The narrowing in India’s goods trade deficit in December is likely to reverse over the coming months. But we think that a low level of commodity imports will help to prevent the external shortfall from ballooning to unsustainable levels. India’s monthly …
16th January 2020
The Phase One trade agreement signed today removes the downside risk of a never-ending escalation of tariffs imposed by the US and China on each other’s imports, but the modest scale of the roll-back of existing tariffs means that the deal will provide …
15th January 2020
We have argued for some time that a near-term interest rate cut is a strong possibility. The market has now come around to this view. While the decision is a toss-up, at least until we see the next batch of data, our hunch remains that interest rates will …
We think that a combination of stronger supply, and weaker demand, growth will push the wheat market into a surplus this year. As a result, we expect wheat prices to drop by about 20% in 2020 . To recap, the price of wheat has surged to around 570 cents …
As the slowdown in household spending and the growth in e-commerce weighs on prime retail rents, we think that rents will fall in all Nordic cities this year. While most of continental Europe has been grappling with weakness in the retail sector, much of …
Hungary’s economy is likely to lose some steam this year, but loose policy will ensure that growth remains above potential. This will keep inflation high and economic imbalances will continue to build . The outperformance of Hungary’s economy last year …
Banks’ housing lending standards remain tight. But this hasn’t prevented housing arrears from climbing to fresh highs as household balance sheets are stretched. And given that we expect the unemployment rate to creep higher and income growth to remain …
While the price of gold remains elevated at present, we think it’s only a matter of time before it begins to ease back. Subdued gold imports in China and India and softer safe-haven demand should depress the price. Meanwhile, we expect that some US dollar …
14th January 2020
There is mounting evidence to suggest that business investment growth is set to rebound, which should help drive overall GDP growth back above its potential pace in the second half of this year. Looking at the latest hard data, the downturn in business …
China’s commodity imports were strong in December, and in 2019 as a whole, in part because a number of one-off structural factors boosted volumes. Looking ahead, we expect growth in commodity imports to ease back this year as China’s economy slows . …
The sharp rise in the Future Sales Indicator of the Business Outlook Survey (BOS) is surely the final nail in the coffin for the idea that the Bank of Canada might soon cut interest rates. The survey supports our view that GDP growth will rebound in the …
13th January 2020
We expect the S&P 500 to outperform Treasuries by much less in 2020 than in 2019, as government bond yields edge up, the equity risk premium stops tumbling, and corporate earnings continue to disappoint. While US large-cap equities and government bonds …
This decade is likely to be marked by slower growth and softer inflation in emerging markets. One consequence is that interest rates will probably be lower than most currently anticipate. A broad-based monetary easing cycle has been underway in emerging …
Five years after the so-called Frankenshock, the SNB is near the end of the road for conventional monetary easing. Accordingly, the Bank may be forced to make another radical policy choice if there is a substantial appreciation in the franc in the coming …
The swift appointment of Haitham bin Tariq as the Sultan of Oman, following the death of Sultan Qaboos, has eased fears that the country would enter a prolonged period of political uncertainty. But the new leader faces a difficult task of securing …
We think that the prices of wheat and soybeans will tumble this year on the back of high stocks. However, the outlook is more encouraging for the prices of some of other agricultural commodities, such as corn, which should rise due to a gradual upturn in …
Despite Spain’s relatively strong economic outlook compared to its European peers, with real prime rents at high levels and the economy losing momentum, we think that prime retail rents will fall in 2020. After growing by around 7% in 2018, there was …
Lower than expected interest rates would do little to boost house prices. After all, a shallower path for Bank Rate would reflect weaker than expected economic conditions. And in any case, there is only limited scope for further rate cuts, while mortgage …
10th January 2020
With mortgage rates set for a period of stability over the next couple of years changes in credit conditions, and in particular debt-to-income ratios, will be an important driver of house prices. Given the GSEs have been instructed to act …
There is no denying that last year was a disappointing one for commercial property, with returns likely to be at a decade low. While we do expect some improvement this year, we believe that the outlook will remain highly uncertain as the market deals with …
We think that oil prices will rise in 2020, as the market moves into a small deficit. In contrast, we expect natural gas prices to fall owing to strong supply growth and for this, in turn, to dampen coal prices . Last year, we forecast that the global …
Corporate bond markets in the US, the UK and the euro-zone have started 2020 on a strong footing, largely reflecting expectations that monetary policy there will remain accommodative for the foreseeable future. While we agree with investors that central …
Our measure of aggregate EM inflation, which hit a four and a half year high last month, should fall over the course of this year as the disruption caused by African Swine Fever fades. But this is largely a China story. For most EMs, higher oil prices and …
9th January 2020
Following the recent rise in US-Iran tensions, we estimate that the risk premium in the oil price briefly turned positive. After all, prices rose without there being any disruption to the physical supply of oil. However, regardless of what happens to the …
