China’s commodity import volumes remained high in August, reflecting the broader recovery in economic activity. We expect commodity demand to remain strong in the coming months but import volumes may ease back given the recent rise in prices of many …
7th September 2020
In contrast to the surge in mortgage forbearance following the CARES Act, we doubt the recently announced eviction ban will trigger a jump in rental arrears. For those who can afford it, deciding not to pay the rent still comes with significant costs. …
4th September 2020
Although we think a further shift in real yields in the US vis-à-vis other major economies will keep the dollar under pressure, we expect the overall move to be far smaller than those of the 1980s which were accompanied by big swings in the greenback. So, …
The housing market recovery has exceeded all expectations and we have substantially upgraded our 2020 house price forecast. But as pent up demand runs out, a weak economy, tight credit conditions and the end of the stamp duty cut will hold back further …
Commercial real estate transactions are on course to fall by nearly 50% this year, despite a strong Q1. And with the latest data hinting that our downside scenario is now looking more likely, volumes could still end next year 40% lower than before the …
3rd September 2020
While the Bank of England might not follow the Fed and change its inflation remit, we doubt this will stop it from significantly loosening policy and from keeping it loose for a very long time. The Fed announced last week that it will now seek “to achieve …
The jobs report due on Friday should show employment continuing to rebound in August, but the ongoing weakness of demand in sectors like leisure and hospitality – which account for a higher share of employment than they do of broader economic activity – …
National statistics offices in the euro-zone have taken different approaches to estimating public sector services output during the lockdowns this year. This means that the extent of the falls in GDP may not be strictly comparable, notably for France. …
The reopening of schools this week could give a boost to GDP of around 5% as output in the education sector returns to normal and parents who have had to provide childcare get back to work. The impact that school closures had on the economy was determined …
The latest data suggest that, after one of the world’s steepest economic declines in Q2, Peru’s recovery is already stalling against a backdrop of high and rising new coronavirus cases. But for those willing to squint hard enough, there are some reasons …
2nd September 2020
The coronavirus crisis has caused domestic demand across the Gulf to slump and deflation is likely to persist, with the key exception of Saudi Arabia. Most places are well placed to deal with the negative repercussions of deflation and, if anything, …
New daily coronavirus cases have hit record highs across Central and Eastern Europe over the past month and authorities have responded by tightening restrictions at a local level. Health systems in Poland and the Czech Republic are well placed to deal …
Employment rose in Italy for the first time in five months in August, but this is unlikely to be the start of a trend. With the short-time work scheme becoming less generous and then expiring at the end of the year, we expect employment to fall further …
The recovery in manufacturing output has been relatively muted up to this point but, with goods consumption surging and, as a result, inventories now looking very lean for this stage in the cycle, we expect manufacturing output to climb back to its …
Proposed changes to Bank Indonesia’s mandate, which include a shift to focus more on growth and unemployment, could lead to major changes in how the central bank operates. However, given the country’s high level of foreign currency debt, policymakers …
Although the Norwegian economy is set to contract less sharply than most of Europe this year, the fact that weakness in occupier demand has occurred alongside a large boost to supply means that Oslo prime office rents will decline by a greater extent than …
Remittances to Africa appear to have held up fairly well so far but this is unlikely to be sustained. Weaker inflows will drag on economic recoveries and add to balance of payments strains in many countries, most notably Nigeria. The result is that …
The recent spike in coronavirus cases in Vietnam has had only a small negative impact on the economy. With the virus now seemingly under control again, Vietnam is still likely to be one of the few countries in the world to grow this year. Having gone 99 …
Ongoing virus-related supply disruptions as well as one-off factors such as phone tariff hikes have kept inflation higher than we had anticipated over recent months. But with food inflation set to drop sharply and demand set to remain depressed, we are …
The further rise in the EM manufacturing PMI to a nine-year high of 52.5 in August, from 51.4 in July, suggests that the EM recovery continued in the middle of Q3. But the rebound has been uneven across countries, with PMIs falling in countries recently …
1st September 2020
We suspect that some of the recent underperformance of energy stocks will unwind over the next few years if, as we forecast, the prices of energy commodities grind higher. Nevertheless, we think that the longer-term outlook for the sector is far from …
August’s rise in the global manufacturing PMI was good news with improvements in economies hit hardest by the virus offering particular relief. But the index points to fairly modest growth and it is somewhat disappointing that the recovery has not gained …
The completion of a deal to restructure almost all $66.2bn of Argentina’s international sovereign bonds will give the government some much-needed breathing space over the coming years, as will an upcoming $41.7bn local-law FX debt restructuring. However, …
The Fed’s switch to an average inflation targeting regime and revised interpretation of its full employment goal are a response to challenges which are common to many economies, including the euro-zone. We think the ECB will move in a similar direction …
