Conditions have stabilised after a turbulent few weeks in financial markets, and we expect the rebound in equity markets over the past week or so to continue. Our assessment is that the market fallout from the weak early August US data was …
15th August 2024
Given the revival in house prices and recent falls in mortgage rates, we are raising our Q4 2024 house price growth forecast from 1.0% y/y to 2.0%. We now think that the number of housing transactions per year will increase from 1.02m in 2023 to 1.07m in …
Despite better occupier data in H1, the weak consumer backdrop and still elevated vacancy mean we expect German retail rents to only hold steady this year. Thereafter, we expect rental gains to lag the euro-zone average, especially in Frankfurt given the …
EM goods export growth has accelerated over the past year despite a slowdown in economic growth in DMs. We think this is being driven by three structural factors: Chinese overcapacity, the AI revolution and friendshoring. These will continue to shape …
Norges Bank’s decision to leave its policy rate unchanged at today’s meeting, at 4.5%, was never in doubt. However, we still suspect that continued declines in inflation will allow it to start cutting before the end of the year, which would be earlier …
Since the Riksbank’s last meeting in June, Swedish inflation and activity data have been weaker than policymakers expected. We think this will encourage them to cut the key policy rate from 3.75% to 3.5% next week and to indicate at least a further 50bp …
14th August 2024
South African economy looks to have recorded a pick-up in growth in Q2, but the recovery is operating at two speeds with retail sales and manufacturing on the up, while the mining sector remains a weak spot. Nonetheless, with easing electricity shortages …
Jordan’s economy has been among the hardest hit from the indirect spillovers of the war in Gaza. While severe balance of payments of strains are likely to be avoided, GDP growth will suffer as the key tourism sector has taken the brunt of the impact. And …
Commercial property investment is on track to hit our forecast for a rise of 20% this year, helped by a substantial rise in retail transactions. A decent rental growth outlook coupled with attractive valuations, particularly for shopping centres, is …
Prime Minister Kishida’s resignation is hardly a surprise. At this stage, it’s very difficult to predict who will succeed him and the ruling LDP will probably remain in power for the foreseeable future. The upshot is that Kishida’s withdrawal doesn’t have …
The RBNZ began its easing cycle with a 25bp rate cut at its meeting today. Although the Bank appeared to strike a cautious tone about further policy easing, we think it will cut rates more aggressively than many are anticipating. We were among the 12 …
Signs of a thaw in frosty relations between India and China don’t point to a fundamental realignment in India’s position in a fracturing global economy. But they highlight a growing theme of some EMs tactically courting investment from China to put …
13th August 2024
Developments in Ukraine have once again emerged as a key driver of EU natural gas prices. But a combination of lower gas use and the sourcing of alternative supplies in Europe means that the situation is very different to that during the energy crisis. …
12th August 2024
We are sceptical that the recent decline in mortgage rates will revive the housing market. Rates are still high compared to recent years, discouraging homeowners from moving, while most potential new buyers remain sidelined due to historically stretched …
Container shipping costs have fallen back slightly in the past few weeks. And while the potential for further shipping disruptions makes the outlook for shipping costs highly uncertain, as things stand the rise in shipping costs this year is unlikely to …
European office occupier surveys reveal that office attendance and utilisation has continued to rise over the past year and that it could still improve a bit further. However, despite the rise in attendance, office vacancy has continued to climb and is …
Heightened US recession worries have helped unwound some of the stretched positions in high-carry EM currencies, resulting in their exchange rates moving closer to their “fair values” (judging by our models). While our base case is still for a US soft …
9th August 2024
Inflation in Norway has continued to fall more quickly than policymakers expected. But with the krone coming under renewed pressure recently, we think they will maintain a hawkish tone next week. At the last meeting, in June, Norges Bank left its policy …
Equity markets in East Asia suffered very sharp declines earlier this week, but have generally recovered partially since. We think the rebound has scope to go a lot further as recession fears in the US prove overblown and an AI-related bubble reflates, …
Recent safe haven flows into the franc may have prompted limited FX interventions by the SNB. But we think that the policy rate will remain its main policy tool, even for dampening the franc’s strength. Indeed, we now expect the SNB to cut its policy rate …
8th August 2024
After an already-tough H1 for information sector jobs, we expect the second half of the year to see further cuts, which will be bad news for tech-heavy metros in the West. But a more diverse occupier base and much more pronounced return to the office in …
Several organisations have estimated that a universal 10% tariff on US imports, as proposed by Donald Trump, would reduce euro-zone GDP by at least 1%. We think the hit would be much less than 0.5%. We commented previously on the impact that Donald …
The recent market turmoil didn’t move the needle for the MPC today: it continued to strike a hawkish tone as the majority of members voted to keep the repo rate unchanged at 6.50%. But with inflation set to fall back towards the RBI’s 4% target over the …
Increasing demand points to stronger price growth Tentative signs from July’s RICS survey add to the growing evidence that demand and prices are starting to pick up. And as lenders start to cut mortgage rates, further cuts in Bank Rate than financial …
Protests that originated in Kenya have spread to neighbouring Uganda and as far afield as Nigeria. The common theme of a weak economic backdrop, endemic corruption and fiscal fears means the region is ripe for further unrest. Growth is likely to see a …
