The slump in euro-zone GDP in March and April was just as large as we had feared, but the subsequent recovery has been quicker than we expected. As a result, we now think that GDP probably contracted by “only” around 12.5% q/q in Q2, though the falls in …
7th July 2020
Bank Negara Malaysia (BNM) cut its main policy rate by 25bps to 1.75% today, and with the economic recovery still in its infancy, we doubt this marks the end of the central bank’s easing cycle. The decision to cut was no surprise, 18 of the 25 analysts …
The RBA sounded more optimistic when it left policy settings unchanged today. But with the recovery set to remain bumpy and inflation likely to weaken more sharply than the Bank is anticipating, we still expect the Bank to resume its bond purchases before …
The average value of a home purchase mortgage application hit a record high $359,000 at the end of June. But that doesn’t mean house price growth is set to take-off. An increase in the share of new home sales, tighter credit conditions and perhaps …
6th July 2020
The latest surveys and high-frequency data suggest that Latin America’s economic recovery finally started to firm up in June. But it is still lagging other EM regions – and Chile’s recovery is yet to get going. After a raft of disappointing economic news, …
Online sales surged during the lockdown and rose further even as the Australian and New Zealand economies were opening up again. We suspect online sales will remain high which means measures of physical location may understate the resilience of …
While all-property capital values lag real estate equity prices, the movement in REIT prices can also tell us something about sector performance. The staggered recovery in REITs from March’s low point supports our view that capital values for industrial …
3rd July 2020
The end of the port blockade in Libya should mean that the country’s oil production is restored, but we think that supply will be slow to return not least because of damage to facilities and weak global demand. By way of background, the dramatic loss of …
While the quicker than anticipated pick-up in high frequency data has meant that the fall in Greek economic activity is likely smaller than initially feared, retail rents are still set to drop sharply this year. The following recovery in Greek rents will …
We expect real estate yields to spike this year due to both a rise in the property risk premium and lower expectations for property income streams. However, breaking down the observed yield gap into rental predictions and the risk premium has more than …
2nd July 2020
Our Recovery Trackers suggest that activity generally continued to rebound heading into Q3. But higher infections seem to have taken a toll in some US states, while Latam is the weakest link in the global recovery. Our proprietary Covid Recovery Trackers …
A rebound in fuel inflation will push up headline inflation in most EMs over the coming months, even as food and core price pressures moderate. Alongside the recovery in activity, this means that the broad-based EM monetary easing cycle is approaching its …
Poland’s central bank appears to have become concerned about the strength of the zloty recently and the negative impact this could have on the pace of the economic recovery, suggesting that it is likely do more to loosen policy this year. We think that …
The hit to the luxury retail market and prolonged weakness in international tourism will cause Paris prime retail rents to decline this year for the first time since 2009. Although some rental recovery is expected next year, the virus outbreak has …
Given the success of the government’s job furlough scheme and the signs of a strong initial rebound in economic activity we now think that the unemployment rate will peak later, in June 2021 rather than in July 2020, and at a lower rate of 7%, …
The strong rise in the EM manufacturing PMI from 45.4 in May to 49.6 in June suggests that EM manufacturing is firmly on the road to recovery. We think that the rebound in activity will probably be fastest in China and Emerging Europe. The headline EM …
1st July 2020
The hit to apartment absorption from the coronavirus has occurred at the same time as a large number of new units are set to enter the market. Even with current tenants staying put, that raises the risk of a spike in the vacancy rate. However, …
With lockdowns continuing to ease across the globe, it was of little surprise that the manufacturing PMIs rose in June. While the PMIs are still considerably below their pre-crisis levels, they have rebounded more swiftly than they did during the …
The chances of PM Abe serving a fourth term as LDP leader have fallen considerably in recent months. Instead, speculation has turned to whether Mr Abe will be able to hang on as Prime Minister for the duration of his third term as party leader, which …
The decision by the Colombian central bank to slow the pace of easing from 50bp to 25bp at last night’s meeting suggests that the rate-cutting cycle is approaching its conclusion. We remain comfortable with our forecast for two more 25bp cuts in the …
China’s June PMIs indicated a continued improvement in domestic industrial activity, which should be positive for commodities. However, fading external demand may prove to be a headwind for exports . The Caixin manufacturing PMI rose to 51.2 in June, from …
The Riksbank has put its money where its mouth is when it comes to expanding its balance sheet, but in our view all roads still lead to a return to negative interest rates, either in late-2020 or early-2021. While the Riksbank’s decision to leave the repo …
India’s current account swung into a rare surplus in Q1. That probably won’t last for long as oil prices rebound, remittances drop and the trade deficit starts to widen again over the coming months. But the deficit is likely to remain very small. And with …
China’s import data are another sign that demand is bouncing back in the world’s largest metal consumer. However, in some cases, a lack of supply is restricting shipments. This is likely to become more of an issue in the months ahead and is another reason …
30th June 2020
The Saudi economy contracted by 1% y/y in Q1 and the figures from Q2 point to an even sharper downturn in Q2 due to the coronavirus crisis. The lifting of the lockdown this month is helping to support a recovery but a fresh bout of fiscal austerity means …
