China’s official and unofficial manufacturing PMIs remained strong at the end of 2019, which is positive news for commodities demand. However, we think that the ongoing slowdown in construction activity will constrain economic growth, and will weigh on …
2nd January 2020
The election of a Conservative government with a large majority is likely to mean a slightly improved commercial property outlook. While we do not expect a post-election rebound, lower interest rates and a slightly better rental outlook will bring less …
24th December 2019
After large gains for both bonds and equities in 2019, we expect that both will fare less well next year. And, in contrast to most other forecasters, we think that the US dollar will rise further in 2020. While we forecast that the global economy will …
23rd December 2019
Despite a weaker lira, Istanbul prime office rents have, perhaps surprisingly, held up in the last two years. We expect them to hold steady over the next two years, but beyond 2021, we forecast positive, but feeble, rental growth. Despite 2018’s recession …
Our big calls for 2020 are that economic growth and inflation will generally be weaker than the consensus expects, and that rates cuts are on the cards in Switzerland and Sweden. The first section of this Update looks at how some of our key forecasts for …
US commercial crude stocks remained high in 2019 owing principally to strong domestic production and increased Strategic Petroleum Reserve (SPR) releases. Looking ahead, we think that a further rise in export growth and higher domestic demand will reduce …
20th December 2019
This Update was originally sent to clients as a Rapid Response immediately after the vote in Parliament on 20 th December on Boris Johnson’s Brexit deal. The ease at which Johnson’s Brexit divorce bill passed through Parliament today illustrates the power …
The planned reforms to France’s retirement schemes that have provoked strikes and protests this month are important to put the country’s pensions and public finances on a more sustainable footing. But in the short term, they have few economic benefits and …
The confirmation that Andrew Bailey will take over from Mark Carney as Governor of the Bank of England on 16 th March 2020 doesn’t change the outlook for monetary policy. But Bailey will face many challenges during his eight-year term, such as navigating …
This Update was originally sent to clients as a Rapid Response immediately after the announcement by the PBOC. The Loan Prime Rate (LPR), the reference point against which banks now price loans, held steady in December. The one-year LPR was unchanged at …
Whatever the Brexit drama delivers in 2020, it seems that uncertainty will continue to hold back GDP growth and keep a lid on the pound, interest rates and gilt yields. But looser fiscal policy should generate at least some improvement in GDP growth and …
19th December 2019
ESG rules won’t significantly deter investment in International Oil Companies (IOCs) or reduce fossil fuels production. Instead, output is likely to be guided by underlying oil prices, which we expect to fall over the medium-term. We suspect that price …
The tone of December’s Monetary Policy Committee (MPC) statement and minutes was barely changed from November, indicating that the MPC is content to sit on its hands for the time being. As a result, we remain comfortable with our view that interest rates …
We think the euro-zone will continue to struggle in the first half of 2020 as Germany and Italy remain close to recession and inflation stays well below target, prompting the ECB to loosen policy further. Things should improve a bit in the second half of …
Despite a rise in oil prices over the past couple of months, the Canadian dollar and the Norwegian krone have underperformed most other G10 currencies. Nonetheless, we expect both to fare better next year. Since the start of October, the price of Brent …
While today’s decision by the Riksbank to raise the repo rate back to zero was never really in doubt, the fact that two of the Deputy Governors opposed the move lends support to our non-consensus view that policymakers will end up cutting rates back into …
Bank Indonesia (BI) today left interest rates unchanged at 5.0% but, with growth set to remain weak and the rupiah holding up well, we think further easing is likely in the new year. Having cut rates by a cumulative 100bp so far this year, the central …
To mark the new year, our various teams have published a series of key calls notes setting out what to watch for in 2020. This Update wraps up some of our key views for Sub-Saharan Africa. While growth in Sub-Saharan Africa will almost certainly …
The Bank of Japan didn’t surprise anyone by keeping interest rates unchanged today and we think it will remain on hold for the foreseeable future. The Bank’s decision to leave its short-term policy rate at -0.1% and its target for 10-year bond yields …
To mark the new year, our various teams have published a series of key calls notes setting out what to watch for in 2020. This Update wraps up some of our key views for Latin America. First, growth is likely to disappoint in 2020 . Economies across the …
18th December 2019
Although the anaemic performance of the euro-zone economy is expected to weigh on occupier demand, real estate equity markets suggest that confidence in property markets has held up. We think that this will spark an improvement in investment activity next …
If enacted, we estimate that the Trump Administration’s reported proposals for altering fuel efficiency standards in automobiles will mean that US gasoline consumption will be around 0.3m bpd higher than would otherwise be the case by 2026. This would be …
The Bank of Thailand (BoT) left its policy rate unchanged today, but further rate cuts are likely next year. Having cut interest rates twice this year already (in August and November) today’s decision to leave rates unchanged at 1.25% came as no surprise, …
The People’s Bank has made another small downward adjustment to the rates it charges banks for short-run liquidity. We expect further cuts in the coming months, which will open the door to lower interbank rates and encourage banks to cut lending rates . …
