Pakistan’s central bank (SBP) today raised its benchmark interest rates by a further 100bp amid continued concerns about high inflation and the country’s current account deficit. With inflation set to rise further over the coming months and the external …
16th July 2019
A further sharp rise in EU structural fund inflows will support strong Polish fixed investment growth over the next couple of years. But that won’t be enough to prevent overall GDP growth from slowing. Since the start of 2018, fixed investment growth has …
The Czech economy has slowed over the past 18 months, which, alongside strong new development, has kept industrial rents in check. But, with signs of renewed vigour in occupier demand and rents already coming under upward pressure due to rising land and …
New regulations from the central bank will probably do little to encourage lending to the private sector. So long as government bond yields remain elevated, banks will prefer to park their money in treasuries. The Central Bank of Nigeria (CBN) has issued …
India’s merchandise trade deficit narrowed for the first time in five months in June. Looking ahead, a limited exposure to a more protectionist US, as well as low oil prices, will help to keep the trade deficit contained over the coming months. Data …
With budget deficits still large in Brazil and Argentina, fiscal policy there will continue to be tightened over the coming years. But small budget deficits in Mexico, Chile and Peru mean that governments there now have scope to loosen the purse strings. …
15th July 2019
Strong domestic demand means that Romania’s current account deficit, which is already among the largest of any major EM, is likely to widen further. This makes the leu increasingly vulnerable to a deterioration in investor sentiment and is likely to …
While we are lowering our end-2019 and end-2020 forecasts for the 10-year BTP yield, we remain pessimistic about the near-term prospects for government bonds in Italy. Back in January, when the yield of 10-year Italian government bonds (BTPs) was roughly …
The July Financial Stability Report (FSR) noted weak foreign investment and sharp outflows from open-ended property funds as two key risks for commercial property this year. In fact, estimates of the sensitivity of property fund redemptions to price …
Japan’s government will probably expand the number of operating nuclear reactors from nine now to 17 by 2030. While the impact on the trade balance will be tiny, electricity prices may fall significantly. Japan has made steady progress in restarting its …
China’s trade data for June painted a fairly downbeat picture of its demand for commodities. Given that we expect the Chinese economy to slow further over the coming months, a pick-up in China’s commodities imports looks unlikely . Continuing a run of …
12th July 2019
We expect refined zinc output to grow at its fastest pace for nine years in 2019 and this, combined with ailing demand, suggests zinc prices should continue to fall to our end-2019 forecast of $2,300 per tonne . We have long been of the view that zinc …
We think that the OPEC+ production cuts will fail to reduce global crude stocks. Instead, we expect soft demand growth and rising global supply, particularly from the US, to push stocks higher in the remainder of this year, which underpins our forecast of …
As demand fears have taken centre stage, persistently low exchange stocks have stayed under the radar. We think this is unlikely to change this year. But in 2020, looser monetary conditions and rising risk appetite could shift market attention to waning …
11th July 2019
A lot has happened since the Governing Council’s policy meeting on 6 th June, so the account published today has arguably been superseded by events. But it does confirm that even five weeks ago the Bank was gearing up for action. The account also hints at …
It is inevitable that housing starts will drop back from June’s elevated level and we expect the decline over the next 12 months to be steeper than others anticipate. The surge in housing starts in June to 246,000 annualised, from 197,000, would seem to …
Activity data for May added to the evidence that the economy rebounded following its contraction in Q1. Even so, we think that the Reserve Bank will cut its policy rate from 6.75% to 6.50% next week. Figures released today showed that manufacturing output …
The large margin of victory for Brazil’s pension bill in its first vote in the lower house last night is likely to result in a rally in local markets later today, and makes an interest rate cut at the Copom meeting this month a done deal. We have also …
Although the tone of Bank of Canada’s monetary policy statement remained fairly neutral, its updated forecasts suggest that the Bank is losing faith in the economy’s short-term prospects. We continue to expect the Bank to cut interest rates in October. As …
10th July 2019
Leading economic indicators underline that most of the recent weakness has been confined to the export-orientated industrial sector, suggesting the risks of an outright recession are contained for now . The Conference Board leading index, which combines …
Chair Jerome Powell’s semi-annual testimony to Congress indicates that, despite the trade truce following the recent G20 meeting and the strength of employment growth in June, the Fed intends to push ahead with a rate cut at the FOMC meeting at the end of …
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 …
IPF Consensus office rent forecasts for 2019 were generally upgraded in their latest iteration, with central Europe seeing a particularly large rise. We also made widespread upgrades to our forecasts in the same six-month period. While our overall …
The Czech economy has underperformed its regional peers in recent years due to its larger exposure to the euro-zone and weaker household spending. However, the Czech slowdown is close to bottoming out. In contrast, slowdowns elsewhere in Central Europe …
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 …
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
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 …
