The strike at General Motors, together with continued problems at Boeing, means that the incoming manufacturing data over the next month or two will go from bad to terrible . That is another reason to expect economic growth to slow further in the fourth …
9th October 2019
At first glance, weak global aluminium output so far this year can be chalked up to the slump in prices. However, lower Chinese production growth has more to do with government-led crackdowns on excess capacity which should continue even if, as we expect, …
Calls for any fiscal stimulus to support the Swedish economy are likely to fall on deaf ears, so the burden will continue to be entirely on the Riksbank. A combination of a dovish shift by the Bank and a further escalation in global trade tensions will …
We expect appetite for risk and monetary policy to continue to be more important factors than commodity prices in determining the direction of the Aussie, Kiwi and Loonie. With that in mind, we think that the relative resilience of the Loonie so far this …
The government’s latest no deal tariff plans released yesterday provide us with some reassurance that although there will be some hit to the economy from higher tariffs it won’t be as big as most feared. Although there’s little the UK can do to prevent …
While Paris prime retail rents rose in 2018, we doubt this marks the start of a prolonged upward trend. With tourist flows set to stagnate due to a weak global economy, rents will not rise by much before 2023, but the continued attraction of Europe’s …
We now expect growth in New Zealand to ease from 2.2% in 2019 to 1.5% in 2020. Along with a rising unemployment rate, weak economic activity will prompt the RBNZ to cut rates twice next year. Growth in New Zealand has gradually eased over 2019 as weak …
We expect that global oil supply will remain constrained in 2020. But we also forecast somewhat stronger growth in demand next year and a pick-up in risk appetite on the back of monetary easing. As a result, we are raising our forecast of the price of …
In a change to our previous forecast, we now think there’s a fair chance that the Bank of England will cut interest rates if Brexit is delayed. That means interest rate cuts now feature in two of our three Brexit scenarios and would only be avoided if …
8th October 2019
Côte d’Ivoire’s upcoming elections in 2020 raise political risks facing the economy. But our core view is that the vote will pass peacefully, and that looser fiscal policy combined with more favourable external conditions will boost growth to 7.5% next …
The prospect of Turkish military action in Syria has again raised the spectre of US sanctions. While these would probably be on the soft end of the spectrum, Turkey’s poor external position means that the mere threat of more action would weigh on the lira …
Other surveys suggest that the ISM manufacturing index is over-playing the extent of the factory-sector slowdown. But the wider evidence suggests the outlook for manufacturers is still pretty poor. The fall in the ISM manufacturing index to a 10-year low …
7th October 2019
Headline consumer price inflation is likely to have jumped in September on the back of a surge in onion prices. But that’ll hardly bring tears to the eyes of the RBI, as it is likely to have stayed below the 4.0% target. Another rate cut in December seems …
The recent stabilisation in MSCI’s monthly measure of shopping centre rental value growth appears to reflect coverage issues rather than signs that an improvement is on the way. As such, we are comfortable with our forecast that rental value growth will …
Once interest rates approach their lower bound, the RBA could provide long-term loans to banks and link their interest rate to the amount of new lending those banks undertake. However, if the Bank decided more stimulus was needed, we still think that …
As the outlook for the global economy grows gloomier, the US dollar is strengthening towards multi-year highs. We expect it will appreciate further as safe haven demand intensifies over coming months. After rising by 5% in 2018, the US dollar has …
4th October 2019
If faced with a steep downturn, most EM central banks would be able to cut interest rates substantially in order to cushion their economies. Interest rates in a handful of countries are close to the zero bound, but these are typically economies with …
The Reserve Bank reverted back to a 25bp rate cut today and has left the door open for further easing in the near term. But we are firmly non-consensus in expecting modest rate hikes by the end of next year. The MPC’s decision to cut the repo rate for …
Worsening relations between the Brazilian presidency and legislature threaten to delay the much-vaunted pension bill and will keep markets on tenterhooks in the coming weeks. It still looks like the reform will be approved, but the latest events suggest …
3rd October 2019
While the hike to Japan’s sales tax means its economy will probably contract in Q4, we suspect that the impact on bonds and equities there will be fairly small. However, we still think that Japan’s stock market will fall by the end of this year, as waning …
Chile’s economic slowdown this year was mostly due to weaker private consumption, caused by a fall in consumer confidence. But with the labour market strengthening and copper prices likely to rise next year, we expect that consumer spending growth will …
When put on a like-for-like basis, the Bank of England’s assumptions for how weak the economy would be in the 12 months after a no deal Brexit are not that different to our own. And both we and the Bank think that after a no deal economic growth would …
Aggregate emerging market growth is likely to stabilise at close to 4% y/y in the coming quarters, but within this several different economic cycles are playing out. The recent resilience in Central Europe and, importantly, China, is unlikely to last. But …
South Korean capital flows into European commercial property have surged so far this year. Against the backdrop of cheap credit and robust fundamentals in many markets, these flows look set to continue for at least another couple of years. However, …
Kenya’s economy remained weak in Q2, but there are signs that the key agricultural sector has held up pretty well given this year’s drought. With the drag from the sector easing, GDP growth will pick up over the remainder of this year and into 2020, when …