The surge in crude oil and natural gas production over the past decade has eliminated the petroleum-related trade deficit, but there is a risk that, echoing what happened in other countries that experienced similar surges, the energy revolution could yet …
The recent rise in inflation to multi-year highs across most of Central Europe has only a little further to run, but it will stay above central banks’ targets across the region this year. Policymakers will probably look through this and keep interest …
Recession risk remains low The chances of a recession in 2020 are still barely higher than the normal background risk. Our composite 12 month ahead probit model – based on the yield curve, financial conditions and various activity indicators – puts the …
Following relatively weak all-property returns last year, we expect that 2020 will see an improvement as the retail downturn bottoms out later in the year. Despite this, even a positive return of around 4% will be well behind what is expected for …
The French economy is likely to continue to perform reasonably well this year as solid consumer spending growth partly offsets fiscal tightening and a slowdown in investment. Moreover, the pensions reforms are likely to be passed, helping to keep …
South Africa’s manufacturing sector was struggling even before December’s power cuts, so production almost certainly fell in Q4. Given weakness in other sectors, we think that South Africa slipped into another technical recession last quarter. Figures …
While corporate earnings in the US will probably recover a bit this year, we think that they will fall short of expectations of a big rebound. And given that we don’t expect valuations to rise anything like as fast as they did last year, we anticipate …
Another surge in headline CPI inflation in December – most likely to a five-year high – would almost certainly bring an end to the RBI’s easing cycle. And a rise in core inflation over the coming quarters should prompt the central bank to switch to …
The continued slide in the ISM manufacturing index is increasingly hard to explain, but the wider evidence suggests the more upbeat Markit manufacturing PMI is providing a more accurate gauge of activity. The further fall in the ISM manufacturing index in …
8th January 2020
The further deterioration in the latest data have caused some to double down on their forecasts that the Bank of Canada will cut interest rates this year. But the weakness in November was mainly due to temporary factors and the business surveys suggest …
With interest rates set to stay lower for longer, we think that property yields will decline further in 2020. The exception is retail where, outside of Emerging Europe, yields are expected to rise in response to the bleak rental outlook. Nonetheless, even …
The deadly bushfires that are ravaging Australia are first and foremost a human tragedy. But there are economic effects to consider, too. We suspect that the impact on consumption and working hours will be negligible, while firefighters working longer …
7th January 2020
Rebranding the West African CFA franc as the “Eco” will have little economic effect; the new currency seems likely to be governed by the same FX regime as its controversial predecessor. The move may, however, scupper plans for a region-wide currency …
We forecast that the prices of base metals will fare better than precious metals in 2020. This view hinges on a modest recovery in the global economy, which should give a lift to metals demand at a time of already strained supply. That said, we think that …
Fears of a direct conflict between the US and Iran have eased over the past day or so, but the risk has not disappeared and the rest of the MENA region is vulnerable to any retaliation by Tehran. Attacks on oil facilities or an attempt to close the Strait …
While we could have been bolder with our forecast for rental growth in Europe, in particular Nordic offices, on the whole our forecasts for 2019 proved to be correct. With 2019 now behind us, it is worth looking back to see how our predictions for the …
We are cautiously optimistic about the outlook for commodities prices this year. While global economic growth will remain subdued, we think it will start to revive over the course of 2020. Therefore, there is now scope for price gains, particularly as the …
The Gulf states are likely to have recorded their second weakest pace of aggregate growth since the global financial crisis in 2019 due to oil output cuts and poor performances from non-oil sectors. While we think there will be a recovery in 2020-21, it …
The direct economic impact of the protests that began in opposition to the citizenship amendment bill is likely to be small. However, the protests have increased the chances of a larger fiscal stimulus in next month’s union budget, which would be positive …
6th January 2020
We forecast that the price of aluminium will rise this year even if, as we expect, the market flips from a deficit to a surplus. This is due to our expectation that investors will focus on a more positive backdrop for aluminium demand, amid low inventory …
3rd January 2020
The oil price has jumped today on the back of the US assassination of a powerful Iranian military leader. Given the backdrop of improved investor sentiment in the oil market, prices could remain elevated. That said, regardless of geopolitical events, we …
The assassination of Qassem Soleimani, a major figure in the Iranian regime, in a US airstrike last night has significantly raised the chances of an outright conflict between the US and Iran. We’ve previously estimated that a US-Iran war could shave …
The PMIs for December suggest that EM manufacturers, barring those in Latin America, ended 2019 on a firmer footing. Nonetheless, the external backdrop will remain challenging in 2020. The EM manufacturing PMI held steady at 51.0 in December for the …
2nd January 2020
Final manufacturing PMIs for December weakened a touch in most major economies, suggesting that global industrial activity ended 2019 on a slightly softer note. The surveys are still consistent with a modest rebound in growth in the manufacturing sector, …
The initial estimate of Q4 GDP suggests Singapore’s economy remains in the doldrums. However, the numbers are based on preliminary data from only the first two months of the quarter and are not normally a good guide to the final reading. According to …
