There has been an encouraging rebound in retail sales across advanced economies as lockdowns have eased, driven by a pick-up in sales of discretionary items such as clothing and furniture and a shift towards online sales. While the recovery should …
16th July 2020
Even though unemployment is likely to continue declining faster than in previous recoveries, we still expect the unemployment rate to remain elevated for years, falling to 8.7% by the end of 2020 and 5.8% by end-2021 . But the lesson from the post-2008 …
The recent underperformance of US equity REITs compared with ordinary US equities seems to reflect concerns that the coronavirus could change behaviour in a way that hits the demand for many types of commercial property hard. We think that most of this …
India’s monthly trade balance swung into its largest monthly surplus on record in June. But this is not something to celebrate since it is the result of continued weakness in domestic demand. Data released late yesterday show that the monthly goods trade …
Bank Indonesia’s (BI) decision to cut interest rates today suggests that for now at least it is prioritising the economy over supporting the rupiah. We think further rate cuts are likely over the coming months, but the pace of easing is set to be gradual. …
Despite the apparent strength of the euro-zone labour market in early Q2 data and the office sector’s inherent resilience, we still expect prime rents to fall this year on the back of the weak economy and uncertainty surrounding the virus. With …
The Bank of Korea (BoK) left its policy rate on hold at 0.50% today and while it did not unveil any further unconventional policy measures, the Bank gave hints it could employ them in future. With growth likely to disappoint, we still expect a more …
The Bank of Canada’s pledge today to keep the policy rate unchanged until the “2 percent inflation target is sustainably achieved” implies that it has no plans to raise interest rates until at least 2023. The Bank reiterated in its statement that the …
15th July 2020
The struggles in Mexico’s industrial sector suggests that GDP fell by around 20% q/q in Q2. And the weak prospects for the sector will dampen Mexico’s economic recovery over the coming quarters. Having collapsed in April, Mexico’s industrial production …
Global property markets are expected to see a lasting impact from the effects of the COVID-19 outbreak. Over the coming weeks, we will publish a series of pieces looking at the post-pandemic future across the main property types. We start this by …
The number of coronavirus cases has continued to rise sharply in South Africa, making it more likely that the government will tighten containment measures, which would add to reasons to expect a slow economic recovery. Elsewhere in the region, extremely …
The Bank of Japan kept policy settings unchanged today as widely anticipated and we think it won’t announce major new measures over the coming months . The Bank’s decision to keep both its short-term policy rate as well as its target for 10-year …
The unemployment rate, which at 12.3% is the highest among the major developed economies, should drop below 9% by December. We expect progress beyond then to be much slower, unless the hinted expansion of the Canada Emergency Wage Subsidy makes the scheme …
14th July 2020
As COVID infections have surged, the slowdown or reversal of reopening across the South will weigh on home sales. Given sellers and buyers now have more experience in transacting during the pandemic, we doubt the fall in sales in the South will match the …
In general, our Covid Recovery Trackers continued to improve at the end of Q2 and in the first ten days of July. Things are even looking up a bit in Latin America. But the US recovery risks going into reverse. Our global average tracker maintained its …
The Office for Budget Responsibility (OBR) today sent a clear message to the government that regardless of the speed of the recovery, the government debt to GDP ratio is on an unsustainable path. Even so, we suspect that soaring debt levels will be …
China’s commodity import volumes surged in June, while exports remained in the doldrums. We expect this trend to partially reverse in the coming months as higher commodity prices will curb bargain-hunting purchases and a further pick-up in economic …
The debt restructuring deal provisionally agreed between Ecuador’s government and a group of its creditors would, if implemented, ease near-term pressures on the public finances. But we are more pessimistic on its potential to help Ecuador achieve debt …
13th July 2020
One consequence of the new policies announced by the Chancellor last week is that the UK will soon enter a period of deflation. But this will be the good form of deflation, which is temporary, boosts real incomes and incentivises people to spend, rather …
On the face of it, history doesn’t offer much reassurance that the world economy will be able to return to the path it would have been on had it not been for COVID-19. Indeed, looking back at all the downturns that have taken place in the OECD since 1965, …
The latest stamp duty cut will bring forward some housing demand and, by increasing perceptions that the government is standing behind the market, the cut reduces the chance of a house price crash. That said, with the potential tax savings unable to …
The slump in industrial production eased in May, confirming that the recovery in industry is now underway. But given the likelihood of a renewed tightening in containment measures and the substantial damage already caused during the lockdown, the road to …
The recent launch of the European Commission’s hydrogen strategy marks a step forward in the region’s decarbonisation push in which it hopes to use ‘green’ hydrogen in place of fossil fuels. We answer five key questions about hydrogen technology and …
10th July 2020
The most recent UK economic indicators have been better than expected. This suggests potential upside to our commercial property rental forecasts. But there are significant uncertainties ahead and, with activity expected to be well behind its pre-virus …
9th July 2020
Turkey’s credit boom that started towards the end of last year has been turbocharged in recent months and this should provide some welcome support to the economy as it emerges from the coronavirus crisis. That said, the nature of the lending reinforces …
