The manufacturing PMIs for July suggests that growth in EM industry remained soft at the start of Q3, with activity in Emerging Europe weakening sharply. The surveys also provide further evidence that price pressures are easing, supporting our view that …
1st August 2019
Commercial property investment activity looks likely to drop back slightly from the highs seen last year. But, rather than pointing to a downturn in pricing, we believe that this reflects investors re-evaluating the implications of the softer …
The communications following today’s meeting suggest that Czech policymakers are trying to temper the market’s view that interest rates will be cut in the coming months. Nonetheless, the Bank’s projections have moved closer to our view that rate cuts will …
Much like the Fed, the Monetary Policy Committee today blamed a lot of its more downbeat assessment of the outlook on the global economy. But unlike the Fed, the MPC still thinks it will probably need to raise interest rates (if there’s a Brexit deal). …
In this Update we are launching our coverage of the European TTF natural gas price. In short, we think that surging global supply of liquefied natural gas will keep EU markets amply supplied over the next few years. As such, we expect only a modest rise …
Data from the English Housing Survey suggest that rising tenant demand has come from newly formed households. That could reflect more young adults moving out of their parents’ homes, and supports our view that rental growth will rise to 3.5% y/y by 2021. …
China’s official and unofficial PMIs both rose in July, but they remain consistent with a renewed slowdown in economic activity, which will be a key factor weighing on commodity prices later this year . The official manufacturing PMI ticked up to 49.7 …
The Brazilian central bank’s larger-than-expected 50bp reduction in the Selic rate last night to 6.00%, and hints of more stimulus, have prompted us to pencil in an additional two 25bp rate cuts this year. We now expect the Selic rate to end this year and …
The Fed reduced the fed funds rate by 25bp — to between 2.00% and 2.25% — at today’s FOMC meeting, but it was arguably a “hawkish” rather than “dovish” cut, which supports our view that the next reduction won’t arrive until much later this year. According …
31st July 2019
Government debt-to-GDP ratios across the Gulf have risen significantly over the past five years but only in Bahrain and Oman do we hold serious concerns over the health of the public finances. Financial support from their neighbours should prevent …
There has been mounting speculation that the Monetary Policy Committee (MPC) will join the global loosening cycle by cutting interest rates. We think it will if there is a no deal Brexit. But if there’s a Brexit deal or many more delays, the UK could buck …
The rebound in the three-month annualised rate of core PCE inflation to a seven-year high of 2.5% in June, together with evidence that unit labour costs have been rising more rapidly than thought, suggests that core inflation could surprise on the upside …
30th July 2019
Our estimates suggest that if a no deal Brexit was fully priced into the market the pound would fall from $1.22 (€1.09) now to about $1.15 (€1.05) or a little lower. Over the past few days the pound has weakened to two-year lows of $1.22 and €1.09 in …
Our GDP Tracker suggests that the slowdown in Saudi Arabia’s economy at the start of this year extended into Q2 and it looks set to intensify over the rest of 2019. Our forecast for GDP growth of just 0.3% over this year as a whole lies well below …
Gold prices have hit a record high in rupee terms in recent weeks, surpassing the previous peak in 2012 when India was on the brink of a balance of payments crisis. But a drop in underlying demand for gold, and lower prices for other major imports, …
The Bank of Japan projected a dovish tone today, promising further easing if needed. But unlike other major central banks the BoJ still seems a long way from following that up with action. We think it will refrain from lowering interest rates for the …
The decline in Swedish GDP in Q2 will make it harder for the Riksbank to sit on the fence. With the economy unlikely to find much support in H2, the rising prospect of a recession lends further support to our forecast that the krona will fall sharply by …
The ending of the Central Bank Gold Agreement signals that worries about central bank gold sales are firmly behind us. In fact, central bank buying is now a significant prop rather than a headwind to the gold market. Indeed, with significant European …
With valuations looking stretched and the rental value outlook weak, regardless of how the pound moves in response to Brexit, we do not expect a rebound in overseas demand for property. Our three Brexit scenarios, as outlined in the latest UK Economics …
The grounding of the Boeing 737 Max aircraft delivered a hit to business equipment investment and net exports in the second quarter, reducing annualised GDP growth by 0.25% points. A similar hit to third quarter GDP is likely if production is cut further …
29th July 2019
The Bank of Canada’s forecasts for residential investment do not seem to account for the shift away from single-family to multi-family construction. That shift means it will take longer for construction to respond to the Bank’s previous interest rate …
Spending on cars has fallen sharply since the EU referendum, and unless a Brexit deal is agreed we suspect that it will remain a drag on consumer spending growth for a few years yet. Since the EU referendum in June 2016, real spending on cars has declined …
We have upgraded our forecasts for Portugal’s economy and now expect growth to be above trend in 2019 and 2020. Along with a halving in the size of the Lisbon office development pipeline in the next few years, this has led us to upgrade our rental growth …
A steady decline in home sales last year pushed the homeownership rate to a 1½-year low in the second quarter, and we doubt it will recover over the next couple of years. A slowing economy will prevent the recent drop in mortgage rates from boosting …
26th July 2019
