If the recent wave of protests across Nigeria and the curfew in Lagos come to an end in the next day or two, the economic impact should be limited. But if these run on for longer, the recovery in the non-oil sector would be derailed in Q4, and …
21st October 2020
With the US election result unlikely to have immediate ramifications for US GDP, the main issue for much of Asia is how it affects trade policy. A Joe Biden presidency would be less confrontational towards Asian economies outside China. By contrast, a …
The RBA’s assets will rise further over the coming months as banks draw down funding under the TFF. But so will the assets of other central banks. If the Bank wanted to catch up with the advanced economies’ most expansionary central banks, it would need …
The Bank of Canada’s balance sheet has been shrinking in recent weeks, as demand for its emergency repos loans continues to subside, and it will experience a bigger fall next spring, when the 12-month repo loans made at the height of the …
20th October 2020
The government is removing some of its support to employment. The national furlough ends on the 31 st October and the new Job Support Scheme is less generous and narrower. As a result, the pace of the fall in employment will soon speed up. At its peak in …
We think that the second wave of COVID-19 infections and new containment measures will cause the euro-zone economy to stagnate over the next six months or so. In quarter-on-quarter terms, GDP would still increase slightly in Q4, but it would mean zero …
While we wouldn’t rule out negative interest rates being used a bit further down the line, over the next 6-12 months we think 10-year gilt yields will be kept close to 0.15% by the Bank of England expanding quantitative easing (QE) by a further £250bn by …
The detailed breakdown of China’s Q3 GDP data published today shows that the recovery within the service sector remains highly uneven. Encouragingly though, all types of services activity showed a clear improvement, especially among the sectors hardest …
Commercial banks left the Loan Prime Rate (LPR) on hold today. With the PBOC appearing reluctant to keep monetary policy loose for longer than needed amid a broadening economic recovery, we think the next move in the LPR will be an increase early next …
While there has been some good news on virus numbers in India and Latin America, Europe and parts of the US are grappling with a big resurgence in infections. Restrictions have already been tightened in several European countries, and more measures are …
19th October 2020
The industrial sector could see a further increase in its share of investment in the coming quarters thanks to both its own resilience and concerns surrounding the other sectors. Those diverging prospects are likely to mean that the negative yield gap …
We are upgrading our already above-consensus forecast for the Canadian dollar, as we expect higher oil prices, stronger-than-expected GDP growth, and favourable interest rate differentials to drive a continued appreciation over the next two years. Those …
An abrupt U-turn on workers returning to their offices last month signalled that the virus will continue to dominate lives in the UK into next year. In fact, we think office working may never quite be the same. As more remote working could reduce space …
Whatever the outcome of the US election, we expect that the trends of US-China decoupling and deglobalisation will continue. The election result could be pivotal for some EMs: a Joe Biden victory could raise geopolitical tensions with Turkey and Russia. …
16th October 2020
In the current environment, bank lending to property will likely stay weak. Moreover, falling values are expected to lead to an estimated £30bn re-financing gap in the coming years, which will put pressure on investors to find other forms of finance or …
On the face of it, the rebound in retail sales in advanced economies suggests that the consumer sector is leading a V-shaped economic recovery. But other types of spending, including on consumer services, has been far weaker, and the import-intensity of …
Even though lockdown restrictions had eased, office take-up in Paris in Q3 was still well below pre-virus levels. And the recent imposition of tighter restrictions in Paris will likely curtail leasing activity in Q4. With similar strict measures likely in …
A “circuit-breaker” lockdown where most pubs and restaurants are closed across the country would throw the economic recovery into reverse and mean that, depending on the severity and length of the restrictions, it could be well into 2023 before GDP …
15th October 2020
Government action has meant corporate bankruptcies have remained low, which has prevented a sharp rise in tenancy defaults and has supported income security on leases. But, as this support is gradually withdrawn, rising tenancy defaults in a weak occupier …
A renewed rise in longer-dated Treasury yields in response to growing expectations of a large US post-election fiscal stimulus would test the Fed’s resolve to keep monetary conditions extremely loose. We suspect that it would want to keep those yields …
The renewed risk of domestic political unrest in Thailand following the declaration of a “severe” state of emergency could act as a further drag on the already beleaguered economy. In response to student-led protests calling for Prime Minister Prayuth …
With the virus spreading rapidly, governments are ramping up their containment measures. The new restrictions will be more targeted, regional and time-specific than in the first wave, but they are still likely to cause a new contraction in the services …
14th October 2020
The big downward revision to employment in the labour market statistics reveals that renters have seen a larger hit to employment than homeowners. This supports our view that house prices will be resilient next year, while private rents will probably …
