Recent extensions to job retention schemes and hopes of a vaccine appear to have improved the outlook for labour markets. But there is still a risk that governments scale back support too quickly and it is almost inevitable that further job losses are to …
16th November 2020
Our measures of labour market slack suggest that the official unemployment rate is significantly understating how much spare capacity there is at the moment and will probably continue to do so for a long time. This supports our view that even with a …
India recorded its largest monthly goods trade deficit since the start of the pandemic in October as the export recovery came to an abrupt halt. Looking ahead, unlike much of Asia, India will not benefit much from strong global demand for electronics and …
Mobility data up to 8 th November suggest that the recovery in developed and emerging Europe has already gone into reverse and that recoveries in other parts of the world are losing steam. To recap, our proprietary Mobility Trackers* gauge economic …
13th November 2020
The Central Bank of Egypt (CBE) unexpectedly moved to cut interest rates for a second consecutive meeting on Thursday evening and, with inflation set to remain weak, we think that the easing cycle has further to run over the next twelve months or so. The …
The communications accompanying the Mexican central bank’s decision to leave its policy rate unchanged at 4.25% suggest that there may still be scope for one more cut in the easing cycle. While it’s touch and go, we think it’s most likely that there will …
12th November 2020
Talks to establish the world’s biggest free-trade agreement, the Regional Comprehensive Economic Partnership (RCEP), are finally expected to conclude at the weekend. While a deal would provide a boost to sentiment, the direct economic benefits would be …
Third quarter data make it look increasingly likely that our year-end price forecasts will prove to be too negative. However, with the UK still on course for a capital value fall of close to 10% this year, this doesn’t necessarily mean that the US or …
Strong demand from China together with constrained production should support the price of natural rubber through the first half of next year. That said, we think that prices will start to fall back by end-21 . After dropping in the first half of the year …
The recent tightening of virus containment measures across the region will push back the economic recovery well into 2021 and means that policy support will need to be stepped up before, as seems likely, an effective vaccine is distributed next year. But …
President Erdogan’s latest comments suggest that the recent changes in Turkey’s economic management team may herald a shift back to orthodox policymaking. If these developments are backed up by a sharp interest rate hike at next week’s MPC meeting – we …
The easing of containment measures in South Africa in September supported industrial activity, but the recovery remains sluggish. Leading indicators suggest that the pace of recovery waned further in Q4. Activity data published by Stats SA today showed …
While the positive developments in finding an effective vaccine against COVID-19 have boosted investor risk appetite, we still think that gold prices will remain high in the year ahead . The price of gold surged between March and August in large part due …
11th November 2020
The relatively low valuations of US equity REITs influence our view that they will outperform ordinary US equities over the next two years or so, provided that COVID-19 is contained. While a few sectors of the commercial property market, such as …
In her opening remarks to today’s ECB Forum on Central Banking, President Christine Lagarde gave a clear message that encouraging news about a vaccine would not stop the Bank from loosening policy in December. An expansion of the PEPP, and additional …
The Bank of England won’t be worried by the recent jump in gilt yields given that it has been triggered by the growing possibility of a COVID-19 vaccine improving the economic outlook. As such, we have revised up our gilt yield forecasts. However, as the …
Reports of an imminent, and highly effective, vaccine against COVID-19 point to generally stronger commodities demand. Once there is more certainty on the vaccine, we will review our price forecasts . Risk appetite returned with a bang on Monday as news …
The news that mutated versions of SARS-CoV-2 have been transmitted from minks to humans in Denmark has raised fears that the goalposts for a vaccine may have already shifted. This Update answers six key questions about the new strain of the virus and its …
News of a vaccine sent oil prices surging on Monday on the back of expectations that this will enable demand to recover more quickly than previously thought. But higher prices also increase the chances of a faster return of supply, particularly from …
The impeachment of Peru’s president, Martín Vizcarra, has rattled the country’s financial markets and may pave the way for looser (and more populist) fiscal measures in the coming months. Given the country’s strong balance sheet, such policies should have …
There have been some concerns that as well as there being little scope to generate stimulus through interest rate cuts, the Bank of England is now reaching its limits on Quantitative Easing (QE). But the Bank seems open to loosening its own QE rules. And …
