Froth has returned to Japan’s housing market, especially in urban areas where prices are now back to levels seen just before the collapse of the property bubble in the early nineties. A price correction is likely at some point, but the impact on the …
10th July 2019
The latest NFIB and JOLT surveys point to a contraction in business equipment investment and suggest that labour market conditions are starting to soften. The fall in the NFIB small business index in June left it above its long-run average, but there has …
9th July 2019
Brazil’s pension reform bill would, if passed in its current form, reduce vulnerabilities stemming from the dire public finances. But we are sceptical that it would lead to the near-term turnaround in the economy that some seem to expect. The pension …
The recent acceleration in productivity growth to a decade high of more than 2% y/y has renewed hopes that we could finally be seeing a structural pick-up linked to a new wave of technological advances. (See Chart 1.) We are optimistic about the potential …
Bank Negara Malaysia’s (BNM) left interest rates unchanged at 3.0% today, but kept the door open to further easing. With growth set to slow in the second half of the year, we think the central bank will cut interest rates again soon. Today’s decision came …
Although there has been little clarity about Brexit, under any of our scenarios – deal, no deal or repeated delays – we think the economy is well placed for growth to pick up by 2021. In turn, although timings will differ, we expect the cumulative impact …
President Donald Trump’s recent tweets have sparked speculation that, as part of an escalation of the trade war, he could order the Treasury to intervene in foreign exchange markets to manipulate the dollar lower. Historically, however, attempts to weaken …
8th July 2019
The global industrial downturn so far has been fairly broad-based, but cars have fared particularly badly. While some temporary factors have been to blame, the longer-term drivers of the slowdown point to prolonged weakness in the auto sector. Needless to …
We believe that the restarts at Alunorte, Becancour and in China will provide additional downward pressure on the price of aluminium. This, coupled with a weak demand backdrop, means that we expect aluminium prices to fall to a three-year low by end-2019 …
We suspect that the current tensions between Korea and Japan will subside after the Upper House elections. Even if Korean consumers decided to boycott Japanese products, the impact on Japan’s economy would be small as the bulk of Japan’s exports to Korea …
The dismissal of Turkey’s central bank governor over the weekend increases the chances of aggressive cuts in interest rates in the near-term. But it has also raised the risk of larger currency falls and is likely to make the country’s high inflation …
The likely rise in headline inflation in June won’t prevent the MPC – now firmly under the control of doves following the surprise resignation of deputy governor Viral Acharya last month – from cutting rates further over the coming months. However, …
New Democracy’s clear victory in Greece’s parliamentary elections yesterday will be welcomed by investors. But it will not be a game changer for the economy, not least because the government will still be constrained by its membership of the single …
With euro-zone bond yields falling, this creates the potential for a further compression of property yields. In our view, there will not be much of an immediate impact, though it is becoming more likely that any upturn in euro-zone property yields further …
5th July 2019
In the last month, a slew of events sparked gold’s strongest rally in nearly three years. We have not changed our long-held view that lacklustre global growth and a tumble in equity markets will keep gold prices elevated for the remainder of 2019. But we …
EM investment growth probably slowed to its weakest rate in twenty years in early 2019, although most of that seems to be related to tighter financial conditions and low commodity prices rather than the trade war. While there are signs that investment is …
The finance ministry attempted to demonstrate its commitment to fiscal prudence by lowering the FY19/20 deficit target in today’s union budget announcement. However, it is also aiming to boost economic growth with proposals to support SMEs and bolster the …
Christine Lagarde’s nomination as ECB President makes us even more optimistic about the near-term outlook for government bonds in the euro-zone and reinforces our view that corporate bonds there will hold up better than elsewhere. We have argued for some …
Economic growth in the UAE will slow over the rest of this year due to the impact of oil production cuts. But preparations for the World Expo will help to drive a rebound in 2020 and we expect the economy to be the best performing in the Gulf. The latest …
4th July 2019
Paris office take-up is likely to drop back a little this year, but with economic growth staying steady, it’s unlikely to fall off a cliff. A fairly restricted supply outlook means that vacancy can stay close to current lows over the next few years, …
The policy tightening and structural reforms that Pakistan has agreed to as the price of a deal with the IMF are likely to lead to a sharp slowdown in economic growth in the near-term but should also help to put the economy on a more secure footing. The …
The unprecedented surge in state & local government investment, which added close to 0.4%pts to annualised GDP growth in both the first and second quarters, is unlikely to be sustained. This is another reason to expect growth to slow sharply in the second …
3rd July 2019
Broad money growth accelerated to a decade high in May, as past increases in interest rates boosted portfolio demand, but the more recent renewed slump in rates will trigger a slowdown in the second half of this year. (See Chart 1.) The decline in …
The relatively dovish stance adopted by Poland’s MPC in the communications accompanying today’s interest rate meeting supports our view that monetary policy settings will be left unchanged until the end of the Council’s term in early-2022. The decision by …
The construction PMI fell sharply in June, but we doubt that housing starts will see a comparable decline. However, with Help-to-Buy due to be pared back, we do expect a small fall in housebuilding out to 2021. June’s CIPS/IHS Markit construction PMI …
