The US dollar would have to appreciate a lot further before having significant effects on the global economy and financial system. A key risk to watch for is the widening policy divergence between the US and Asia leading to a major depreciation in the …
25th April 2024
The latest RICS survey suggested that there was a further improvement in occupier and investment demand at the beginning of 2024. However, the big picture was one of a very weak market, reaffirming our view that rent growth will slow further and the …
The Q1 RICS commercial survey provided further evidence that occupier demand has turned the corner, with demand ticking up in the industrial and office sectors. But with availability still elevated, office and retail rents are expected to decline over …
Foreign-born workers have been entirely responsible for the post-pandemic recovery in employment. But a gradual rise in labour market participation and a moderation in net migration may mean the share of UK-born employment starts to rise again. The risk …
A later start to Fed rate cuts than we anticipated will push the fall in mortgage rates and recovery in activity into the second half of the year. But as we think that the Fed Funds rate will eventually be cut by more than markets have currently priced …
Spanish house prices have risen 5% over the last two years despite rising interest rates. The relative affordability of houses in Spain is the main reason that the market remains strong, but the resilience of foreign demand for houses and a rising …
The policy shifts underway in Turkey, Nigeria, Argentina and Egypt have ticked a lot of the right boxes so far, but it will take years for the full economic benefits to materialise and require policymakers to remain committed to reforms. We’re most …
24th April 2024
The Central Bank of Nigeria’s (CBN) monetary policy reforms have injected a welcome dose of momentum back into the country’s policy shift. But the minutes to the latest MPC meetings also suggest that a slowdown in growth could prompt a (premature) shift …
In a surprise move, Bank Indonesia (BI) today hiked its main policy rate by 25bps (to 6.25%) and made clear that supporting the currency would remain its key priority over the coming months. But there is a good chance this will be a case of “one and …
While EM policymakers haven’t raised concerns about Chinese overcapacity in the same way that their counterparts in the US and Europe have, they too are facing widening trade deficits with China. We suspect EMs will be less likely than DMs to turn to …
Although the BLS’s new tenant rent index has overstated the speed of the slowdown in shelter inflation, the leading indicators remain unanimous in their message that the slowdown is still coming. Despite some larger monthly rises in core goods and …
23rd April 2024
The latest e-commerce statistics suggest that the pandemic has left US online sales on a permanently higher trend. That will be bad news for retail rents generally, though the detailed data also hint that there may have been a return to physical shopping …
The latest flash PMIs suggest that GDP growth picked up in most advanced economies at the start of Q2. But stronger services activity risks keeping price pressures elevated in some DMs. The flash PMIs for April suggest that economic activity picked up in …
Prime office rent growth in Scandinavia is expected to moderate in the coming years as soft demand and rising supply push up vacancy. But having trailed the other Scandinavian cities in 2023, we think that tighter supply could help rent growth in Oslo …
If sustained, the recent rises in market interest rate expectations and gilt yields may mean that the Chancellor has only around £5bn of fiscal headroom, down from £8.9bn in the March Budget, with which to fund further tax cuts before the next election. …
This publication has been updated with additional analysis since the post-meeting press statement and press conference. MNB shifting down the monetary easing gears The communications accompanying the decision by the Hungarian central bank (MNB) to opt for …
The better-than-expected budget figures out of Argentina at the start of the year are undoubtedly good news and show that the fiscal adjustment is happening more quickly than we’d expected. That said, many of the factors that have helped to flip the …
A resurgent nuclear power sector in Japan and a continuously growing one in South Korea coupled with an expansion in renewable power capacities will ensure both countries’ LNG demand will fall throughout the rest of this decade. All this supports our view …
South Africa’s upcoming general election looks likely to result in a much more fragmented parliament and mark a shift to coalition government. The lesson from elsewhere in the emerging world is that this can often lead to a worsening fiscal position. …
The rapid expansion in China’s manufacturing capacity of green technology is a symptom of the country’s investment-led growth model and so there is no reason to believe that any change in tack is imminent. Against this backdrop, western governments will …
The UAE’s economy outperformed the other Gulf economies in 2023 and we think that this outperformance will continue this year. While we are still waiting for the full 2023 GDP data from the UAE, we can piece together the data from Abu Dhabi and Dubai, the …
A week spent visiting client s, contacts and friends in Beijing and Shanghai has underlined the extent of the pessimistic shift in sentiment within China. At first glance, China’s economy is doing fine . The streets of Beijing and Shanghai are bustling …
We now expect services inflation to remain around 2% this year as a fading tailwind from soaring hotel and package tour prices will be offset by stronger labour cost growth. The upshot is that the Bank of Japan will probably lift its policy rate once more …
New more granular MSCI data shows that the outperformance of residential property over the past decade was primarily down to student housing. Indeed, only in the past couple of years have multifamily returns exceeded that of all property. But with overall …
22nd April 2024
A weak labour market and high interest rates will continue to weigh heavily on Korea’s consumer sector this year. The poor prospects for consumer spending is one of the main reasons we think overall GDP growth will remain subdued. Korea’s recovery from …
