The hard activity data from South Africa released this week confirm that the country suffered one of the largest falls in output in Q2 anywhere in the world, at around 22% q/q (63% q/q on an annualised basis). Even though activity has rebounded since …
13th August 2020
Short-time working has been widely used during the pandemic to stop unemployment soaring. But even with financial help from Brussels, the mounting costs will force the more fiscally constrained countries, primarily Italy and Spain, to wind back their …
Saudi Arabia’s budget deficit will narrow over the coming years as oil prices recover and the government ploughs ahead with austerity. But debt will rise further, reaching close to 40% of GDP by end-2022, having been less than 2% of GDP in 2014. And …
With accommodative monetary policy anchoring bond yields, we think that yield compression in the euro-zone is set to resume next year. But the balance of risks have clearly changed post-virus. Yield rises in the face of the COVID-19 shock were inevitable. …
Although we still think that “risky” assets will make further ground between now and the end of 2022, we no longer expect “safe” government bond yields to rise. We have also become more positive on the prospects for bonds in the euro-zone periphery . Back …
12th August 2020
Growing pressure on South Africa’s Reserve Bank (SARB) to do more to support the economy and finance the government is unlikely to result in a major shift in policymaking over the next year or two. But it’s a distinct possibility further out and, while …
A fundamental force behind the growing pressure on the Turkish lira is the economy’s widening current account deficit. But in most cases, the Covid-19 crisis appears to be causing current account deficits to narrow, which is one factor that should limit …
Turkey’s banks are more vulnerable now to a sell-off in the lira and a tightening of external financing conditions than they were in the run-up to the 2018 currency crisis. The Turkish lira has stabilised after the central bank took steps to tighten …
The current account deficit is set to widen during the coming few quarters as the recovery in imports outpaces that in exports, but we do not think this poses a risk to the economy or to the exchange rate. In June, a 22% m/m rebound in imports and a …
While Joe Biden has said that he would clamp down on the US companies, particularly in the technology, pharmaceutical and biotech industries, who book much of their earnings in tax havens, we think that there is a good chance his proposed tax reforms …
The high-frequency data that we track suggest that the recovery is most advanced in China and Taiwan, with India, Indonesia and the Philippines bring up the rear. Recent virus outbreaks in Hong Kong and Vietnam have put their recoveries into reverse. In …
The development of a vaccine would represent a breakthrough in the public health battle against Covid-19, but it would not necessarily transform the immediate economic outlook. President Putin yesterday announced that Russia had become the first country …
Despite sharply lower investment in Q2, solid Q1 activity and the faster-than-expected economic recovery means we now think that total pan-Europe (ex UK) investment in 2020 will be only around 15% lower than its 2019 level. The disruption from the virus …
The Reserve Bank of New Zealand (RBNZ) further expanded its quantitative easing programme at today’s meeting and we think the Bank will cut rates into negative territory next year. The Bank’s decision to keep rates on hold was correctly anticipated by all …
The recovery in India’s industrial sector has stalled. Given the substantial damage caused during the lockdown and the likelihood of a re-imposition of containment measures, the road to normality for the sector will be long and difficult. Data released …
We think that it will take over a year for oil product consumption to recover to pre-virus levels. This in turn will limit crude oil demand for the next 18 months or so and any near-term price gains . Earlier this year, we thought that global crude oil …
11th August 2020
Turkey’s central bank (CBRT) has burned through its FX reserves to defend the lira this year, but the CBRT’s firepower is severely depleted and reserves are now so dangerously low that monetary conditions will need to be tightened by much more to prevent …
Travel restrictions and caution shown by holidaymakers have hit the hotel sector hard. While there has been a boost from the temporary cut in VAT for hospitality and tourism, weak global growth and virus-related restrictions and uncertainty will continue …
The success of the Eat Out to Help Out (EOHO) scheme suggests that fears about the virus are not preventing activity. But as meals out only seem to be popular due to a heavy discount, consumers are still behaving cautiously. This restraint is part of the …
By July, we think that around 4 million people had already left the government’s job furlough scheme and 5 million remained on the scheme. That fall is faster than we had expected but does not change our forecast that the ILO unemployment rate will reach …
10th August 2020
If strains in Turkey’s balance of payments fail to ease, the central bank will probably tighten monetary conditions more aggressively within the interest rate “corridor”. But use of the corridor alone would not allow real interest rates to return to …
Earlier this week, the gold price broke through the previous record set back in 2011 to reach an all-time high. Given that we now expect real yields to continue to grind lower, we have revised upwards our gold price forecast to $2,100 per ounce by …
7th August 2020
We don’t think that the recent resurgence in the coronavirus in certain parts of the UK makes the economic outlook any weaker than we already thought. But more widespread outbreaks would either slow the pace of the economic recovery, stall it, or send it …
China’s industrial import volumes rose in July, which is consistent with the recovery in economic activity and opportunistic stockpiling at low prices. While final commodity demand will remain strong for the remainder of this year, China’s import volumes …
The landslide victory by Sri Lanka People’s Party (SLPP) will allow incumbent President Rajapaksa to consolidate power. This is likely to lead to an increase in corruption and nepotism and will also add impetus to Mr Rajapaksa’s plans to “restore …
