Rising owner occupation in part reflects government policy – tax hikes on buy-to-let landlords and support from Help to Buy. As a result, landlord taxation is unlikely to be eased anytime soon. And it suggests that Help to Buy will probably continue …
3rd February 2020
Chinese international tourist spending has surged over the past decade, which is one reason to think that the economic spillovers will be greater for the coronavirus than they were for SARS. But outside of Asia (and Mauritius), Chinese tourist spending is …
The People’s Bank has lowered the rates it charges banks for short-run liquidity. Given the mounting toll of the Coronavirus outbreak, we expect more cuts in the coming months. The People’s Bank (PBOC) has just cut its 7-day reverse repo to 2.40% from …
Even though house prices in Sydney and Melbourne plunged during the housing downturn, the house price to earnings ratio in both cities is still 40% higher than it was a decade ago. However, we think that housing is only moderately overvalued at the moment …
The finance ministry set aside notions of near term fiscal consolidation by announcing additional stimulus in the FY20/21 union budget. That should help to support economic growth over the coming quarters, albeit at the cost of putting upward pressure on …
While not at dangerous levels, the house price-to-earnings ratio does suggest home valuations are stretched. With mortgage interest rates unlikely to fall much further, and limited prospect for a relaxation in credit conditions, that will limit house …
31st January 2020
The extensive efforts to contain the coronavirus will cause GDP growth in China and emerging Asia to slow sharply in Q1. We still hope the economic and market disruption will prove temporary. But, given China’s prominent position in global supply chains …
We still think that the ECB will loosen policy this year, albeit by a little less than we had previously pencilled in. But with interest rates and bond yields still set to remain at historic lows, property will continue to look fairly priced. As such, it …
The market impact of the coronavirus outbreak in China has escalated over recent days, and increasingly resembles last year’s trade-war-driven turmoil in May and August. But unless the fallout from the epidemic escalates significantly, it is hard to see …
The outbreak of coronavirus in China threatens to derail the recovery we were expecting in the price of copper this year. In fact, when our estimate for the potential loss of copper demand is plugged into our forecast for the market balance, a surplus …
Even when the UK leaves the EU tonight, the shape of its future relationship with the EU is still very uncertain. We suspect it will eventually have a more distant “Canada, plus, plus” type relationship with the EU. While that will probably have a …
The MPC kept interest rates on hold at 0.75% today but left the door open to a rate cut in the coming months. Nonetheless, with the economy turning a corner and a big fiscal stimulus approaching, we suspect the next move in interest rates will be up not …
30th January 2020
Palladium’s blistering price rally has probably run its course, but we expect prices to remain close to historic highs in 2020. The market is mired in a deficit and demand growth looks set to remain solid, even if it softens from last year. Admittedly, …
Mexico dodged another technical recession in Q4, we think that the weakness seen in the later months of last year will persist into 2020, causing growth to fall far below consensus expectations. Provisional figures released today showed that Mexico’s …
Having deteriorated throughout 2018-19, the most reliable global economic indicators have stabilised recently, suggesting that the world economy is passing the worst. A range of data for the G7 show this story holds at the country level too. However, …
The Central Bank of Sri Lanka (CBSL) unexpectedly cut interest rates today but given our view that the rupee will come under downward pressure again this year, the scope for further loosening is limited. The CBSL’s decision to cut both its deposit and …
The almost unchanged statement issued at the conclusion of this week's FOMC meeting suggests that Fed officials currently don’t believe the disruption caused by the new coronavirus warrants the type of “material reassessment” to the economic outlook that …
29th January 2020
Our analysis suggests that it is difficult to square the coronavirus-led sell-off in oil markets with the fundamentals. Instead, we think the move is rooted in a marked deterioration in investor sentiment which, if signs emerge that the virus is being …
We expect that Chile’s central bank will cut interest rates later this year, and that this will push local currency bond yields down over the next 12 months. But with the demands of protestors likely to result in looser fiscal policy and a larger rise in …
As long as the number of coronavirus cases remains low in Europe and contained elsewhere in the world, the impact of the virus on euro-zone GDP is likely to be small and temporary. It would need to be much worse than the SARS outbreak in 2003 for economic …
After the SARS outbreak, the Bank of Canada shifted from raising to cutting rates in just three months. Other factors were also at play, however, and the Wuhan virus is less likely to tip the scales this time. The Bank was in the middle of a tightening …
The Swedish economy appears to have stabilised in recent months, but we doubt that this will mark the start of a sustained pick-up in growth. While the Riksbank will stay in wait-and-see mode for the time being, we think it is only a matter of time before …
Although economic growth in Budapest is expected to remain robust this year, weakness in tourism is likely to weigh on prime retail rental values. However, improving global growth should support foreign tourist arrivals from mid-year. Combined with the …
28th January 2020
A sharp fall in Chinese tourist arrivals will hit economic growth in Emerging Asia hard this quarter. The impact will be even more severe if the disruption spreads to the region’s industrial sectors. At least initially, the main channel through which the …
Our GDP Tracker suggests that the downturn in Saudi Arabia’s economy deepened at the end of last year as the drag from oil production cuts intensified. A recovery is likely to take hold this year, but it is likely to be weaker than most currently …