7th August 2024
German industrial output rebounded in June and may well expand a bit over the coming year or so. But any recovery will be weak and the sector will remain in structural decline. German industrial output rose more than expected in June. Data released today …
The news that the economy may now be 2.6% bigger than its Q4 2019 pre-pandemic size, rather than 1.8%, suggests it is in better shape than we previously thought. But with the UK still suffering from balefully low productivity and labour force growth, …
Market turmoil has not yet led to a tightening of financial conditions in the US and most other advanced economies. That’s because borrowing costs have fallen sharply as investors have grown to expect more rate cuts from the Fed. To recap, our financial …
The Q2 rise in euro-zone investment marks the start of the recovery, but one that will be weak and uneven across markets. Economic and political concerns means investment in Germany and France is likely to lag, while the faster pick-up to date in Italy …
Following another leg down in industrial metals prices, this time due to growing worries about a US recession and the broader financial market carnage, we still think that prices will fall further over the next few years. However, while attention has …
Even though it’s difficult to identify what could have broken as a result of the recent rapid market moves, a stronger yen is a bigger threat to the health of Japan’s financial institutions than falling stock prices. The Topix has reversed half of the …
We are in the minority of forecasters who expect the Reserve Bank of New Zealand to hand down a 25bp rate cut at its meeting next week. Moreover, with excess capacity in the economy rising rapidly, we think the Bank will embark on a more aggressive easing …
Although the UK has clearly been caught up in the recent turmoil in global financial markets, we do not think a double-dip recession is on the cards. Nonetheless, the disorderly market reaction, if sustained, raises the downside risks to our GDP forecast …
6th August 2024
The minutes to last week’s central bank meeting in Brazil raised the possibility that policymakers will respond to the worsening inflation outlook by hiking interest rates. And despite the sharp shift down in US interest rate expectations since that …
While the UK led the recovery in investment activity in Q4 last year, the latest data suggest the US and euro-zone are now also turning a corner. But given concerns over economic growth in all three markets alongside structurally higher long-term rates, …
While the recent financial market meltdown has pushed some euro-zone government bond spreads up, we don’t see good reasons for risk sentiment to remain so downbeat. So we expect the upward pressure on those spreads to ease soon. But we think the relief …
The UAE’s economy has been the strongest performer in the Gulf over the past year or so and a robust non-oil sector should help the UAE retain its crown as the fastest growing economy in the region. Recently-released Q1 GDP data from Abu Dhabi and Dubai …
The sharp fall in oil prices over the past week shows that fears of a US recession have so far outweighed concerns about conflict in the Middle East. But we think that oil prices have fallen too far, and will rise back to $80pb by the end of the year. …
Although the RBA left rates on hold today, it poured cold water on market expectations that it will loosen policy later this year. With the economy still running above its speed limit, we continue to believe that rate cuts won’t be on the agenda until Q2 …
Japan’s government has intervened in the FX markets to weaken the yen far more often than to strengthen it. But FX interventions have become very rare over the past two decades and our sense is that the government is welcoming a stronger exchange rate in …
The outbreak of political violence and the sudden resignation of Prime Minister Sheikh Hasina has rocked Bangladesh today. But provided that peace and stability is restored relatively soon, the economy is unlikely to suffer major long-term effects. Sheikh …
5th August 2024
We doubt the AI-fuelled rally in global equities has burst, despite a rout in the stock market in the US after some disappointing data there last week and a plunge in Asian indices today . It feels less like 2000 – when the dotcom bubble popped – than …
Despite the weakness of the latest labour market data, we judge that a soft landing is still the most likely outcome for the economy. Nonetheless, the risk of a hard landing has increased, while the disorderly market reaction – if sustained – could prompt …
Tourism in the euro-zone is likely to continue growing at a decent pace over the coming quarters due to rising real wages and increased capacity. This will be a particular boon to the southern economies, which in general we think will continue to grow …
Fears of a US recession have rattled EM equity markets at a time when EM economies themselves are showing more pronounced signs of weakness. Most EM currencies have held up well, suggesting a dovish tilt may come from EM central banks – particularly those …
The impact of the cost-of-living crisis, which has been weighing on London industrial take-up, has a bit further to run. But London is well-positioned to benefit from the rise in consumer spending we expect from 2025. Coupled with supply constraints, …
In its new urbanisation plan, China’s government is setting its targets low . The goal of reaching a 70% urbanisation rate in five years’ time could be met with far smaller increases in the urban population than have been seen in the past few years. And …
2nd August 2024
The latest manufacturing PMIs suggest that global industrial activity slowed sharply at the start of Q3, and that activity will probably slow further. But weaker activity hasn’t taken the heat out of price pressures in advanced economies, meaning that …
1st August 2024
The sharp fall in the EM manufacturing PMI suggests that the recent strength of industry may not be sustained in Q3. The declines in the PMIs were broad-based, although they are still relatively high in most of Asia. The PMIs also provided encouraging …
This is a revamped version of our quarterly Financial Risk Monitor to include commentary and analysis of our latest EM risk indicators. Currency risks continue to ease, fiscal risks remain moderate Financial vulnerabilities have continued to ease across …