The 11% q/q drop in GDP in Turkey in Q2 was smaller than we had expected and we now forecast the economy to slump by 3% this year (previously 5.8%). But the recovery over the coming quarters will be held back by weakness in the tourism sector as well as …
Japan will very soon have a new Prime Minister. Close Abe aide Suga Yoshihide is the current front runner in the LDP leadership contest and would likely keep policy firmly on the course set by Mr Abe. But even if Abe critic Ishiba Shigeru were to win, we …
China’s August PMI readings support our view that the economy will return to its pre-virus trend by the end of this year, which is positive for almost all commodities prices, but especially industrial metals . That said, metals prices have already had a …
The RBA today expanded its Term Funding Facility which should contribute to continued strong growth in the money supply. And while it didn’t indicate that additional stimulus is forthcoming, we still expect it to expand its bond purchases before long . As …
The Bank of Japan’s recent purchases of Treasury Bills have yet to feed through into the money supply as the government’s deposit account at the Bank has ballooned. That will provide a further boost to the money holdings of households and firms but we …
31st August 2020
The surge in corporate profits in Q2 happened despite a large drop in sales and mostly reflects the impact of the JobKeeper wage subsidy. With that subsidy being scaled back, corporate profits should come off the boil and business investment will continue …
Global oil supply fell to a multi-year low in the second quarter, and recent data point to output having fallen further in the third quarter. With demand reviving, we think the oil market is now in a deficit, which – assuming there is no ‘second wave’ of …
28th August 2020
The impact of the pandemic on property has superseded that of Brexit, but that’s not to say that Brexit risks can or should be fully discounted. While we expect a slim deal to be agreed this year, we don’t envisage it having a notable upside effect on …
Retail malls are set to fare badly in this downturn as Americans avoid enclosed spaces and adopt online shopping practices. But regional and super-regional malls, which were already underperforming before the outbreak as tenants shuttered stores and …
While we think that nominal interest rates and bond yields in developed markets will remain around their current ultra-low levels for some time, we think that their real counterparts will fall further in the US relative to the euro-zone and Japan. In our …
On the face of it, the rise in core inflation in several advanced economies in July seems to challenge the idea that lower demand will dominate lower supply in the tug of war over consumer prices. But we continue to think that spare capacity will keep a …
The slump in underlying inflation in Tokyo in August was mostly driven by subsidies to domestic travel as part of the Go To travel campaign. But even when we strip out the impact of those subsidies, underlying inflation has now started to slow and we …
Given interest rates are already very low, we doubt any additional stimulus introduced because of the change to the inflation target will provide a significant boost to the economy or house prices. Indeed, the past relationship between interest rates and …
27th August 2020
Chair Jerome Powell announced this morning that the Fed will be adopting what he described as a “flexible form of average inflation targeting”, which we expect will trigger additional policy stimulus in the form of stronger forward guidance and possibly …
The recovery in total consumer spending is almost certainly lagging well behind the surge in retail sales. And although the early signs of a recovery have been positive, a coming wave of unemployment will put a dampener on consumers’ willingness and …
We estimate that non-farm payrolls increased by a more modest one million in August and without the restarting of field operations for the 2020 Census, which probably added 250,000 jobs, employment growth would have slowed even more sharply. The 1,763,000 …
The annual growth rates of the main monetary aggregates remain unusually elevated, but the growth rate of bank loans has fallen back. (See Chart 1.) Furthermore, although those monetary aggregates are significantly higher than the level 12 months ago, …
Despite the news that the latest round of UK-EU Brexit negotiations ended in deadlock last Friday, sterling has remained remarkably stable. This suggests that while there may be some small upside for sterling if a slim trade deal is agreed by 31 st …
Broad money growth accelerated to a 12-year high in July, but we think that this will prove to be temporary and is not likely to push up inflation. Meanwhile, growth in bank lending to firms has returned to more normal levels, while consumer credit …
Both Korea and Japan are experiencing second waves, but a stronger shift in consumer behaviour in Korea means the outbreak there is likely to have a larger impact on growth. As such, we’ve revised down our GDP forecast for Korea but kept it the same for …
The Bank of Korea (BoK) left its policy rate on hold at 0.50% today but gave hints at the press conference that fresh rate cuts were on the table. We have pencilled in a cut in Q3 as a result and are sticking with our view that the BoK will expand …
While some of the early epicentres of the coronavirus outbreak in India now appear to be getting infections under control, cases are rising quickly in several states that avoided an initial surge. This means more restrictions covering wider areas will …
Part of the eviction ban is due to end in September, and court ordered evictions are likely to surge as the backlog works through the system. Even so, evictions will remain small compared to the rental stock, meaning the impact on private rents is likely …
26th August 2020
New Finance Minister Chrystia Freeland has already shown her colours by ramping up fiscal spending after just one day on the job, and her previous calls for a “new New Deal” to address inequality suggest she may soon push for even greater spending. The …
Governments across the Gulf have managed to get on top of coronavirus outbreaks but Morocco, Tunisia, Jordan, and Lebanon have seen the virus spread rapidly in recent weeks. These economies are the most vulnerable in the region to a fresh tightening of …