Dubai’s economy slowed in 2018 and the activity data for this year suggest that growth has stayed weak. The 2020 World Expo will provide a fillip to the economy, but a number of other factors mean that GDP will grow at rates of 1-2% over 2019-21, well …
2nd October 2019
Having cut its key interest rate by 25bps this morning, we now expect the Central Bank of Iceland (CBI) to stay in easing mode over the coming months and to reduce rates to 2.75% by year-end. The reduction in the seven-day deposit interest rate in Iceland …
We think that the ECB will increase its monthly bond-buying next year by purchasing more corporate debt. This would lead to a marked pick-up in bond issuance, but only a small increase in investment. The divisions on the ECB’s Governing Council become …
There has been a dramatic expansion in the co-working office sector globally over the last five years. As these operators use a different approach to traditional landlords, this brings new risks to office markets, though we feel it is probably too soon to …
We still believe that the unemployment rate would have to fall to 4.0% to meet the RBA’s definition of full employment. With the actual unemployment rate now at 5.3% and rising, that means that the RBA has more work to do. We reiterate our forecast that …
The rise in the EM manufacturing PMI to a six-month high in September adds to our view that EM growth is stabilising, even as advanced economies continue to lose momentum. The EM manufacturing PMI rose from 50.4 in August to 51.0 in September. While it …
1st October 2019
The Liberals would loosen fiscal policy by more than the Conservatives if they won October’s election, but neither parties’ plans would seriously transform the economic outlook. On Sunday the Liberals released the cost breakdown of their policy proposals, …
We estimate that the direct and indirect effects of the slump in vehicle production account for around half of the downturn in German industrial production since the beginning of last year. A sustained recovery will not take place until the sector is back …
The dissolution of congress by President Martín Vizcarra and his heated stand-off with the opposition will likely cause a sell-off in markets and further political gridlock. But as things stand, we doubt that this will prevent Peruvian GDP growth from …
The global manufacturing PMI picked up again in September, but this was largely due to a jump in China’s index that we don’t think will be sustained. While it is still too early to call time on the downturn in global industry, it is at least of some …
The RBA cut interest rates to 0.75% as widely anticipated and we think it will lower rates to 0.5% by the end of the year. Rates approaching the zero lower bound will inevitably invite speculation about quantitative easing but the RBA’s forceful response …
India’s current account deficit narrowed a touch in the four quarters to Q2 and looks unlikely to balloon any time soon as imports of key commodities remain in check. Meanwhile, FDI inflows edged up in Q2 and are likely to rise over the coming quarters as …
Suggestions that the recent rise in interbank rates was caused by the ECB’s new tiered interest rate system are wide of the mark. Instead, the increase reflects investors’ re-evaluation of the outlook for policy rates. They now anticipate a single 10 …
30th September 2019
Although we forecast a correction in the US stock market later this year, we think it will outperform Treasuries by a large margin in 2020-21. This view rests on an assumption that inflation will remain quite low, but positive. Other inflation outcomes …
The latest business surveys from Switzerland indicate that the woes in Germany are posing an increasing drag on activity. We have therefore revised our forecasts for Swiss GDP growth down to just 0.5% this year and next, which puts us well below the …
China’s official and unofficial PMIs rose in September, but we think this is unlikely to mark an economic turnaround not least because global demand looks set to weaken further. What’s more, signs of slower construction activity have particularly negative …
Data released over the weekend suggest that Vietnam grew strongly in the third quarter of the year, and we think it will remain one of the fastest growing economies in the region. The possibility that the US will introduce tariffs on its imports from …
Tomorrow’s tax hike is likely to do less immediate damage to economic growth in Japan than previous increases. But it is still likely to trigger a sizeable fall in GDP in Q4. A rapid rebound next year is unlikely. The sales tax was introduced at 3% in …
The giveaways to households and firms announced by French finance minister Bruno Le Maire yesterday do not alter the fact that there will be a tightening in France’s fiscal stance in 2020. Indeed, the French government has not got the will (nor the scope …
27th September 2019
Investors’ continued optimism about corporate earnings in the US is hard to square with our view that economic growth there and in the rest of the world will remain weak. That is the key reason why we expect US equities to perform poorly during the rest …
We have revised up our forecasts for India’s Sensex equity index following the corporate tax reform there. And more generally, we expect it to be one of the best performers among EM stock markets over the next few years, even if it falls back a little …
A further downgrade to the euro-zone growth outlook means that additional monetary loosening is on the cards. While this doesn’t substantially shift our expectations for property yields over the next few years, it will keep the supply of capital strong …
Mexican policymakers cut their policy rate from 8.00% to 7.75% yesterday, and we think that they will continue to loosen policy over the coming quarters. We now expect a 25bp cut in both of the remaining meetings this year, taking the rate to 7.25% rather …
Assessing investors’ expectations about the future path of policy interest rates in Norway is not as straightforward as it is in other countries, not least neighbouring Sweden. In this Update we answer ten key questions to provide a primer on how to gauge …
