that the …
There is some early evidence that a “Boris bounce” after the election victory might be in progress, but the size and duration of any upswing will depend on how well the next stage of the Brexit negotiations go. December’s final IHS Markit/CIPS services …
Risks still prominent in Turkey’s banks Turkey’s financial markets have rebounded in recent days, partly because fears of a US-Iran war have eased but also because local banks have sounded more bullish on their own performance this year. But long-standing …
News that the headline inflation rate in the euro-zone jumped from 1.0% in November to 1.3% in December, and that the core rate (excluding energy, food, alcohol and tobacco) was unchanged, also at 1.3%, has once again raised the possibility that inflation …
SNB back in the FX market If staff at the SNB had hoped to ease themselves back in gently after the Christmas break, they will have been disappointed. Data released on Monday indicate that the Bank intervened to weaken the franc last week for the first …
Recovering pork supply to offset higher oil prices Fuel prices jumped in December, pushing non-food inflation to a 5-month high. Another pick-up seems likely this month, even though the spike in oil prices following the killing of Iranian General …
South Africa: Latest figures point to Q4 decline Surveys and activity data released this week added to the evidence that South Africa’s economy contracted in the fourth quarter, which would have tipped the country into another technical recession. …
Capacity remained tight in Q3 The Bank of Japan has signalled that it would not loosen policy in response to a temporary slowdown in demand as long as capacity shortages remained pronounced. Data released this week show that this was indeed the case on …
Net trade probably bolstered growth in Q4 External trade data for November released this week showed a sharp improvement in the trade balance supported by a rise in export values while import values declined. The rise in export values is particularly …
Recent developments raise odds of fiscal loosening Developments this week have raised the likelihood of Finance Minister Nirmala Sitharaman announcing more fiscal stimulus in next month’s union budget for FY20/21. First, the protests initially triggered …
Taiwan heads to the polls Given her huge lead in the opinion polls, it will come as a major surprise if Tsai Ing-wen is not re-elected for a second and final term as Taiwan’s president on Saturday. Whether Tsai can get to grips with the main challenges …
As threat of war recedes, Iran shift its focus The immediate threat of direct conflict between the US and Iran has diminished over the past day or so, supporting a rally in local and global financial markets. But the threat has not disappeared and Iran …
9th January 2020
South Africa: growing trade surplus not so positive The improvement in South Africa’s trade surplus in November was not the rare piece of positive news it first appeared and is merely a reflection of the weakness of the economy. The rise in the trade …
3rd January 2020
Argentine policymakers resorting to old tricks There is a sense of déjà vu about recent Argentine policymaking. Deficit monetisation is back, despite Economy Minister Martín Guzmán’s warning last month that it is a destabilising tool. The central bank has …
The renewed surge in US-Iran tensions has pushed geopolitical risk back up the list of things to worry about in 2020. But with the US no longer a net importer of oil products, the economy is likely to be resilient even if oil prices spike. With other …
Russian inflation dips, paving the way for rate cut The drop in Russian inflation in December, combined with comments from the central bank governor, support our view that there will be at least one more interest rate cut in the current easing cycle. …
The loonie has started 2020 in strong form and we’re more optimistic than most about the currency’s prospects for the next two years. In the short term, however, a further deterioration in the data and a dovish policy statement from the Bank of Canada …
The turn of the decade has not caused the main headwind to the economy to blow over. The passage of the Withdrawal Agreement Bill through Parliament means that Brexit will officially happen on the 31 st January when the UK will enter a transition period …
The latest data suggest that the euro-zone economy might have avoided a further slowdown in Q4 last year, adding to the evidence that growth is “bottoming out”. However, the economy seems to have remained sluggish and we don’t think that a recovery is on …
Swiss economy still not out of the woods The latest surveys from Switzerland support our view that the economy is likely to continue growing at a fairly sluggish pace over the first half of this year. Admittedly, data published in late December showed the …
Hukou reform not a gamechanger for property The scrapping of restrictions on residency (hukou) in smaller cities announced last week might give a boost to property markets in some places but it will be small. With urbanisation slowing and population …
Oil price spike to have limited impact on inflation Oil prices have jumped following the killing of Qassem Soleimani, one of Iran’s most powerful generals, but they would need to rise much further before higher prices started to have a major impact on …
Surge in oil prices not yet a concern Global oil prices have surged today following news of a US airstrike that killed a top Iranian military leader. A further sharp increase could be economically-destabilising for India. After all, it is the world’s …
Housing market going from strength to strength With bushfires still roaring across large parts of the country, the economic data are naturally taking a backseat. This week we learned that house price growth slowed from 1.9% m/m in November to 1.4% m/m in …