27th January 2020
Even if the coronavirus outbreak is brought under control quicker than SARS was in 2003, the economic impact now looks likely to be of at least a similar scale. We estimate that SARS lowered China’s growth by three percentage points in the worst-affected …
Flash PMIs for January offer further evidence of stabilisation in the world economy. With forward-looking indicators pointing to a gradual improvement, advanced economies are probably past the worst. Composite PMIs rose in the US, UK and Japan at the …
24th January 2020
A sharp slowdown in the pace of inventory accumulation weighed heavily on GDP growth in the second half of 2019 but, with that adjustment now largely over, the turning inventory cycle looks set to support a rebound in economic growth later in 2020. After …
23rd January 2020
We expect that the broad-based EM easing cycle has further to run in the coming months but, as growth and inflation in many countries rise, it will be less widespread than in 2019. More importantly, we think that there will be some dovish surprises …
The ECB left its policy settings unchanged today, made little change to its assessment of the economic outlook and said nothing new about the strategy review. While the markets are pricing in no policy changes this year, we still suspect that the Bank …
We don’t expect the recent marked outperformance of US mega-cap equities to continue during the rest of this year and suspect that it will unwind if a Democrat wins the race to the White House. The phenomenal showing by US mega-cap equities can be seen in …
There are encouraging signs that the cost and availability of materials, lots and labour are all starting to improve. Coupled with strong new home demand, and a shift toward the construction of cheaper homes, that supports our above-consensus call for …
The Egyptian pound has strengthened further at the start of this year but it is now making exports uncompetitive and, with support from high real interest rates likely to fade, the currency will probably give up some of its gains over the rest of this …
We estimate that net capital outflows from Emerging Markets fell to a six-month low in December, and they probably declined further at the start of this year. With global growth close to bottoming out and the Phase One US-China trade deal now agreed, …
This morning’s decision by the Norges Bank to leave its key policy rate on hold at 1.50% was widely expected. We suspect that the Bank will leave rates on hold until 2022 though, if anything, our forecast for oil prices to rise suggests that the balance …
Bank Indonesia (BI) today left interest rates unchanged at 5.0% but kept the door open to further cuts. With the economy struggling, inflationary pressures low and the rupiah continuing to appreciate against the US dollar, we think further easing is …
The ECB could decide in its strategy review to include owner-occupied housing costs in the measure of inflation which it targets. But we think it is unlikely to do so and, in any case, such a change would not make much difference to measured inflation, …
22nd January 2020
We are not convinced the Bank of Canada made a sharp dovish turn today as many suggest. As the data are likely to surprise the Bank to the upside before its next meeting, we continue to see it on hold in 2020. The initial reactions to the policy statement …
The Fed’s recent asset purchases and repo auctions have reversed more than half of the earlier quantitative tightening. Even so, it is the Fed’s interest rate cuts that have been the far more important factor driving money & credit aggregates . (See Chart …
The legislation that President Joko Widodo has presented to parliament, which includes proposals to cut red tape, lower taxes and free up the labour market, would form the basis of any foreign investor’s wish list. However, with opposition to the reforms …
This Update was originally sent to clients as a US Rapid Response on Tuesday 21 st January. The new Wuhan coronavirus has apparently already spread to the US – with a first case reported in Washington State – but we don't expect it to cause the sort of …
After holding up despite the slowdown in economic activity, we expect jobs growth in office-based sectors to lose momentum over the next two years, weighing on occupier demand. This underpins our forecast of a slowdown in growth in euro-zone prime office …
Bank Negara Malaysia (BNM) today cut its policy rate from 3.00% to 2.75%, and with growth set to slow further over the next couple of quarters, we think the central bank will ease policy again later this year. Only two of the 26 analysts polled by …
Single-family housing starts and new home sales set for another good year A lack of homes for sale means forecasters agree that existing home sales will just tread water over 2020. But we are more optimistic than others on the outlook for new home sales …
21st January 2020
Fears are growing about the spread of a newly-identified coronavirus across Asia. In this Update we discuss the likely implications for the region’s economies. Stock markets across the region fell today as fears over the spread of the virus escalated. It …
While we have altered our forecasts for ECB policy this year, we are still more dovish than investors about the outlook for interest rates in the euro-zone. As such, we continue to think that government bond yields in the region will fall back and that …
The Bank of Japan shocked no one in leaving its major policy settings unchanged today. And with obstacles to further easing high, the slight fall in capacity shortages we are expecting this year won’t be enough to push the Bank into cutting its policy …
We doubt that the bushfire crisis will prompt a major shift in the Australian government’s attitude towards the mining industry. But the sector’s importance is set to decline either way as mining investment has slumped and a structural slowdown is …
In this Update we take a look at the important elections and political events that are set to take place across Asia over the coming year, assessing the implications for policymaking and economic growth. One of the main political events of the year has …
20th January 2020
Underlying inflation pressures in the euro-zone have been building over the past five years, but so slowly that it’s barely perceptible. And rather than being the start of a new trend, the jump in core inflation at the end of last year is more likely to …
