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We doubt the outcome of the UK’s general election will have a big impact on UK equities in general. Nonetheless, we still expect them to continue to underperform US equities. We don’t think the Labour Party’s return to power – which the polls suggest is …
13th June 2024
Faltering demand and rising supply mean prices will slip back The May RICS survey was the weakest so far this year, as new demand faltered and sales slowed. With the quantity of homes coming onto the market increasing at the same time, prices are likely …
France’s National Rally has advocated policies that would increase the budget deficit and provoke clashes with the EU. During the election campaign, it will probably moderate these views, but the chance of France reducing its deficit to 3% of GDP by 2027, …
11th June 2024
Sluggish economic growth in the euro-zone’s trading partners and a deterioration in competitiveness caused an extremely rare absolute decline in euro-zone export volumes last year. Poor competitiveness will remain a perennial problem, but global growth …
The granular data on mortgage lending in Q1 contained some signs of relief following the dip in mortgage rates at the end of last year. But given that decline in rates has since reversed, we don’t think it signals a further improvement in activity to …
The ECB began its easing cycle today, as expected, but the accompanying guidance and forecasts suggest that it will proceed cautiously. We now think the Bank will cut interest rates by only a further 50bp before the end of the year, with the next cut …
6th June 2024
Indications that take-up stabilised across many markets in Q1 were encouraging. However, looking ahead we think the prospects for occupier demand are better in southern European markets. As we recently highlighted , there were tentative signs that Europe …
Whoever wins the general election on 4 th July will have three main choices when it comes to spending and taxes. First, the new government could change the fiscal rules to give itself more fiscal space. Second, it could keep the current fiscal rules and …
5th June 2024
Inflation has been stickier than we had expected and we have therefore pushed back when we think the Bank will start cutting interest rates. That may put a little upward pressure on property yields over the next couple of months. But we still think …
4th June 2024
Having lagged behind other emerging market (EM) currencies for most of the post-pandemic period, the Polish zloty has lead the pack over the past six months. While we think that most of this rally has now run its course, we expect the zloty to stay …
3rd June 2024
With the government debt-to-GDP ratio likely to trend up over the medium term, and the budget deficit set to stay above 3% of GDP, we suspect that France will be subject to further rating downgrades in future. The risks are significantly higher in the …
During the coming months, we expect falling goods and energy inflation to pull down the headline inflation rate in Sweden. This should encourage policymakers to cut rates from 3.75% currently to 3.00% by the end of the year. However, we are not pencilling …
30th May 2024
Sovereign bond yields in Russia have surged to multi-year highs this year as markets have increasingly questioned the trade-off between the war effort on the one hand and policymakers’ ability to maintain fiscal stability and control inflation on the …
29th May 2024
While German property yields stabilised in Q1, further indications of rising distress give us confidence in our view that property values there have not yet reached the bottom. The stabilisation in German prime all-property yields in Q1 has led some to …
The latest IPF Consensus Survey showed limited change on the previous forecast round in March. There was a small upward revision to all-property rental growth expectations for 2024, but a downgrade to total return expectations, which implies yields are …
While the timing of the sharp hit to UK commercial real estate values owes much to the ill-fated “mini-Budget” of September 2022, we think the UK’s role in leading the valuation downgrades also owes to its relatively insulated lending market in this …
28th May 2024
The sharp drop in frontier market sovereign dollar bond spreads this year has caught many by surprise. We think there’s a case that the bond rally may have gone too far in Argentina, Ecuador and Tunisia. But the decline in spreads in some frontiers, …
24th May 2024
Spanish industrial rent growth beat expectations in Q1 this year, outpacing rises elsewhere in the euro-zone. However, this was mainly due to Barcelona, where we have raised our prime rent forecast. Madrid rent gains were more sluggish and this trend is …
Croatia has established itself as one of the fastest growing economies in the EU and we think that it will maintain GDP growth of around 3% p.a. over 2024-26. Income convergence – which has been rapid in recent years – will continue over the rest of this …
23rd May 2024
We still think inflation will fall faster than the Bank of England is expecting, but in the light of April’s CPI release we now expect the downward trend to be slower and smaller. As a result, we have shifted back our forecast for the timing of the first …
Putting the politics aside, the high number of migrants coming to the UK for work is the main reason why the number of people willing and able to work isn’t shrinking. The provisional data show that net inward migration to the UK was 685,000 in the year …
We don’t think the pick-up in euro-zone negotiated wage growth in Q1 will stop the ECB from cutting interest rates in June. But the continued strength of pay pressures reduces the chance of the ECB cutting rates rapidly in the second half of the year. The …
We’ll be discussing what the election means for the economy and financial markets in a 20-minute online briefing at 9.30am BST on Thursday 23rd May. (Register here .) The general election on Thursday 4 th July, which the Prime Minister announced today, …
22nd May 2024
The next German federal election will be crucial in determining how Germany will respond to its structural economic challenges. This Update answers some key questions on what to expect from the election and its implications for economic policy and …
20th May 2024
At our recent roundtable we shared our view that strong rental prospects mean residential property is likely to outperform other commercial property sectors over the next five years. The slides from the event are available on our website . Across the …
