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Higher bond yields a risk to fragile recovery The rise in house prices in December builds on November’s gain, providing some support to our view that house prices will rise by a healthy 4% this year. That said, with the sales-to-new listing ratio dropping …
16th January 2025
Higher mortgage rates appear to be weighing on housing demand December’s RICS survey suggests that the relief rally after the Budget may have started to fade at the end of last year and the recent rise in mortgage rates have finally began to weigh on …
The ceasefire reportedly agreed between Israel and Hamas is likely to have significant consequences for some countries in the region, notably Israel itself as well as Jordan and Egypt. But the possible disinflationary impact for the rest of the world via …
15th January 2025
If sustained, rising bond yields add to downside risks to economic growth. The potential direct effects on real activity are greatest in the US. But higher yields in other DMs could limit how far borrowing costs in the private sector fall and force the …
Slowing economic growth and rising availability will hold back French industrial rental growth this year, with affordability concerns likely to be an additional drag in Paris. This will leave the region underperforming other euro-zone markets, with …
It’s possible that prolonged weakness in economic activity and a jump in unemployment force the RBA to cut rates more aggressively than we’re anticipating. However, a more likely scenario resulting in below-neutral rates is that a sharper-than-expected …
Our base case is that a stabilisation and eventual fall back in gilt yields will allow the government to muddle through and wait until the next fiscal event on 26 th March before making any decisions on taxes and spending. However, a significant worsening …
14th January 2025
While commercial real estate insurance premiums remain elevated, their growth dropped back substantially last year. But as the West and Gulf coasts still face the greatest threat from climate risks, we expect continued rapid premium growth in those …
13th January 2025
Raising the federal debt ceiling this year will likely come as part of a budget reconciliation package alongside concessionary spending cuts given the razor-thin Republican majority in the House. As ever, a deal likely won’t be reached until the eleventh …
With long-dated gilt yields hitting multi-decade highs, we held an online Drop-In session on Wednesday to discuss the outlook for the gilt market and the implications for government policy and the UK macro and housing market outlook. (See a recording here …
9th January 2025
We originally published an Update ahead of the general election on 4 th July on what taxes the next government could raise. In light of the recent rise in gilt yields putting the Chancellor on course to break her fiscal rule, we have refreshed this …
The troubling start to 2025 is casting doubt over our key non-consensus forecasts for 2025. But we still think other forecasters are underestimating how fast the economy will grow, how far inflation will fall and how many times the Bank of England will …
Against a backdrop of lower interest rates and weak economic growth in much of Europe, we think the recovery in property values will continue at a gradual pace in 2025. Our forecast for euro-zone total returns of almost 9% is a notable improvement on the …
8th January 2025
Though we think the market has bottomed, we expect a very weak recovery this year, unlike in other cycles. In fact, we think valuation falls still have further to go, leaving our forecasts generally below consensus, particularly for the industrial sector. …
7th January 2025
The rise in corporate bankruptcies last year is not a huge concern, but it does add to the sense that firms are struggling more than the headline GDP and labour market data suggest. That in turn supports our view that GDP growth was set to slow even …
The November JOLTS data, when paired with recent employment reports, show a labour market returning to pre-pandemic norms. Meanwhile, the fall in the private quits rate to its lowest since the height of the pandemic will reassure the Fed that core …
There is a significant chance that the Office for Budget Responsibility (OBR) will judge that the Chancellor, Rachel Reeves, is on course to miss her main fiscal rule when it revises its forecasts on 26 th March. To maintain fiscal credibility, this may …
Prime Minister Justin Trudeau’s resignation as Prime Minister and Liberal Party Leader sets off a contest for who will lead the party into the election due by October, but which could happen much sooner if the opposition parties manage to topple the …
6th January 2025
The manufacturing PMIs overstated the weakness of industrial activity in 2024 but, at face value, their decline throughout most of the world in December suggests that the sector has entered 2025 on a weak footing. While price indices rose, supply chain …
2nd January 2025
2024 was another difficult year for commercial real estate. Although the sector appears to have fared better than we expected, our key calls were broadly right in terms of direction and winners and losers. This time last year we outlined five key calls …
There was little festive cheer in Australia’s housing market last month, with house prices stagnating across the country’s eight capital cities. Given our view that the RBA has only limited room to cut interest rates over the coming year, prospects for a …
While the Bank of England left interest rates at 4.75% today, it struck a slightly more dovish tone. This supports our view that the next 25 basis points (bps) rate cut will come in February and that the Bank will cut rates further and faster than …
19th December 2024
Donald Trump’s policies will be a net drag on US GDP growth over the next couple of years, but we doubt that his re-election will prevent the US from remaining the world’s pre-eminent global economy over the coming decades. That said, economic strength is …
The Bank of Japan's decision to leave rates on hold for a third consecutive meeting was not a great surprise. But in the post-meeting press conference Governor Ueda sounded in no hurry at all to resume the tightening cycle and there’s now a good chance …
The Fed did cut interest rates by an additional 25bp today, as was largely expected, taking the fed funds rate down to between 4.25% and 4.50%. But the vote was not unanimous and, in a hawkish shift, the new median projection now shows only 50bp of …
18th December 2024