While the real returns from a wide variety of assets were positive in the first half of this year, we don’t expect the good news to last. We project that those from US equities and government bonds, for example, will both be negative in the second half of …
The decision by the Riksbank to leave its repo rate on hold at -0.25% this morning came as no surprise, but the fact that it left its (in our view) optimistic forecast for interest rates unchanged bucks the dovish trend by other central banks, notably the …
Yesterday’s announcement that Christine Lagarde will succeed Mario Draghi leaves us even more confident that the ECB will loosen monetary policy in the coming months. We think the Bank is likely to cut its deposit rate in September and re-launch QE before …
The jump in euro-zone core inflation in June seems to have largely reflected temporary factors. More generally, a range of measures of underlying inflation suggest that price pressures remain subdued. This should encourage the ECB to loosen policy sooner …
2nd July 2019
Swiss pension funds and life insurers have been among the losers from negative interest rates, but the SNB is unlikely to follow the Bank of Japan’s example of targeting long-term bond yields to limit the damage on the sector. Given that we now expect …
A rise in inflation has led five of the ten Polish MPC members to suggest that interest rates may soon need to be raised. But we doubt that any of the five more dovish members, including Governor Glapinski (who has the deciding vote in the event of a …
While the RBA lowered the cash rate to 1.0% at today’s meeting, it signalled that it won’t ease policy any further for now. However, we think that the Bank remains too optimistic about the outlook for the labour market and inflation. Accordingly, we’ve …
In theory, last weekend’s trade truce between the US and China is a positive for commodity prices . But the muted market reaction suggests some scepticism. We tend to agree. In fact, we suspect that any boost to demand will only be temporary, and that …
1st July 2019
The continued broad-based decline in the global manufacturing PMI in June appears to confirm that the industrial malaise worsened in the second quarter . The global manufacturing PMI, published today, fell from 49.8 to 49.4, leaving it consistent with a …
The further fall in the EM manufacturing PMI last month suggests that EM growth slowed in Q2 and the forward-looking components of the survey point to a weak start to the third quarter. The EM manufacturing PMI fell to a five-month low of 49.9 in June, …
With the economic slowdown feeding through to weaker job gains, the apparent surge in consumption growth in the second quarter will not be sustained. But the strength of households’ balance sheets and the still-elevated saving rate suggest that, barring a …
As long-term clients will know, we have been publishing different forecasts for the economy based on two different Brexit outcomes, “deal on 31 st October” and “no deal on 31 st October”. We are now adding a third – “repeated delays” in which the Brexit …
The preliminary trade deal between Mercosur (Brazil, Argentina, Uruguay and Paraguay) and the EU, if implemented in full, would boost potential growth in the bloc, perhaps by as much as 0.75-1.0%-pt. But with a lengthy phase-in period for some measures, …
Another month of weak PMI readings confirms a renewed slowdown in China’s economy. While optimism surrounding the US-China trade truce is currently buoying commodity prices, we think slower growth in Chinese demand will be a factor dragging prices lower …
This report is only available as a PDF. Click to download. … Chief Economist's Note: Checking in on our key calls …
India’s current account deficit narrowed in Q1 and, while significant policy loosening could cause imports to pick up over the coming quarters, we think that oil prices will remain low. This should keep the import bill in check. Meanwhile, FDI inflows …
The latest Business Outlook Survey somewhat surprisingly shows that Canadian firms have convinced themselves a recovery is just around the corner, even though the weak global backdrop and evidence of a slowdown south of the border would seem to suggest …
28th June 2019
We had previously assumed that the EU would put Italy into an Excessive Deficit Procedure in July, but recent reports suggest that this might be postponed until later in the year. Either way, Italy’s public finances remain on an unsustainable path, and …
Despite rising trade tensions and soft demand growth, we think that the price of copper will be resilient in the coming months and rally thereafter due to supply constraints . As we had anticipated, the LME copper price has dropped since mid-April due to …
Facebook’s new currency, Libra, could be a significant step forward in reducing the cost of processing international transactions. However, it is very unlikely to become a widely-used global currency. Libra’s unveiling has inevitably invited comparisons …
We have long forecast the yen to strengthen to ¥105/$ by the end of 2019, primarily based on our expectation that a sell-off in global equities would boost the demand for safe havens. While we remain of this view, the policy stance of the Bank of Japan …
The recent slowdown in logistics vehicle traffic is consistent with the softness of industrial take-up in the first quarter. Given the supply of industrial property is expected to increase this year, without a decent improvement in logistics vehicle …
The direct economic impact of an initial round of US sanctions on Turkey related to the purchase of Russian defence equipment would probably be limited, but past experience suggests that the threat of further sanctions would weigh on the lira and cause …
27th June 2019
Portugal recovered well from the euro-zone crisis and its economy is set to record above-trend growth for the rest of this year and next. But its high public and private debt levels suggest that it is vulnerable to an increase in interest rates and/or a …
While the performance of the US stock market in the Fed’s last four easing cycles was varied, our view remains that it will fall in the next one, which we expect to span from late-summer 2019 to spring 2020. The S&P 500 soared by nearly 15% in the …
