This report was first published on the 2 nd December covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on the 4 th December. Growth continues to pick up, led by manufacturing The …
2nd December 2024
Although Australian house prices edged up a notch in November, we remain sceptical about prospects for a second wind in the housing cycle. Given that the RBA is unlikely to provide interest-rate relief until mid-2025 at the earliest, we expect the …
We held an online session on US import tariffs on 26th November. (See a recording here ). In this Update we answer the questions we were most asked. What are Trump’s motives for threatening tariffs and will he follow through? Trump has spoken about using …
29th November 2024
This week we held a series of roundtable discussions with clients in our London office about the outlook for European commercial property. This Update outlines our thoughts on some of the most interesting questions raised, covering the likely winners in …
28th November 2024
It now seems increasingly likely that, as we had been expecting, Germany will loosen its strict fiscal rule after the upcoming general election. However, hopes of a big fiscal stimulus are likely to be disappointed as any reform will be modest and …
The Chancellor, Rachel Reeves, has confidently claimed that she will not be “coming back with more taxes”, but developments since the Budget have already whittled away her fiscal ‘headroom’. Further tax hikes are not inevitable, but they are more likely …
The fiscal tightening measures announced by Brazil’s finance minister late yesterday failed to live up to expectations and reinforce the idea that political commitment to stabilising the public finances is lacking. One consequence is that the central …
The Bank of Korea cut interest rates again today by a further 25bps (to 3.00%) and made clear in its statement that more easing is on the way. We are sticking with our view that the central bank will continue to cut interest rates steadily over the coming …
While the RBNZ started hiking rates earlier during the recent tightening cycle than the RBA, it also lifted rates to a higher peak. The RBA tempered the degree of tightening in order to preserve the large falls in unemployment seen during the pandemic and …
The failure of COP29 to deliver on ambitious climate finance targets means that developing economies still lack sufficient low-cost finance for climate adaption. That leaves them reliant on debt-based finance, adding to debt burdens and raising the risk …
27th November 2024
The latest IPF Consensus Survey was broadly unchanged from the previous forecast round. Total returns at the all-property level are forecast to be 7.7% p.a. over 2024-28, up from 7.6% p.a. previously. That contrasts to downward revisions in our forecasts, …
US tariffs on oil imports from Canada and Mexico would probably result in lower oil output in Canada and Mexico and higher US gasoline prices in the short term, and could also lead to a tightening in the global oil market over the medium term. Although US …
The economic impact of the Israel-Hezbollah ceasefire hinges on whether the deal holds and whether it sets the stage for a broader de-escalation of the regional conflict. If it does, that would allow Lebanon’s shattered economy to recover and ease fiscal …
Even if the government’s easing of planning rules were to mean that at least 300,000 new home approvals in England were granted a year, the number of construction workers would need to rise significantly. We estimate about 500,000 extra construction …
26th November 2024
Latin American (LatAm) markets have been generally resilient in the aftermath of the US election, possibly because investors were already pessimistic about the region’s prospects. But we think domestic and global headwinds will translate into LatAm assets …
Amid the Trump Trade, capital outflows from EM financial markets have persisted over recent weeks. Looking ahead, we expect the US dollar to strengthen further, suggesting that outflows will continue. This will not be a problem for most EMs, but those …
President-elect Donald Trump’s first threatened tariffs since the election are designed to extract concessions on drug trafficking and illegal border crossings, which means it may be possible for the countries targeted – Canada, Mexico and China – to head …
Residential construction employment has been performing much better than the slump in construction over the past year might have implied. We suspect that is because job losses in the new home construction sector have been concentrated among undocumented …
25th November 2024
Given the considerable uncertainty surrounding what policies president-elect Donald Trump will enact during his second term, there is a temptation to read a lot into his Cabinet nominations, but we would caution against that. Following his comprehensive …
The latest flash PMIs suggest that while industry continues to struggle across advanced economies, services activity is now slowing in Europe too. While reduced political uncertainty seems to have lifted business sentiment in the US, the PMIs suggest that …
22nd November 2024
Unsurprisingly, a second Trump presidency will support oil and gas production while rolling back environmental regulations. The fate of the Inflation Reduction Act is less certain, given that the support for manufacturing investment aligns with Trump’s …
With the dust settling on Trump’s victory earlier this month, this Update takes stock of what has happened across currencies, bonds, and equities; the reasons for these moves; and what we think will happen next. As was the case after Trump’s win in 2016, …
Spain’s economy is outperforming the euro-zone as a whole, and the difference is also evident in the labour market, which is still tightening at a decent pace. There now appears to be little slack left in Spain’s labour market and so we think an imbalance …
21st November 2024
The South African Reserve Bank’s decision to lower its repo rate by 25bp to 7.75% was not a surprise and Governor Kganyago sounded more optimistic that inflation is under control. Lingering concerns about the vulnerability of the rand and the growing …
Given our expectation that the Trump administration will push forward with plans to raise tariffs across the board, we have generally revised down our forecasts for stock markets outside the US. And with China being the main target of the trade war, we …