Governments in Brazil and South Africa have outlined plans for large multi-year fiscal squeezes from 2021, which will hold back their economic recoveries and are likely to be politically untenable over a sustained length of time. While a few other …
With further fiscal support likely to be unveiled at some point in the next few weeks, the government appears willing to sustain the fiscal stimulus into the years ahead rather than lurch towards austerity as it did after the Global Financial Crisis. This …
29th June 2020
Weak demand and a recovery in supply should push the sugar market into a surplus in 2020/21. As a result, we forecast that sugar prices will remain low over the coming year . Despite droughts in major producers, including India and Thailand, the price of …
While the proposed joint EU fiscal response has been hailed by some as a “Hamilton moment”, the central budget will be just one-quarter as large as a share of GDP as US federal firepower was in the 1790s. In the absence of greater tax-and-transfer powers, …
While the euro and many euro-zone assets have rallied significantly over the past two months, we think that there is scope for them to make more headway this year . To recap, during this period the euro has gained ground against the US dollar and is now …
26th June 2020
UK retailers continue to suffer, even given the recent re-opening of shops and signs of improving sales. Shopping centres have fared worst and this has been highlighted by the woes of owner Intu. And as some of the underperformance reflects deeper …
The recent withdrawal of high LTV products could impede as many as one in four prospective first-time buyers. More broadly, tighter credit conditions reinforce our view that, despite signs of a surge in demand, lending and transactions won’t recover their …
The current burst of bank lending suggests that governments’ loan guarantees and the ECB’s TLTROs are having the desired effects. Now that economies are re-opening, corporate revenues should begin to recover, making firms less reliant on state-backed …
Having suffered sizeable net capital outflows in March and April, our Tracker suggests that capital flows into and out of the emerging world were essentially balanced last month. And daily data suggest that EMs may have attracted net capital inflows this …
25th June 2020
In light of the recent revision to our China economic growth forecast and our expectation that the rebound in equities has further to run, we have revisited our oil price forecasts for the year ahead. We expect that constrained OPEC+ supply will not be …
Tourism sectors across Africa, like much of the rest of the world, are at a standstill and any recovery is likely to be slow going. Even if travel restrictions are lifted international tourists are unlikely to return this year, and a big hit to incomes …
Recent revisions to our macroeconomic and markets forecasts are more positive for industrial metals than oil, and they support our slightly bearish outlook for the price of gold . The starting point for our commodity price analysis is our view on the …
The ECB has used the minutes of this month’s policy meeting to try to defuse the dispute in Germany over the legality of its asset purchase programmes. Helped by the Bundesbank, this should be enough to smooth things over for now. But future court cases …
Turkey’s central bank unexpectedly left interest rates on hold today and it’s difficult to see how economic conditions will change in such a way over the coming months to justify renewed easing. We now expect rates to be left on hold over the rest of this …
Transactions in April and May have surprised on the upside. What’s more, there are signs that new demand in June has been stronger than expected. Of course, the economic damage from lockdown suggests that sales won’t sustain their pre-virus level anytime …
The central bank in the Philippines (BSP) today cut its policy rate by a larger-than-expected 50bps, to 2.25%, and with economic activity unlikely to recover fully anytime soon, we expect further easing. The timing of today’s decision was a surprise given …
We estimate that the revenues of firms in most sectors were still too low in mid-June to generate profits. If those conditions persisted, nearly one-third of firms would run out of cash by the end of Q3. However, revenue should recover over coming months …
While the Greek economy is set to slump this year, it is becoming increasingly clear that the drop in activity will be much less severe than we previously anticipated. We now think that the Greek economy will shrink by “only” 8% or so this year. At the …
We suspect that the real yields of US Treasury Inflation Protected Securities (TIPS) will fall a bit further, fuelling renewed gains in risky assets and underpinning gold despite a reduction in safe-haven demand. To re-cap, the real yields of TIPS have …
24th June 2020
South Africa’s emergency budget highlighted that the dire state of the public finances is limiting the scope for fiscal support this year and attention is already focused on dealing with the legacy of higher debt. Austerity will be the first port of call, …
Reports that the US is considering rescinding Canada’s exemption to its 10% tariff on aluminium this week are unlikely to have much of an impact on the metal’s price . But such moves have the potential to worsen the oversupply in the global market, acting …
The Bank of Thailand’s (BoT) decision to leave interest rates unchanged at 0.5% today despite the dire outlook for the economy suggests that further cuts to the policy rate are unlikely. Instead, the emphasis over the coming months is likely to be on what …
Euro-zone countries seeking to avoid a surge in unemployment have sought to replicate Germany’s short-time working scheme that served it well during the global financial crisis. Germany’s experience suggests that while euro-zone unemployment will probably …
The Reserve Bank of New Zealand (RBNZ) sounded fairly balanced when it left policy settings unchanged today. But we still think the Bank will cut rates into negative territory next year. The Bank’s decision to keep rates on hold was correctly anticipated …