17th May 2024
There will be some upward pressure on services inflation in the coming months from tourism-related items and the pass-through of higher oil prices. But we think that this will be more than offset by the impact of lower gas prices and slower wage growth, …
The policies of the Mexican presidential frontrunner, Claudia Sheinbaum, would provide a more supportive environment for the nearshoring of manufacturing supply chains. But we doubt that she’ll carry out the wholesale economic reforms needed to reap the …
16th May 2024
This note answers some of the most frequently asked questions that we received from clients during a recent online briefing about the latest US tariffs on China. Watch the original briefing here . What has been announced? Yesterday was the end of a …
15th May 2024
Forecasts for prime office rental growth have generally proven too pessimistic over the past couple of years, but there is again broad agreement that a slowdown is on the way this year. However, we think the risks are still to the downside and that the …
The impact of the US tariffs announced today will barely register on the paltry flows of solar panels and electric vehicles that China directly exports to the US. However, the new tariffs could have a bigger impact on imports of Chinese-made batteries, …
14th May 2024
High net migration has led to a big jump in demand for rental properties that has pushed up the cost of rent compared to the average salary. But comparing rents to average pay is not as accurate a guide to tenant affordability as it used to be. Our …
13th May 2024
An increase in support for populist parties in European parliamentary elections in June will have little bearing on economic policy in the near term because the more centrist parties should still win a majority of seats. Nonetheless, rising populist …
The fiscal tightening steps announced by Turkey’s finance ministry today, which include a freeze on most public construction projects, will help to prevent the large budget deficit from widening even further this year and contribute to the rebalancing …
The shares of the very biggest, ‘mega-cap’, firms have generally outperformed those of smaller ones by less in Europe than they have in the US on net so far this decade. We expect that to remain the case through the end of 2025, as bond yields drop back …
10th May 2024
Private sector savings surged in Israel during the pandemic and jumped again last year amid the war in Gaza. We estimate that those built up due to the war are equivalent to around 3.0% of GDP and could be used to fund consumption, particularly if …
9th May 2024
We’ll be discussing the outlook for Bank of England policy in a 20-minute online briefing at 3pm today. (Register here .) While leaving interest rates at 5.25% today as widely expected, the Bank of England gave the impression that it is close to cutting …
The Italian industrial market made a strong start to 2024, with prime rent growth outpacing the rest of the euro-zone and beating our own forecasts. Rental gains are still expected to slow going forward, but with economic activity in Italy also holding up …
Increasing supply points to softer price growth While sales volumes were robust in April according to the RICS Residential Market Survey, stalling demand and increasing supply suggests that prices will continue to stagnate over the coming months. The …
The Riksbank is likely to follow today’s 25bp rate cut with three more cuts this year, which is one more than the central bank itself forecasts and more than investors are pricing in. The case for rate cuts in Sweden is stronger than for the euro-zone …
8th May 2024
Europe will raise barriers to trade and investment with China in the coming months and years. But policymakers will try to balance conflicting objectives so the result may well be a gradual rather than sudden increase in protectionism with measures …
7th May 2024
The decision by Turkey last week to suspend all goods trade with Israel until there is a permanent ceasefire in the war in Gaza is unlikely to have a major macroeconomic impact in either country, although Israel’s construction sector appears vulnerable …
The rebound in prime retail rents is set to wane this year. But we think prime rents on luxury high streets will continue to outperform those of mass markets in the coming years. The return to rental growth on high streets in 2023 after three years of …
The sharp rise in the price of carbon under China’s Emission Trading Scheme (ETS) this year, to a record high, underlines that Beijing sees carbon pricing as a key part of its emissions-reduction toolkit. Although the price of polluting in China is likely …
Inflation in Norway has been falling faster than Norges Bank expected for some time, but with the core rate still a long way above target, today’s communications show that policymakers are not counting their chickens. While they now seem to envisage …
3rd May 2024
Many central banks are concerned about the fact that services inflation has remained too high. But we think the risks in Switzerland are skewed to the downside and, in our view, outweigh the upside risks from goods prices. This leaves us comfortable with …
2nd May 2024
The Riksbank is likely to kick off its easing cycle next week by cutting its policy rate from 4.0% to 3.75%. Beyond that, our forecast is for 100bp of rate cuts this year which is substantially more than investors are anticipating, as inflation looks on …
Euro-zone construction output picked up at the beginning of this year but we don’t think this was the beginning of a sustained rebound. Surveys suggest that output will decline in the next few months, and while rate cuts should support a recovery later in …
Slight hawkish shift at the CNB, but rates to fall further than most expect The communications accompanying the decision by the Czech National Bank (CNB) to cut its policy rate by 50bp again today (to 5.25%) were slightly more hawkish than expected, but …
On Tuesday we held a Drop-in on the outlook for the German economy. This Update summarises the key points that we discussed and answers some of the questions that we received during the event. 1. Do the Q1 GDP data mean Germany is out of recession? The …
The weakness in euro-zone investment in Q1 highlights that the pricing correction to date has not been enough to entice investors back to the sector. Lower market interest rates will support the recovery in H2, but we expect further rises in property …
