South Africa’s hard activity data for December suggest that the economy avoided contraction in Q4, but the pace of the recovery slowed and is likely to remain weak. Activity data published by Stats SA today showed that, following a 4.0% y/y fall in …
17th February 2021
With the first batch of Chinese trade data for 2021 not due for another few weeks, this Update outlines the key developments to look out for. Overall, we expect imports of refined metal to fall back while ore and scrap imports rise, all of which supports …
We think the risk of a surge in unemployment and slump in household incomes later this year is quite low. Euro-zone governments are choosing to extend their job support schemes and will probably scale them back only gradually as the end of the pandemic …
Following the decline in 2020, we think prime office rents in Amsterdam will hold steady this year. But rental growth should pick up thereafter, supported by continued growth in the information and communication sector, comparatively low rents and the …
We forecast the Norges Bank to be the first advanced central bank to begin raising interest rates, in the second half of this year. This will further bolster the krone, which we expect to be the best-performing G10 currency in 2021, and will drive the …
The continued surge in growth of narrow measures of the money supply underline that the economy is awash with liquidity, but that will not trigger a surge in price inflation when growth in the broader money supply and bank lending are trending lower. (See …
16th February 2021
Singapore today unveiled a budget that will keep fiscal policy loose for the coming fiscal year (April 2021-March 2022), while also attempting to address some of the long-term challenges facing the economy. The budget deficit is projected to narrow from …
After a relatively mild first wave of coronavirus, Portugal is now contending with the worst second wave in Europe. Another economic contraction in Q1 is all but certain and more delays to the vaccine rollout put the tourist season at risk. We forecast …
We do not expect a re-run of the 2013 “taper tantrum”, in which EM assets went into a tailspin and some EM central banks were forced to hike policy rates. But even if there were a similar period of turmoil, the fallout for EMs would be less severe. The …
Mario Draghi’s reputation and large majority put him in a strong position to promote euro-zone reform and he may have some successes in areas such as banking union and fiscal rules. But he will be constrained by his short period in office and the greater …
The narrowing in India’s goods trade deficit in January is likely to soon reverse as the recovery in domestic demand and oil prices pushes up imports. But while this means that India’s recent current account surplus is unlikely to last for long, we still …
A digital euro is many years away, and the fact it is not intended to replace physical cash means that it won’t supercharge monetary policy as some may hope. However, it could become the norm for small cash transactions in the bloc over time and will at …
15th February 2021
We think that slower growth in US housing starts and increased supply will weigh on the price of US lumber over the coming quarters . That said, prices are likely to remain elevated relative to past standards . The price of US lumber soared to …
12th February 2021
Supply disruptions and strong electronics demand have lifted the tin price from its virus-induced lows. But we anticipate that a switch in consumer spending away from goods towards services once lockdowns are relaxed, will act as a drag on the price of …
The recovery in many emerging markets after the Global Financial Crisis was characterised by concerns about destabilising capital inflows, overheating, and asset price bubbles. This recovery is likely to be more gradual, external imbalances are unlikely …
Recent market moves have led us to revise up our end-2021 oil price forecast. But our story remains the same: one of resurgent demand later this year at a time of constrained supply . Having underperformed other commodity prices for much of last year, the …
Russia’s central bank (CBR) left its key policy rate on hold at 4.25% today and the hawkish message about pro-inflationary risks means that there is no room for further easing. The CBR set the groundwork for a return of interest rates back to a neutral …
The unanimous decision by Banxico’s Board to cut its policy rate by 25bp, to 4.00%, suggests that policymakers are more dovish than we had thought. But the initial market reaction – significantly more monetary easing has been priced in – looks overdone. …
With a large fiscal stimulus package looking increasingly probable in the US, and the Fed unlikely to push back on higher inflation expectations, we think the yield of 10-year US Treasuries may rise a little further. We expect this to be driven mainly by …
We think that prolonged weakness in domestic and foreign spending on prime high streets in Italy will add to pressure on rental affordability, triggering rental falls this year. However, a less significant increase in online penetration during the …
Chile is motoring ahead in Latin America’s vaccine race and it may be on course to start lifting stringent lockdown measures by mid-Q2. Other countries may follow suit in Q3, which feeds into our above-consensus GDP growth forecasts for most economies in …
11th February 2021
The spread of performance between UK commercial property sectors hit an all-time high in 2020, with retail spiralling into a GFC-like slump, while industrial barely flinched. This gap will narrow, but not disappear, weighing on the strength of the …
The pound has performed better than all other G10 currencies so far in 2021 (see Chart 1), rising from $1.36 at the start of January to almost a three-year high of $1.41 now. We expect the strength of sterling against the US dollar to continue and have …
The upside surprise in South Africa’s mining and manufacturing output in December is unlikely to be repeated in early 2021. Tighter virus containment measures and continued power cuts probably mean that the pace of the recovery has slowed. Activity data …
We think that past movements in Czech bond yields mean that they are less appropriate to use in our valuation calculations. Using alternative bond benchmarks, re-calculated metrics support the view that industrial yields can fall further while office …