The Fall Economic Statement (FES) showed a much larger budget deficit for the previous fiscal year than previously estimated, but that was largely due to one-off charges related to indigenous settlements. Compared to Budget 2024, the new net spending …
16th December 2024
The latest batch of PMIs suggests that the US economy is growing strongly while Europe is stagnating or contracting. The US economy is no doubt growing more strongly than its advanced economy peers heading into 2025, but the PMIs are probably overstating …
Housing market heating up The rise in home sales in November builds on the jump in October and is particularly positive considering some buyers may have held off from purchases ahead of the new mortgage rules that took effect this month. Prices are set to …
Housing market resilient to higher mortgage rates November’s RICS survey provides further evidence that housing activity and prices remained resilient to the rise in mortgage rates in November. And our view that mortgage rates will start to fall again …
12th December 2024
With pressures on public spending continuing to grow, this has raised the chances that the Chancellor, Rachel Reeves, raises spending further in her 2025 Spending Review. If she raises spending and funds it with higher taxes, that would probably add to …
11th December 2024
Although the Bank of Canada cut interest rates by another 50bp today, its communications were more hawkish than might have been expected, with the Bank no longer indicating that further cuts are guaranteed and instead saying it “will be evaluating the …
The peak in new apartment supply has passed, with completions set to drop back sharply over the next few years. If demand continues to hold up well as we expect, this should put downward pressure on the vacancy rate and support a modest pick-up in rent …
10th December 2024
While mortgage interest cost (MIC) inflation has historically turned negative during, or after, loosening cycles, we expect it to remain positive this time and rebound from 2026. This is because, in contrast to previous monetary policy cycles, the …
Our new Bank of England Caseometer helps track whether the Bank is becoming more inclined to cut interest rates faster and further or slower and not as far. Our forecast is that rates will continue to be cut gradually, but that they will fall to 3.50% in …
The RBA sounded more dovish today and it’s looking increasingly likely that it will lower interest rates sooner rather than later. While a downside surprise in Q4 inflation could trigger a February rate cut, we think the continued tightness of the labour …
A vast share of our clients highlighted geopolitics and/or Trump as their biggest blind spots going into 2025 when polled at our recent London roundtables. Meanwhile, a large majority thought that interest rates will be the key driver of returns next …
9th December 2024
Our expectation of rising evidence of distressed assets in 2024 has come to bear, but we think more is still to come over the next couple of years. Some of that will stem from matured loans requiring refinancing, which have already hit an all-time high in …
5th December 2024
The rebound in job openings in October suggests that labour market conditions are stabilising at a healthy level. Meanwhile, despite a small rebound in the private quits rate, it still points to wage growth slowing sharply. The rebound in job openings to …
3rd December 2024
Tight supply conditions will drive a solid rent outlook for the student housing sector over the next year. But the bigger picture remains one of slowing demand as steady declines in the college-age population and curbs on immigration provide a substantial …
The latest PMIs show that while China’s manufacturing sector is benefiting from a fiscal boost, industry in most of the rest of the world continues to struggle. With demand weak and little disruption on the supply side, indicators of goods price pressures …
2nd December 2024
Although Australian house prices edged up a notch in November, we remain sceptical about prospects for a second wind in the housing cycle. Given that the RBA is unlikely to provide interest-rate relief until mid-2025 at the earliest, we expect the …
The Chancellor, Rachel Reeves, has confidently claimed that she will not be “coming back with more taxes”, but developments since the Budget have already whittled away her fiscal ‘headroom’. Further tax hikes are not inevitable, but they are more likely …
28th November 2024
While the RBNZ started hiking rates earlier during the recent tightening cycle than the RBA, it also lifted rates to a higher peak. The RBA tempered the degree of tightening in order to preserve the large falls in unemployment seen during the pandemic and …
Even if the government’s easing of planning rules were to mean that at least 300,000 new home approvals in England were granted a year, the number of construction workers would need to rise significantly. We estimate about 500,000 extra construction …
26th November 2024
Residential construction employment has been performing much better than the slump in construction over the past year might have implied. We suspect that is because job losses in the new home construction sector have been concentrated among undocumented …
25th November 2024
Given the considerable uncertainty surrounding what policies president-elect Donald Trump will enact during his second term, there is a temptation to read a lot into his Cabinet nominations, but we would caution against that. Following his comprehensive …
The latest flash PMIs suggest that while industry continues to struggle across advanced economies, services activity is now slowing in Europe too. While reduced political uncertainty seems to have lifted business sentiment in the US, the PMIs suggest that …
22nd November 2024
Unsurprisingly, a second Trump presidency will support oil and gas production while rolling back environmental regulations. The fate of the Inflation Reduction Act is less certain, given that the support for manufacturing investment aligns with Trump’s …
The slump in the participation rate this year at least partly reflects the cyclical weakness of hiring, which means that the labour market is weaker than the unemployment rate alone might suggest. The silver lining is that an eventual rebound in …
20th November 2024
We expect the Reserve Bank of New Zealand to cut its policy rate by 50bp, to 4.25%, at its meeting next week. With inflation back at target, the labour market loosening rapidly and activity in the doldrums, there continues to be a compelling case for the …
