The slight easing in the y/y contraction in goods exports and imports in May supports evidence from elsewhere that the worst has now passed for the economy. But both remain extremely weak, and a sharp improvement appears unlikely as external and domestic …
16th June 2020
Lebanon’s government has made little progress with its economic rescue plan and there’s a growing likelihood that the sovereign debt and currency crises already underway will ultimately lead to series of bank failures. We already expected the economy to …
15th June 2020
The dramatic pandemic-related rise in government debt has attracted most of the attention, but it is the surge in corporate debt that could exert a bigger drag on the economic recovery in coming years. The current recession is unique in many ways, not …
We assume that a slim trade deal will be agreed by the end of this year and that a big step change in the UK-EU relationship will be avoided. But with the chances of a “no extension, no Brexit deal” rising, the risks to the UK’s economic recovery are on …
The potential expiry of the expanded $600 weekly unemployment insurance payments at the end of July could weigh on consumption. But those payments look more likely to see at least a partial extension and, in any case, Congress appears to be united on the …
Industrial output ground to a halt in April but high-frequency indicators including electricity consumption and air pollution levels suggest that activity has edged up since then. However, lasting damage from the lockdown and the threat of further sharp …
The latest IPF Consensus Forecasts revealed sharper than expected downgrades for the next few years, largely based on revisions to retail rents. Our views are now above this consensus, though we don’t see this as good enough cause for a further downgrade. …
12th June 2020
We now expect that the US dollar will depreciate further as risky assets resume their rebound and the global economy recovers from the coronavirus pandemic. At the start of the year, we forecast that the dollar would strengthen further in 2020 as …
Housing starts have remained relatively high in recent months. But given the hit to employment, falling rents and signs many are struggling with mortgage payments, house prices are unlikely to be as resilient. Housing starts dropped by 15% m/m to 167,000 …
To help clients get a better sense of the state of recoveries around the world, we have collated some daily indicators that are available in almost all major economies to construct composite Covid Recovery Trackers . The trackers are now published on our …
Our Taylor Rules suggest that monetary easing cycles have further to run in Brazil, Mexico and Colombia, and we have pencilled in additional interest rate cuts in all three countries. Moreover, monetary policy across the region is likely to be looser than …
11th June 2020
The factors that drove the resurgence in home purchase mortgage demand, including record low mortgage rates, the need for more space and the anticipation of finding a bargain, will not give a similar boost to apartment rental demand. Low interest rates …
The huge amount of borrowing undertaken by firms in the last three months is reassuring in the sense that businesses are getting the cash they need to make ends meet. But some firms won’t be able to cope with the higher debt burden. And those that can …
With monetary policy likely to remain loose for a long time and the world’s largest economies gradually re-opening, our view remains that equity markets will continue to make ground over the coming years. Back in March , when global equities were down by …
Policymakers in the likes of India, much of Latin America and parts of Africa are easing lockdowns even though the coronavirus is still spreading rapidly. This may be less economically damaging than keeping stringent restrictions in place for longer, but …
Soaring Chinese imports of platinum group metals (PGM) could be taken as a sign that end-use is racing back towards its pre-virus level. However, we think that higher imports merely reflect opportunistic buying. Accordingly, we continue to expect only a …
Caught out with high levels of debt during the 1991 asset price crash, many Japanese firms then accumulated significant rainy-day funds to shield themselves against a future crisis. That trend intensified after the global financial crisis – when …
Early evidence suggests that the coronavirus and South Africa’s lockdown measures are taking a heavy toll on the economy and supports our view that the economy will decline sharply over the year as a whole. Our forecast is for a contraction of 11.0%, …
Even though working from home has meant business as usual for many office occupiers, weak activity elsewhere has still caused euro-zone office output to fall. With the economic recovery expected to be gradual, these linkages to the wider economy will …
The Fed left its policy stance broadly unchanged at the conclusion of today’s FOMC meeting, but it did strengthen its forward guidance a little – by publishing interest rate projections that show nearly all officials believe the fed funds rate will still …
10th June 2020
This year’s rally in the gold price has come on the back of a coronavirus-led surge in safe-haven buying and a plunge in interest rate expectations. More recently, however, we suspect that the uptick in the gold price has come from investors positioning …
Recently released government budget data for April suggest that fiscal deficits in many EMs, including in Brazil, Mexico, India and Turkey, may be running at 10-20% of GDP. This won’t cause a spate of acute fiscal crises, but it is yet another reason to …
Unlike the period after the Global Financial Crisis (GFC), we doubt that the government will immediately turn to a prolonged period of austerity after the surge in the debt to GDP ratio during the coronavirus crisis. This suggests the economy won’t have …
The tripling of the VAT rate from July will cause inflation in Saudi Arabia to jump, but the impact may be relatively less severe than it was when VAT was first introduced at the start of 2018. That said, the hit to households’ finances reinforces our …