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today, and while rising inflation means further easing isn’t likely in the near term, we still expect the central bank to cut interest rates later this year. Today’s …
The performance of the major FTSE NAREIT sub-sectors since the end of 2019 appears to suggest that our forecasts for 2021 might be too weak for industrial and too strong for the office and apartments sectors. But while we expect to upgrade our industrial …
10th February 2021
When analysing the effect of COVID-19 on business balance sheets, most attention is given to the surge in debt. But this ignores the fact that non-financial firms in DMs have built up a pile of excess cash worth $1.6tn (4% of GDP), so their balance sheets …
Net portfolio inflows into many emerging markets reached multi-year highs towards the end of 2020, which allowed a handful of central banks to lean against the wind and accumulate FX reserves. That said, early data suggest that net portfolio inflows have …
Problems at South Africa’s state electricity firm, Eskom, are an increasingly painful thorn in the side of the economy with higher tariffs and an overhaul of the firm’s finances needed to put it on a sustainable footing and upgrade the country’s energy …
Despite our relatively conservative forecast of supply growth, we still think that the price of iron ore will fall sharply this year owing to slower growth in China’s demand . The price of iron ore had a superb 2020, rising from around $80 per tonne to …
Saudi Arabia’s unemployment rate has risen sharply in the past year and, while we expect it to fall back, the weak recovery means that it might take many years before it gets close to its pre-pandemic rates. Saudi Arabia didn’t publish labour market data …
The easing of the coronavirus restrictions will support a rebound in employment, but the recovery is likely to be slow going for the next few months due to limited progress with vaccinations. Admittedly, almost all restrictions will remain in place in the …
This morning’s announcement that the Riksbank left its policy settings unchanged will have come as a surprise to no one. Policymakers are in no rush to raise the repo rate from zero, but there are likely to be differences in opinion about how to proceed …
The availability of high loan-to-value mortgages has dropped sharply, and the cost of those that are still available has rocketed. So it’s remarkable that the share of mortgage advances going to first-time buyers hasn’t dropped. We put it down to the …
There are fears that, by making the government’s debt servicing costs more vulnerable to short-term rises in interest rates, quantitative easing (QE) is storing up trouble for when Bank Rate rises. However, right from the onset of the scheme, it was clear …
Almost a month since the start of India’s vaccination drive, it appears highly unlikely that the government will meet its target of inoculating 300m people by August. For now, we maintain our assumption that it will take much longer to vaccinate the most …
While the exchange rate has strengthened sharply, goods prices are unlikely to fall. That should allow rising services prices to keep underlying inflation stable. Goods inflation rose to its highest rate in nearly 20 years at the end of 2020. One driver …
The latest NFIB and JOLT surveys suggest that labour market conditions remain stronger than the headline data imply and add to the evidence that inflation will rebound this year. The drop in the job hiring rate in December is no surprise given the …
9th February 2021
A debt write-off would wipe out much of the recent increase in public debt burdens and give the ECB more scope to expand its balance sheet in the future. But the fiscal benefits for euro-zone governments would be smaller than they seem at first sight, and …
We think that UK equities will outperform their peers elsewhere this year, as some of the headwinds that they faced in 2020 fade or even act as tailwinds. The MSCI UK Index generally underperformed the rest of the MSCI World Index of developed market (DM) …
Even though we don’t expect there to be much, if any, long-term economic scarring from the COVID-19 crisis, a surge in the number of businesses going insolvent, a jump in the long-term unemployment rate or a sustained sharp drop in the number of …
One threat to economic recoveries this year is that governments withdraw their generous fiscal support too quickly. So far, that threat does not seem to be an imminent one. That said, the level of fiscal support is set to remain more generous in the US …
Disappointing vaccine developments mean that policymakers in Africa could be forced to keep restrictions on activity in place for longer, delaying economic recoveries and deepening scarring effects. Many Sub-Saharan African economies have endured second …
8th February 2021
As it is based on asking prices, the recently launched Common Haus Price Index (CHPI) could lead other house price indices by 1-2 months, which would make it a useful tool for forecasting short-term changes in house prices. While its track record is far …
We think that concerns about the commitment of Brazil’s government to fiscal sustainability will intensify over the next two years and weigh on its sovereign bonds and the real . While they have recovered a bit over the past few days, Brazil’s sovereign …
Our analysis suggests that the apparent sudden drop in the population of the UK last year has led to a huge rise in vacancy rates in the London and Midlands rental markets. House prices in those regions are also most at risk, both from the direct …
With job losses during the pandemic concentrated in a handful of sectors and demand set to rebound as vaccines are rolled out, we think that the unemployment rate will fall to 5.5% by the end of this year. The virus has hit some industries much harder …
While we still expect US Real Estate Investment Trusts (REITs) overall to fare reasonably well over the next couple of years, we no longer anticipate that they will outperform the US stock market. US REITs have underperformed US equities as an asset class …
5th February 2021
In our view, major central banks will generally take a more cautious approach to tightening monetary policy than they did in the past. This underpins our forecast that the yields of 10-year government bonds in both developed and most emerging countries …