Recent currency falls and higher oil prices are unlikely to put significant upward pressure on consumer prices across Asia. We continue to expect inflation in the region to remain low over the coming year. Consumer price inflation has fallen back sharply …
Despite another large y/y fall in green technology export values from China in March, falling solar panel and battery prices mean that China’s export volumes of the so-called “New Three” were close to the peak recorded in September 2023. After the 12.8% …
Movements in the exchange rate tend to have only a small impact on euro-zone inflation. So while the euro might weaken if monetary policy in the euro-zone and US were to diverge, we think it would take a big move in the exchange rate to have a significant …
19th April 2024
Higher Treasury yields, a resilient US economy, and relatively low valuations are three reasons why we now think that the future for US banks in general is a bit brighter. The share prices of banks in the S&P 500 have underperformed the overall index …
Investors are no longer pricing in a 50bp interest rate cut at the Brazilian central bank meeting next month, despite the forward guidance at the March meeting signalling such a move. While we think it’s too early to throw in the towel on a 50bp cut, a …
18th April 2024
The continued weakness in the German economy that we expect over the rest of this decade presents a challenge to the export-orientated economies of Central and Eastern Europe (CEE). While GDP growth is likely to be slower in CEE over the coming years than …
The risk premia on Turkish assets are now low relative to the past decade or so. We think that will remain the case over the coming quarters, given the positive global risk-on attitude and the ongoing shift to traditional macroeconomic policy. Even so, …
On the face of it, core disinflation seems to have stalled or even reversed in the US but not in Europe, suggesting that Fed cuts will come much later than those by the ECB and BoE. However, there are definitional issues at play that exaggerate the recent …
We forecast that bond yields will fall back in most developed markets (DMs) over the next year or so, as central banks generally embark on bigger easing cycles than investors currently expect. But given our view that the Federal Reserve faces more hurdles …
We think the headwinds driving the depreciation of the Chilean peso against the US dollar have largely run their course. We expect the Chilean peso to recover some ground by the end of the year. The Chilean peso has underperformed almost all other major …
South Africa’s latest hard activity data provided some encouraging signs that the economy may be turning the corner even if it comes too late to help the ANC’s hopes of keeping its majority in parliament after May’s election. With electricity outages …
17th April 2024
Saudi Arabia has yet to be able to raise foreign direct investment towards its Vision 2030 goals, prompting a turn to the Public Investment Fund (PIF) to prop up investment spending. Unless the government makes major strides to improve the local business …
We think it is most likely that future governments bring down Belgium’s budget deficit sufficiently to put its debt on a sustainable trajectory. However, the risks are that the deficit is higher than we forecast because of Belgium’s divided political …
The latest polls ahead of Mexico’s election on 2 nd June suggest that Claudia Sheinbaum, protégée of incumbent President Andrés Manuel López Obrador (Amlo), is likely to become the country’s next leader. She’s widely expected to continue with Amlo’s …
The detailed breakdown of March’s euro-zone HICP data, released this morning, show that the early timing of Easter boosted services inflation by 0.1ppts. This effect was smaller than in previous years. Nevertheless, excluding the tourism-related sectors …
The recent bout of EM currency weakness may prompt (further) FX intervention, particularly in Asia, to stem currency volatility. Turkey’s central bank is likely to hike rates at its meeting next week and a hike is also now on the table at the Bank …
Although Finance Minister Chrystia Freeland stuck to her previous pledge to keep the budget deficit below $40bn in the new fiscal year, she nonetheless spent the small windfall afforded to the government thanks to stronger-than-expected revenue growth. …
16th April 2024
Continued resilience in the US economy looks set to delay the Fed easing cycle until (at least) the second half of this year, so we now think the greenback will stay strong against most currencies over the next couple of quarters. We now forecast the DXY …
As the plunge in employment in Q1 is probably a response to the recession last year, employment will probably soon rebound now that the economy is growing again. The real risk is a rebound in job vacancies prevents wage growth from falling as fast and as …
Concerns about escalating tensions in the Middle East and the impact on global oil supplies increase the likelihood that the US will renew its sanctions waiver on Venezuela when the current one expires on Thursday. A rise in key oil exports would help the …
New housing policies to provide only modest support The government’s policies to boost affordability for first-time buyers will have only a modest impact on demand, but they still add to our sense that house prices will rise in the coming years. While …
As things stand, higher oil prices will boost inflation in advanced economies by only a few tenths of a percentage point in the months ahead and we still expect this boost to fade as the year goes on. There are upside risks relating to tensions in the …
This year’s falls in iron ore prices are likely to have been a dress rehearsal for what's ahead. Our China team’s forecast for the property sector to halve by the end of the decade does not bode well for iron ore producers’ plans to ramp up production. …
Many of the usual relationships between oil prices and equities haven’t held over recent months. This Update explores the reason for that, and what may lie in store for energy equities and the broader market. Since troughing on 12 th December 2023, the …
The resilience of Swiss GDP over the past two years has been largely due to the merchanting sector, which buys and sells goods without them ever entering Switzerland. Excluding that sector, the economy was smaller at the end of 2023 than it was two years …