The stronger employment recovery in Canada than the US seems to reflect several factors including wage subsidies, less immediate pressure on the finances of regional governments, and the faster re-opening of schools. But with new restrictions imposed this …
The upturn in coronavirus infections in the Midwest isn’t in itself a major concern, but a more widespread resurgence in cases over the winter would raise the risks of the economic recovery going into reverse. While Europe grapples with a second wave of …
Upgrades to 2020, but consensus more downbeat on 2021-22 Consensus forecasts for this year have been revised upwards, although the outlook for total returns remains negative. At the same time, the prospects for 2021-22 have been downgraded, but only …
Hard activity data from South Africa released this week point to continued weakness in the economic recovery in August despite the easing of containment measures. Activity data published by Stats SA today showed that retail sales rose by 4.0% m/m in …
The weakness of Egypt’s inflation reading for September is likely to prompt another rate cut at the central bank’s (CBE’s) next meeting. With inflation persistently undershooting the CBE’s target (which expires this quarter), policymakers are likely to …
The coronavirus crisis has already dealt a heavy blow to the Ukrainian economy and the risks to the outlook are growing: recent challenges to the independence of the central bank and anti-corruption institutions threaten to undermine the IMF deal agreed …
The COVID-19 crisis has led to a ballooning of current account surpluses across Emerging Asia that is putting upward pressure on currencies. The shift to bigger external surpluses could also land the region in hot water with the US Treasury as it prepares …
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today and, with the economic recovery holding up relatively well, further rate cuts seem unlikely. Instead the focus of the BoK is likely to shift to cushioning the impact of loose fiscal …
Latin America’s non-oil economies will see larger benefits than most other countries from China’s rebound. This provides grounds for cautious optimism about the prospects for Chile and Peru. But for the rest of the region, the boost from China will be …
13th October 2020
Despite high unemployment, the latest NFIB survey shows small businesses are struggling to hire qualified workers, while inventory levels are exceedingly lean. In contrast to September’s softer CPI figures, the NFIB survey points to some further upward …
The ongoing fiscal-led boost to domestic demand and a stronger renminbi propelled China’s commodity imports higher last month. This tallies with our long-held view that a rapid rebound in the Chinese economy will support generally higher industrial metals …
Bank Indonesia (BI) left interest rates on hold at 4.0% today, but it is too soon to call an end to the easing cycle. With the economy in need of further support, we think the central bank will resume its easing before the end of the year. BI left …
Some measures of valuation and risk-taking in Chinese equities have approached levels last seen prior to their crash in 2015. We think another crash is unlikely, but doubt equities will make much more headway in local currency terms. To recap, over a …
The post-Global Financial Crisis (GFC) experience suggests that the South African Reserve Bank (SARB) is unlikely to raise the repo rate within our near-term forecast horizon (to end-2022). Investors are anticipating that the SARB will hike the policy …
12th October 2020
The speed and scale of the rise in coronavirus infections across Emerging Europe has prompted a response from the authorities, but policymakers are likely to turn to much broader and tighter restrictions that affect more areas of economic activity. This …
Data published by Eurostat yesterday underline that there was a large increase in labour market slack. Looking ahead, it is likely to continue to rise sharply. The euro-zone’s unemployment rate has remained very low this year in spite of the collapse in …
9th October 2020
Along with difficulty in conducting viewings, London’s hard-hit hospitality and leisure sectors meant that there was a sharp fall in multi-let industrial take-up in H1. While availability is likely to rise further in the coming months on the back of …
August’s strong increase in industrial production in Italy is not as good as it first appears. The timelier surveys point to annual declines in output, and rising virus numbers present a growing threat. Industrial production in Italy jumped by 7.7% m/m in …
The recent strength of retail sales data overstates demand on European prime high streets, with spending by tourists still absent and online purchases making an above-average contribution in most markets. That said, online spending growth has been …
It came as no surprise that the new MPC voted unanimously to keep the repo and reverse repo rates on hold today. But the relatively dovish tone of the statement, along with the dire growth outlook, mean we remain comfortable with our non-consensus view …
The conflict between Armenia and Azerbaijan in the disputed region of Nagorno-Karabakh has created yet another schism in Turkey’s relations with the US, the EU and Russia. It may only take a misstep in the conflict to trigger an escalation of geopolitical …
8th October 2020
Daily data suggest that foreign investors have been net sellers of emerging market bonds and equities in recent weeks, but there are reasons not to be very concerned. Our EM Capital Flows Trackers are constructed using monthly data on foreign exchange …
The account of the last ECB Governing Council meeting suggests that policymakers were in no hurry to increase the size of the PEPP. There has been more disappointing news on the economy since then, but on balance we still think the Bank will leave the …
We have revised up our already-bullish forecasts for the Australian dollar and the New Zealand dollar against the US dollar over the next few years, to reflect changes to our outlook for the Chinese renminbi. Crucially, though, this view hinges on …