Weekly data for June and July point to a slight recovery in US crude oil production from May’s depressed level of 10m bpd. We expect output to remain subdued for the rest of 2020 . US crude oil production fell to 10m bpd in May, from 12m bpd in April, …
6th August 2020
Last week saw the zinc price return to its pre-pandemic level, making it the second in the S&P GSCI of Industrial Metals to do so after copper. But unlike copper, we expect the zinc market to remain oversupplied for the foreseeable future. Accordingly, we …
Data for Q2 revealed widespread drops in GDP, but the extent of the damage varied markedly depending on the length and severity of lockdowns. Recoveries since then have followed the same pattern. Looking ahead, Asian economies including China and Korea …
The Monetary Policy Committee (MPC) left its interest rate and quantitative easing (QE) policies unchanged today and its new projections appear to suggest that no further loosening is required. But its dovish language is more important for the future path …
The only new step taken by the RBI today was the introduction of a new framework to help struggling borrowers manage their bank debt. The MPC voted unanimously to keep the repo and reverse repo rates on hold. But, with the growth outlook worsening amid …
Turkey’s current account deficit has widened to levels not seen since 2018, which can partly be explained by a slump in tourism receipts. While this should start to reverse over the rest of this year, Turkey’s large external financing needs will keep the …
The 25bp cut in the Selic rate, to 2.00%, at last night’s Brazilian central bank meeting probably marks the last reduction in the cycle, but the accompanying statement supports our view that rates will remain at rock bottom levels into 2022. The reduction …
While high-frequency mobility data should be interpreted with caution, they are now consistent with a marked slowdown in the pace of recovery, dashing hopes of a V-shaped rebound in the world economy. July saw a pronounced acceleration in the spread of …
5th August 2020
The coronavirus has changed how people live their lives and spend their money. The consumption of almost all agricultural commodities has fallen so far this year and we expect that it will take until 2022 for demand to return to pre-virus levels. As a …
Although demand for Romanian industrial space held up in H1, we expect it to weaken over the rest of the year as consumer demand falters and the economy recovers only slowly. Combined with incentives rising and the significant increase in supply in recent …
The major blast in Beirut yesterday has severe humanitarian consequences, and the incident threatens to deepen the country’s economic and political crises. Yesterday, a huge blast rocked Lebanon’s capital city, Beirut, that emanated from the local port. …
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at 0.5% despite the very poor outlook for the economy suggests further rate cuts are unlikely. In its statement, the BoT hinted at further measures it could take to support growth, …
While the future of the virus is very uncertain, three things seem clear from recent developments: the pandemic has entered its fifth phase; the Americas are still the global hotspots; and containment measures are more likely to be extended or tightened …
4th August 2020
We expect office-based employment growth to be faster than total employment growth by around 0.3-0.5% ppts each year over the next decade in the US, the UK and the euro-zone. The coronavirus crisis will dampen the outlook in the short run, but the less …
We predicted four months ago that Australian house prices would fall by 5-10% from their peak. The short-lived nature of the recent downturn and the fact that affordability is looking increasingly attractive means that forecast is still looking good. …
The RBA turned more pessimistic about the outlook for the economy when it kept policy settings unchanged today and we think it will engage in additional asset purchases before long . As widely anticipated, the RBA kept both its cash rate as well as the …
The rise in the EM manufacturing PMI in July (to 51.4) should be treated with caution but, even so, it still suggests that conditions in EM manufacturing are improving. The recovery is likely to be fastest in China and Central & Eastern Europe. The …
3rd August 2020
The latest China import data tally with our view that constrained supply will help to push the prices of most base metals higher. Conversely, the surge in iron ore shipments is consistent with our forecast that a rise in supply will send the price of iron …
While the global manufacturing PMI rose again in July, it masked a divergence in the strength of recoveries among major economies. With growing concerns in recent weeks over a resurgence in the virus in many parts of the world, the recovery of global …
July’s encouraging batch of PMIs for China suggest that the robust economic rebound continued into the start of Q3. And with policy support set to be stepped up, strong Chinese activity will continue to be a fillip for commodities demand in the months …
Even though Congress failed to prevent the $600 additional UI payments from expiring last Friday, we still expect a deal in the coming weeks which will offset the continued hit to incomes from the pandemic. With the saving rate so elevated, the bigger …
While the auto sector was hit particularly hard by the virus lockdowns, sales and production now seem to be recovering. In the near term, this bodes well for economies which rely heavily on vehicle production including Germany, Japan and Czechia. However, …
The re-imposition of some restrictions in late-June is weighing heavily on Portugal’s tourism sector. Along with its unfavourable labour market structure and fragile banking system, this will hold back the recovery of consumption and investment. …
The additional restrictions on activity imposed in Victoria this week to curb the renewed surge in virus cases will cause the recovery in output to slow markedly in Q3. The number of virus cases in Victoria continues to surge, with new daily cases …
The second virus wave that is hitting Japan supports our view that Japan’s economy will contract more sharply this year than most anticipate. However, a renewed state of emergency would probably not be as economically damaging as the one declared in April …