Hard activity data from South Africa confirm that the economy has been among the hardest hit across major EMs by the coronavirus crisis and, while the lockdown has been eased in recent months, we think that the recovery will be a lot weaker than most …
A surge in the money supply has piqued fears of a leap in inflation. But in our view, there is little chance that this expansion of the money supply, driven almost entirely by quantitative easing, will lead to inflation because demand is very weak. There …
Several EMs in Latin America, as well as South Africa, Nigeria, India and Turkey could use financial repression policies to deal with the legacy of higher public debt burdens resulting from the coronavirus crisis. This Update explains what form these …
As the US economy continues to recover from virus-related disruption, we expect the housing and retail sectors to rebound. This, along with a stronger Canadian dollar and restricted supply (owing to social distancing measures), means that we expect the …
We continue to expect the 10-year conventional Treasury yield to remain firmly anchored, even as the S&P 500 rises further. This would be a marked contrast to the increase in the yield towards the end of the Global Financial Crisis (GFC), which gathered …
The Central Bank of Sri Lanka (CBSL) cut both its deposit and lending rates by 100bps to 4.50% and 5.50% respectively at its meeting today, and given the poor outlook for the economy, we think the easing cycle has further to run. The decision was …
Daily price data suggest that food inflation has eased over recent weeks and, with demand also likely to remain depressed, inflation does not appear to be a pressing concern. The focus of policymakers should therefore be to support the economy as much as …
The government confirmed today that it is allocating additional funds to various COVID-19 related programs that will cause the deficit to widen to $343bn this fiscal year, or 16% of GDP. And with Finance Minister Bill Morneau also hinting that the …
8th July 2020
We recently raised our price forecasts for base metals, including lead, as we now forecast a quicker economic rebound in China. And though we expect lead’s near-term price recovery to be driven by reviving car sales, a faster shift towards EVs will weigh …
A combination of timely policy support and resilient cross-border banking sector flows appeared to alleviate a collapse in EM credit growth during height of the coronavirus crisis. These forces should continue to buoy credit growth in the coming months, …
The high-frequency data suggest renewed fears about the coronavirus are starting to weigh on consumption even in states that haven’t moved to reimpose restrictions, reinforcing our view that the pace of the economic recovery will slow over the next few …
CMBS delinquencies have risen sharply in recent months, yet we aren’t expecting a repeat of the real estate debt meltdown witnessed in the GFC. However, non-performing loan rates are especially high in the retail and lodging sectors, meaning that holders …
After blowing out in April, budget deficits in Latin America remained wide in May. And while a pick-up in economic activity should help tax revenues to recover and social welfare spending to ease over the second half of the year, the slow pace of the …
The £30bn (1.4% of GDP) of extra measures announced today by the Chancellor may go some way to speeding up the economic recovery from the coronavirus crisis and limiting the long-term hit to unemployment. But we still doubt that GDP will return to its …
The pick-up in mainland Norwegian GDP in May was a tad underwhelming, with the economy’s recovery now seeming to follow a shallow “U” rather than the deep “V” seen in the euro-zone. Nonetheless, the total loss of output this year is set to be much smaller …
Weak core inflation is likely to keep the headline rate in South Africa close to the bottom of the Reserve Bank’s 3-6% target range both this year and next. This should allow the central bank to keep interest rates low for longer than markets currently …
Tunisia’s public finances have deteriorated sharply over the past decade and the government’s debt burden appears to be on an unsustainable path. This would be exacerbated if external financing conditions tighten and the dinar weakens sharply. A sovereign …
While we remain optimistic about the outlook for equities and other risky assets, the rapid increase in new coronavirus cases, especially in the US, poses a key downside risk to our generally optimistic forecasts. As we set out here , our forecasts for …
The fact that there were signs of improvement in Scandinavian transactions in June provides some hope for the rest of Europe. But overall, commercial property investment will still face an uphill battle as uncertainty lingers and economic activity remains …
News that a major US shale oil producer filed for bankruptcy last week has raised concerns about a new wave of coronavirus-induced corporate defaults. But even if the default rate does pick up in the coming months, we don’t think this will prevent credit …
7th July 2020
Some indicators suggest the UK is lagging behind other countries in the race to recover from the coronavirus, and it faces some additional hurdles which could slow it down even more. That’s why we expect UK authorities to keep fiscal and monetary policy …
Borders are slowly re-opening across Emerging Europe, but international tourists are unlikely to return to the region in significant numbers for the key summer season. Romania and Russia are the least vulnerable and efforts to promote domestic tourism …
The post-lockdown rebound has been quicker than we anticipated, so we are revising up our euro-zone GDP forecast from -12% to -7% for 2020. That does not alter our view that the economy will remain below its pre-crisis level for a long time yet, and that …
Renewed coronavirus outbreaks in some parts of the world have not caused us to rip up our economic forecasts. The initial stages of the recovery have been faster than we feared and we had always assumed that a limited recurrence of the virus would cause …
The Swiss labour market is expected to hold up comparatively well this year which would normally bode well for occupier demand. But we expect a shift in bargaining power in favour of the tenant and competition from new supply to contribute to rental …