Consumption rebound, manufacturing slump The activity data released over the holiday break confirmed our view that the economy appears to have weathered October’s sales tax hike better than some had feared. Retail sales bounced back by 4.5% m/m in …
Saudi recovery to disappoint Saudi Arabia’s economy contracted in Q3 of last year and the latest evidence suggests that Q4 was even worse. While a recovery will probably take hold this year, we think that it will be weaker than most currently anticipate. …
2nd January 2020
The data this week suggest that GDP declined in October and we suspect it fell in November as well. Those falls mean that GDP probably stagnated in the fourth quarter. But the weakness was partly due to temporary factors and first-quarter GDP growth will …
20th December 2019
Argentina: Maturity extensions not bold enough The government stated today that it will postpone around $9bn of upcoming payments on Treasury bills (known as Letes) until August 2020. This is not hugely surprising. Most upcoming payments were due on …
If the markets (and ourselves!) had any thoughts of winding down in the run-up to Christmas they didn’t last long as there were important enough events this week for the pound to have its worst week of the year. The fall from $1.35 to $1.30 was not an …
As the boost from this year’s loosening in financial conditions feeds through, we expect GDP growth to rebound more sharply than most others anticipate in the second half of 2020. But events this week have highlighted several risks to that more positive …
Better than 2009 The euro-zone economy is in better shape at the end of the current decade than it was ten years ago. In December 2009, we were writing Updates with titles such as “Greece heads deeper into the mire” and “Austrian banking troubles a sign …
A decade in the spotlight Despite accounting for just 1.5% of global GDP between them (at PPP exchange rates), Switzerland and the Nordic economies have found themselves at the frontier of economic policymaking over the past decade – particularly when it …
Weak lira to (eventually) force rate hikes in Turkey The Turkish lira has been one of the worst performing EM currencies this month and this probably sets the scene for next year. This is a key reason why we think that the central bank will ultimately …
Bond defaults hurting credit allocation Corporate bond defaults continue to dominate the headlines. As we argued two weeks ago , the recent pick-up in defaults adds to broader evidence that corporate balance sheets remain under strain. That said, it …
Nigeria: Trade restrictions hurt consumers Nigerian inflation jumped to 11.9% y/y in November, strengthening our view that recent border closures have pushed up prices. This will delay rate cuts until late next year. (See Chart 1.) Chart 1: Nigeria …
Bank of Korea minutes reveal dovishness Minutes from the Bank of Korea’s (BoK) November rate meeting reveal that while only one of the seven members of its Monetary Policy Board voted for a cut, other members also struck a dovish tone. The member who …
Consumption weathered tax hike well Assessing the impact of October’s sales tax hike has been complicated by the large number of consumption indicators, each telling a slightly different story. But the most reliable measure, released this week for …
Vegetable price surge will keep RBI on sidelines RBI Governor Shaktikanta Das reiterated in a conference this week that, while the MPC unexpectedly kept rates on hold earlier this month, that didn’t necessarily signal the end of the loosening cycle. Mr …
Australia’s labour market broadly stable The minutes of the RBA’s December meeting noted that “it would be important to reassess the economic outlook in February 2020, when the Bank would prepare updated forecasts”. The Board noted that “it would be …
Higher oil prices won’t loosen the purse strings We think that the recent rise in oil prices has further to run but this is unlikely to result in a shift towards looser fiscal policy across the Gulf. Our commodities team now expects that the price of oil …
19th December 2019
Argentina: Still more questions than answers Reassuring comments from newly inaugurated President Fernández and his economy minister Martín Guzmán helped to drive a small rise in Argentine bond prices this week. Both said that the government seeks a …
13th December 2019
Most industrial commodity prices rose this week, as the US and China announced that they had reached a phase-one trade deal . The agreement cancels the tariffs scheduled to come into effect this Sunday (which had the potential to be particularly damaging …
The apparent agreement between the US and China to avoid the December increase in tariffs and begin a phased rollback of existing tariffs, together with the more upbeat tone from the Fed, all but eliminates the prospect of a final rate cut in 2020. At the …
The news this week that the updated NAFTA will be signed into law in the first half of 2020, as well as developments that have reduced global trade policy uncertainty, support our view that the Bank of Canada is likely to keep policy rates on hold in …
Lagarde not just Draghi 2.0 In her opening press conference, Christine Lagarde seemed to be just as dovish as her predecessor. Her claim to be an owl, rather than a dove or a hawk, was more of a political gesture than view on policy. And her suggestion …
While the election result has changed sentiment in the markets and Westminster, as far as the economy is concerned the most crucial decisions about the UK’s future trading relationship with Europe and the size of any fiscal stimulus are still to come. …