This Update draws together the conclusions from the various pieces of research that we have published in recent weeks on how the fiscal costs of the crisis will be dealt with. In short, we are generally sanguine about the rise in government debt, which we …
Despite the sharp rise in the unemployment rate last month, there are signs that the Korean labour market has turned a corner. This adds to evidence that the economy has now bottomed out. The unemployment rate shot up from 3.8% in April to 4.5% in May, …
Palm oil consumption will be hit hard by weak biofuel demand in 2020. However, we think that consumption will rebound strongly next season as higher biodiesel mandates incentivise more biofuel production. As a result, we expect palm oil prices to rise …
Timely activity indicators suggest that the Scandinavian economies are already on the gradual path to normality, which will provide support to occupier demand and, in turn, prime office rents this year. Scandinavian economies appear to be holding up …
Even after further easing of South African lockdown measures last week, a quarter of the economy remains closed. And the impact of the lockdown on unemployment and insolvencies will cause long-lasting economic damage that will hold back the recovery. We …
The bulk of the leap in the saving rate will be reversed as the economy opens and people start spending again but the desire to hold more savings post-lockdown combined with lower incomes will weigh on consumption over the next few years, prolonging the …
Financial conditions have eased substantially across major EMs over the past few months, but we doubt that this fading headwind will turn into a major tailwind for activity in the coming quarters. Financial conditions gauge the state of financial markets …
9th June 2020
The unexpected 290,000 rise in employment in May was driven by Quebec, where restrictions on activity were lifted early in the month. As the other three most populous provinces lifted restrictions from the second half of May, and the evidence from Quebec …
Governments in Chile and Peru should be able to live comfortably with a jump in their public debt-to-GDP ratios this year. Those in Colombia, Mexico and, to a greater extent, Brazil will struggle. The first port of call will probably be renewed austerity, …
As the crisis in Italy escalated, record numbers of disillusioned jobseekers dropped out of the labour force, causing the unemployment rate to fall. Now that the lockdown is being lifted and activity is recovering, many of those people should return to …
The early signs are that activity is recovering quickly in Poland as lockdown measures are lifted. Provided that the virus is contained, we think that Poland will experience the smallest contraction in GDP across Europe this year. Large policy stimulus …
A reasonable proportion of the Central London office completions for this year are likely to be pushed into 2021, but a fall in employment will hit demand for office space and lead to a pick-up in vacancy. This will put downward pressure on rental values, …
The unexpected 2.5 million rebound in nonfarm payroll employment in May, against a consensus expectation of a 7.5 million decline , has generated a lot of speculation that the figures were either manipulated for political reasons or juiced by firms …
Data so far have shown a significant variation in how the virus has affected activity, with economies in Southern Europe hit very hard, the US suffering somewhat less and some Asian economies relatively unscathed. Differences are related to the timing and …
Lockdowns are being eased in India, Pakistan and Bangladesh without any sign that coronavirus infections are being brought under control. Economic recoveries will face greater headwinds than in places where the virus has been contained as a result. But …
The sharp decline in activity in Australia is set to result in much weaker inflation before long. And even though output will recover rapidly over the coming months as virus restrictions are eased, we think that inflation will remain well below the RBA’s …
With domestic infections contained, the main way in which the global pandemic has threatened Taiwan economically is through weakness in external demand. Exports have held up much better than we had originally anticipated, and so we are raising our 2020 …
8th June 2020
As expected, OPEC+ extended its 9.7m bpd production cut for another month (until end-July) . Given that prices have rallied strongly in recent weeks, the group’s caution reflects the still-high level of uncertainty surrounding prospects for oil demand. …
Although China’s commodity imports volumes dropped in May, we expect the recent infrastructure-related fiscal support measures to lift domestic demand and commodity imports in the coming months . China’s exports fell by 3.3% y/y in May in US dollar terms, …
The minutes of the Reserve Bank’s late May policy meeting – in which it trimmed both the repo and reverse repo rates – show that the MPC has become markedly more bearish on the outlook for economic growth amid the coronavirus containment hit. And with …
While sovereign bond yields in most developed markets are unlikely to reach new lows and, in our view, will stay around their current levels for some time, local-currency sovereign bond yields in some emerging markets could yet fall further, especially if …
5th June 2020
If we are right that the world faces a period of low inflation over the next few years investors are unlikely to begin anticipating tighter monetary policy and so undermine the returns from government bonds. We think it is much more likely that returns …
As US states emerge from lockdown and the worst of the economic crisis appears to be over, thoughts are turning to the recovery. In this, not all parts of the US will be equal. Some insight into the resilience of markets can be gained by looking at …
Consumption of natural rubber (NR) will be hit by sharply lower vehicle production this year. That said, we think that a revival in both demand and oil prices later in the year should give a lift to NR prices . Like most commodities, the price of natural …