The relatively dovish statement accompanying the Russian central bank’s decision to cut the policy rate today supports our view that the easing cycle has a lot further to go. We expect an additional 75bp of cuts over the next 9-12 months, whereas the …
The Swiss franc has been the best performing G10 currency over the past three months, despite falling back a bit after the ECB meeting on Thursday. We think that monetary policy as well as safe-haven flows will continue to support it against the euro …
A raft of survey data suggests that last month’s fall in Hungarian core inflation is unlikely to mark the start of a downward trend – as the central bank anticipates. We expect that underlying price pressures will build over the coming quarters, prompting …
A number of major central banks in Latin America are on the cusp of joining the global easing cycle but, in contrast to the prevailing view, we don’t think that Colombia will be one of them. We expect a weaker Colombian peso to push inflation up in the …
25th July 2019
Growth in China is slowing, but fears of a big drag on Africa are overdone. While the Asian giant’s demand for some commodities will soften, it will remain a key trade and investment partner. Indeed, in a slower-growing but more consumer-focused China may …
The apparent confirmation this afternoon that the ECB is inching towards loosening policy lends further support to our view that more rate cuts are on the cards in Denmark and Switzerland too. As we had expected, the ECB left its policy settings unchanged …
The market reaction to today’s ECB press conference suggests that President Draghi was not as dovish as some investors had hoped for. But the big picture is that it seems clear that policy loosening is coming. We expect the Bank to cut its deposit rate in …
The latest oil production forecasts from the National Energy Board suggest that there are downside risks to our below-consensus forecast that GDP growth declined to 1.5% annualised in the third quarter. The blue line in Chart 1 shows the National Energy …
Transactions fell sharply in June, but leading indicators suggest that the decline probably won’t be sustained. Indeed, assuming a no deal Brexit is avoided, we think housing transactions will fall by only 1% this year, before seeing a modest rise out to …
Commercial banks in New Zealand have kicked up a fuss over a proposal by the Reserve Bank to increase the level of capital the banks are required to hold. By contrast, we believe the new rules won’t result in a major increase in bank lending rates or a …
The Turkish central bank’s new governor, Murat Uysal, delivered a sharp 425bp interest rate cut at today’s MPC meeting and pressure from President Erdogan means that further aggressive easing lies in store over the coming months. But this is likely to …
We think that the price of palm oil (PO) will rise a touch this year and pick up strongly in 2020 primarily on the back of stronger demand growth, which will shift the market into a deficit . By way of background, the price of PO has tumbled since the …
Credit is growing at its strongest rate since the early 1990s. Given that investment growth has started to slow, the spike in private debt seems odd at first glance but much of it appears to have been driven by firms borrowing to seek higher rates of …
Advanced economy PMI surveys for July revealed that the relatively resilient services sector struggled to support growth, as the industrial downturn deepened. And the latest results of the Global Business Outlook surveys support our view that the slowdown …
24th July 2019
Judging by their recent performance, more bad news is priced into German than US equities. As a result, if we are right and risky assets around the world come under pressure as global growth slows further, we suspect that the German stock market will fall …
If it is introduced (which is far from certain) a tiered deposit rate would reduce the cost of negative interest rates for banks, but it would do so by only a trivial amount. Its main purpose would be to help to build support for, or buy off opposition …
Any spending spree by the new administration will probably be accompanied by a rise in borrowing, which could breach the current fiscal rule, especially if there is a no deal Brexit. However, fiscal rules are made to be broken, so we don’t think that this …
The latest rally in the Baltic Dry Index (BDI) has more to do with developments in the iron ore market than trends in world trade. As such, we think that the index will fall back as the iron ore trade normalises and the reality of slower global growth and …
The recent drop in corporate profits appears to have been driven by weak global demand rather than by rising wages. Accordingly, profits are likely to fall further over coming months even if we’re right in expecting the unemployment rate to pick up. The …
Australia’s corporate tax rate remains one of the highest in the world. However, the boost to GDP growth from lowering it towards the levels seen elsewhere would probably be quite small. The government has started to reduce the corporate tax rate from 30% …
Manufacturing surveys across Central Europe have overstated the weakness of industry recently, but the strength of production growth looks unsustainable. As prolonged weakness in the euro-zone takes an increasing toll on activity in the region, a slowdown …
Measures announced during this month’s union budget to ease restrictions on foreign direct investment into India should help to assuage concerns that policymakers have taken a more insular view on investment policy. Our view remains that the Modi …
The IMF has revised down its global growth forecasts, but they are still much stronger than our own. Its forecasts for advanced economies look particularly optimistic and we think that the changing monetary policy stance will take longer to bear fruit …
23rd July 2019
Nigerian policymakers held their key rate at 13.50% today, and indicated that they will rely on unconventional policy tools to boost lending over the coming quarters. These are, however, unlikely to work, and we think that this will prompt another 50bp …
The budget deal agreed by the Trump administration and Congress removes the risk of a damaging debt ceiling crisis in September and prevents a contraction in discretionary spending from October onwards. But our forecasts already assumed that the old …