The Reserve Bank of New Zealand’s (RBNZ) decision to implement a funding for lending programme in December should provide some further stimulus on its own and is another step towards implementing negative rates in 2021. The Bank did not adjust the OCR or …
The BJP’s relatively strong performance in the state election in Bihar suggests that goodwill for the ruling national party remains intact amid India’s largest recession in modern history. Bihar has also been one of the states to recently implement labour …
The rollout of an effective vaccine in early 2021 would cause us to pull up our growth forecasts for next year, but the boost to GDP in 2022 could be much smaller if the improved near-term outlook causes the government to carry out less investment …
10th November 2020
The distribution of an effective COVID-19 vaccine across the emerging world would clearly improve the near-term economic outlook significantly. Even so, some EMs, including India and parts of Latin America and Africa, would still suffer economic …
While an effective vaccine would greatly improve the outlook for next year, the latest data show that the virus is still spreading rapidly. Unless this is reversed soon, the one-month lockdowns in place in many euro-zone countries may be extended, keeping …
Cities with a large tourism sector, such as Las Vegas and Orlando, still employ 10% fewer people than they did in February, which will hurt retail spending and apartment demand. And, while office-using jobs are holding up in tech-led cities, these have …
The introduction of one or more highly effective vaccines early next year would prompt us to revise up our 2021 GDP forecast, possibly quite significantly. The prospects of a vaccine might convince Congress to scale back the size of any fiscal stimulus …
The escalation of political tensions in Ethiopia into outright military conflict threatens to morph into civil war that would push the economy into a deep recession and raise the risk of a sovereign default. Even if this is avoided, Ethiopia’s reputation …
Asia may have less to gain than other parts of the world from a coronavirus vaccine, given successes in containing the new coronavirus. A widely-distributed and effective vaccine would nonetheless give a huge boost to tourist industries and it would …
The high-frequency data suggest there is a growing risk that the recovery stalls over the next month or two, even as the growing potential for effective vaccines together with a bipartisan fiscal stimulus mean the balance of risks to our forecasts further …
An effective COVID-19 vaccine would dramatically improve the economic outlook. It may allow GDP to rise to its pre-virus level a year earlier than otherwise and mean that the unemployment rate peaks at 7% next year instead of 9%. But while this would …
If an effective vaccine is rolled out in the euro-zone in the coming months, it would lead to stronger growth next year but slower growth in 2022. With light at the end of the tunnel, policy support may be just as generous in the short term and be more …
9th November 2020
A vaccine with a 90% efficacy rate would clearly represent a major boost for both public health and the economy. While there remain issues around the likely speed of production and distribution of the Pfizer vaccine, today’s news raises the chances that …
Italy’s new tiered COVID-19 restrictions are likely to cause GDP to fall by about 2.5% q/q in Q4, and there is a risk that government is forced into a more severe national lockdown. That said, the news today on a potential vaccine is an upside risk to our …
A survey of firms from France’s central bank and high frequency mobility for last week suggest that the new national lockdown will have a smaller impact on France’s GDP than the first, perhaps of “only” 8%-points. This is broadly in line with our own …
High-frequency mobility data have their flaws but have offered some guide to how economies have responded to government restrictions. As Europe enters a fresh set of lockdowns, careful interpretation of these data will again allow us to shine some light …
Saudi Arabia’s economic recovery has lost momentum in recent months and persistent low oil prices reinforce our view that policymakers are unlikely to row back on fiscal austerity and there is rising probability that current oil production cuts are …
Joe Biden is likely to take a different approach to trade relations than Donald Trump, but his election will not reinvigorate globalisation, which has stalled over recent years. This will act as a headwind for the region’s poorer economies. Joe Biden …
China’s commodity import volumes remained high in October, although they eased back from September levels. We expect import volumes to remain solid in the coming months given the strength in economic activity, but higher prices should prevent a repeat of …
The sacking of Turkey’s central bank governor, as well as the (possible) departure of Finance Minister and President Erdogan’s son-in-law Berat Albayrak, has prompted a rally in local financial markets on expectations that breaks within the ruling AK …
Cladding issues are a downside risk to our already weak housing transactions forecasts for next year. If there continues to be severe testing delays and no change in policy, transactions could end up significantly weaker than our expectations in 2021. …