US President-elect Trump’s protectionist rhetoric may mean that African sovereigns are contemplating the loss of preferential trade access to the US via the AGOA scheme. We think the overall impact from such a move would be limited, but specific sectors …
Morocco’s weaker economic performance this year is likely to be a blip. Buoyed by low and stable inflation, looser monetary policy, and a burgeoning manufacturing sector, we expect Morocco’s economy to grow by around 5% in 2025 and 2026, which is faster …
Friendshoring into India has for the most part been limited to high-end manufactured goods, but broader supply chain reconfiguration into the country could take place if the Trump administration imposes a 60% tariff on China. Trump has also been critical …
Retail has suffered some severe blows over the last decade, but the nadir for the sector seems to have passed and for some time we have been talking about recovery ahead, albeit a weak one. In this note, we extend our analysis to the largest US city …
20th November 2024
The experience of the first Trump administration suggests that other countries will retaliate to the imposition of new US tariffs but in a way that is measured and minimises the risk of escalating tensions with Washington. The imposition of …
We held a series of client meetings in the US last week which focused on the implications of Trump’s victory in the US election and the spillovers to EMs. This Update answers some of the most frequent and important questions that came up. What impact will …
The slump in the participation rate this year at least partly reflects the cyclical weakness of hiring, which means that the labour market is weaker than the unemployment rate alone might suggest. The silver lining is that an eventual rebound in …
A year ago, we published an in-depth report arguing that the calm prevailing at the time around sovereign debt risks in Latin America wouldn’t last and that public debt dynamics would deteriorate. While there have been some positive stories (Argentina, to …
South Africa’s activity data for September points to a subdued end to Q3, but we think this softer patch will be short-lived as low inflation and the SARB’s easing cycle provide some support to demand. That said, tight fiscal policy will prevent the …
The jump in euro-zone negotiated wage growth in Q3, to a record high of 5.4%, was mostly due to one-off payments in Germany. Wage growth elsewhere was little changed. With headline inflation around 2% and the labour market loosening, wage growth is very …
The recovery in euro-zone real estate investment has been weak in 2024, with total activity in the first three quarters little changed on 2023’s near-record-lows. However, prospects for 2025 are brighter. We think investment will rise 25% y/y as interest …
China’s green export volumes rose in October and were just 3% shy of the record high reached in August. Chinese battery makers could be hit hard by President-elect Trump’s tariff proposals. But the surge in battery exports following the announcement of a …
We expect the Reserve Bank of New Zealand to cut its policy rate by 50bp, to 4.25%, at its meeting next week. With inflation back at target, the labour market loosening rapidly and activity in the doldrums, there continues to be a compelling case for the …
Artificial intelligence (AI) is still not being used very widely outside of the ICT sector. But we remain confident that, in time, it has the potential to be used across all sectors and industries. Surveys of firms in the US and EU show that AI usage is …
19th November 2024
New immigration targets threaten nascent recovery Lower mortgage rates appear to be finally sparking a recovery in the housing market, with home sales soaring to a two-and-a-half-year high last month and the sales-to-new listing ratio now pointing to …
Services inflation in the euro-zone has been stuck around 4% for the past 12 months, but there are good reasons to expect it to decline significantly next year. We think that core inflation will continue to edge down in 2025 and the headline rate will …
The latest data suggest that Colombia and Chile underperformed Peru’s economy in Q3. Looking ahead, we think that lower prices for key commodity exports combined with relatively tight fiscal stances will offset any the favourable effect from looser …
The larger and faster pace of ECB rate cuts we now expect means euro-zone government bond yields are likely to be lower in the coming years than previously forecast. This is positive for property valuations and means property yields could fall by more in …
Higher US interest rates will probably continue to weigh on government bonds globally. But we still expect bond yields in most developed market (DM) economies to fall back by the end of 2025, as domestic monetary policy eases further. Sovereign yields …
We think that the euro will fall to parity against the US dollar next year but will strengthen against some other currencies, such as the renminbi, and on a trade-weighted basis we forecast it to be little changed. So the effect of FX moves on growth and …
18th November 2024
US President-elect Donald Trump’s plans to curb immigration and undertake a mass deportation of undocumented migrants could boost labour supply in countries that are the source of migrants. But there could be social and fiscal costs, as well as lower …
A plunge in the average household size kept housing demand strong during the pandemic even as population growth ground to a halt. RBA estimates suggest that the average household size has remained low ever since, but economic forces point to a rebound. …
European natural gas prices have trended higher this year and are likely to fluctuate around €40-45 per MWh until conditions in the global LNG market loosen. That said, prices will drop back meaningfully once the wave of LNG supply arrives, with a good …
15th November 2024
We think that the impact of Trump’s proposed 10% universal tariff on euro-zone GDP would be very small, in part because we expect the effect to be offset by a weaker euro. So we aren’t pushing down our already below-consensus GDP growth forecasts any …
The US dollar has rallied sharply since the US election last week – as we had expected it would in the event of a Trump win. Based on our assessment of the new policy outlook in the US, we think the greenback will make further gains over the next year as …
14th November 2024