Boeing’s decision to halt production of the 737 Max aircraft could deliver a big hit to the manufacturing sector just as prospects were beginning to brighten. If it the shutdown lasts the entire quarter we estimate it could knock up to 0.5%-pts annualised …
17th December 2019
We expect the global economy to bottom out around the first quarter of 2020, with growth recovering thereafter. However, the pace of this recovery will be relatively slow and, perhaps most importantly, it will be spread unevenly across regions. The US …
The muted market reaction to news of a provisional trade deal between the US and China lends weight to our view that the trade war’s grip on metals markets will ease over the coming year. While we are bearish on the outlook for iron ore and Chinese steel, …
We don’t think that China will import the $40bn of agricultural goods that it has reportedly pledged to buy from the US. As such, the impact on prices should be fairly minimal . Last Friday, the US and China reached a ‘Phase One’ trade deal. (See our …
16th December 2019
The details of the reported “Phase One” trade deal between the US and China are sketchy and we are not convinced that it will hold. While the deal removes a downside risk, it does not justify a change in our central forecasts for GDP growth in the US, …
The “Phase One” trade deal apparently agreed with China is a small positive for the outlook to the extent that it removes the threat of further tariffs. But we doubt the rollback of existing tariffs or the promise of China ramping up purchases of US goods …
Flash PMIs for December are consistent with advanced economies having lost momentum in Q4, and forward-looking indicators are yet to suggest that a material rebound is around the corner. Using flash PMIs for the US, euro-zone, UK and Japan, we estimate …
Protests in Chile will probably result in a shift towards permanently looser fiscal policy. But it would take a long time for the debt ratio to become a concern, so any corresponding rise in bond yields over the next five years is likely to be fairly …
Political uncertainty has eased following the election result, but the housing market fundamentals leave little room for a recovery in price growth or transactions in 2020. Combined with waning support from Help to Buy, weak housing market conditions will …
Australia’s government pledged to increase spending in today’s Budget update. And its pessimistic forecasts for nominal GDP growth suggest that tax revenue may continue to surprise on the upside, leaving scope for additional fiscal stimulus in the …
India’s monthly goods trade deficit widened in November and we expect this to continue into 2020. Nevertheless, with imports of key commodities set to remain low, we think that the external shortfall will still remain small by historic standards. Data …
The Russian central bank governor’s post-meeting press conference was characteristically cautious, supporting our view that following today’s 25bp interest rate cut, there will probably be just one more 25bp reduction (to 6.00%) in the current easing …
13th December 2019
One of the biggest disappointments of this decade has been the stubborn weakness of global productivity growth. While we do not think that this is a permanent shift, a turn-around does not look imminent. And any improvement depends in part on countries …
After scaling a multi-year high in 2019, we forecast that iron ore prices will fall back over the coming years. This is premised on the continued return of supply from Brazil and Australia following major disruptions earlier this year, as well as a marked …
While the majority secured by the Conservatives in the election clears the path to a Brexit deal being passed by 31 st January and fiscal policy being loosened in a Budget in February, the resulting boost to the economy will be restrained by the risk that …
This Update was originally sent to clients as a Rapid Response immediately after the general election exit poll was published at 10pm on 12 th December 2019. If the exit poll’s estimation that the Conservatives secured a majority of 86 seats in today’s …
12th December 2019
Recent mass retail fund outflows are not good news for the beleaguered UK commercial property market. In our view, this trend is not surprising given declining returns and, while we see downside to our forecasts if outflows don’t stabilise post-election, …
While Ms Lagarde’s assessment of the outlook in today’s press conference was slightly less gloomy than Mr Draghi’s in October, this does not change our view that the ECB will loosen policy again during 2020. After all, policy would need to be eased even …
Domestic headwinds will continue to weigh on growth next year, even as the external environment starts to improve. We expect this to trigger additional policy easing, with the PBOC likely to cut rates by more than most anticipate and allow the renminbi to …
The 200bp interest rate cut (to 12.0%) by the Turkish central bank as well as other recent tweaks to boost lending suggest that policymakers will try to meet President Erdogan’s demand to bring rates down to single digits and bolster growth. As a result, …
Today’s decision by the Swiss National Bank to leave its policy stance unchanged came as a surprise to nobody. Five years on since the Bank first cut interest rates into negative territory, there is every chance that it will keep them below zero over the …
The recent strength of motor vehicle production across Central Europe will be increasingly difficult to sustain as weakness in the German economy persists. The Czech Republic’s vehicle sector is likely to struggle the most as a result, while Hungary’s …
Activity data suggest that South Africa’s economy continued to contract in October . Given the escalation of power sector problems more recently, it’s likely that the economy has now entered recession. Activity figures released today showed that mining …
The statement accompanying the Brazilian central bank’s meeting last night did leave the door open for one more interest rate cut, but on balance we think the easing cycle is at an end. By the same token, the interest rate hikes that are now being priced …
