In much of the world, interest rates are likely to settle at higher levels than was the case prior to the pandemic. But China is a key exception, with its shrinking population, slowing productivity gains, low inflation rate and increasingly-heavy debt …
29th November 2023
We expect 10-year Treasuries to outperform 2-year Treasuries between now and the end of 2024, even though we forecast the 2-year Treasury yield to fall by more than the 10-year Treasury yield in that period. The Treasury yield curve went through a period …
28th November 2023
Our recent r* work reinforces the view that property yields will stay relatively high longer term. That implies global returns in low single digits over the next decade or so, well below pre-pandemic averages. Our recent Global Economics Focus summarises …
27th November 2023
Guyana’s oil production looks set to grow quickly over the next few years even if the total volume can only play a small role in raising global supply. That said, substantial reserves and low break-even costs should mean that it can continue to produce …
Following a temporary reversal in Q3, EM inflation has started to fall again in the last few months. While this is set to continue, we think it marks the start of a second phase in the EM disinflation process – one that will be characterised by a much …
A close look at the data suggests that the boom in investment in Mexico this year is due to a surge in transport infrastructure construction on the Yucatán Peninsula rather than a boom in nearshoring-related investment. With these projects nearing …
The S&P Global PMIs have provided misleading signals about the strength of activity in the US and Europe this year. But, for what it’s worth, the flash surveys for November suggest that DMs are ending 2023 on a weak note, with activity stagnating or …
24th November 2023
We think the yields of long-dated local-currency government bonds in Asia will generally fall further by the end of next year, and that most regional currencies will continue to make ground against the US dollar. But we suspect some of the intra-regional …
23rd November 2023
The South African Reserve Bank opted against responding to last month’s larger-than-expected rise in inflation with an interest rate hike, leaving the repo rate unchanged at 8.25% today. But officials continued to strike a hawkish tone and it looks like …
Despite the Riksbank Executive Board insisting that it might raise interest rates again in the coming months, we would be very surprised if it does so. Instead, we think the next move will be a rate cut next May, and expect the Bank to then cut rates …
While subdued capital spending has contributed to the slump in productivity, the recent plunge in the capital/labour ratio can only partly be explained by the surge in net migration. It is now a well-documented fact that Australia’s labour productivity …
Coal prices in both Europe and Asia will fall next year as growth in demand eases. But the fall in Europe should be larger as we expect demand there to outright contract. This should ensure that coal prices in Asia trade at a premium to prices in Europe …
22nd November 2023
The Israeli government’s budget deficit is widening sharply and we think it will breach 5% of GDP next year. Provided the length of the war and the increase in the deficit are short-lived, we don’t think this will cause funding problems and the …
US equities’ outperformance this year is due almost entirely to the few industries that include “Big Tech” firms, as the rest of the US stock market fared similarly to equities in the rest of the world. While we expect a broader stock market rally next …
We continue to forecast a small fall in euro-zone yield spreads over Bunds in the next year or so. However, rising risks to the upside in recent months and differences in fiscal positions between countries may mean that the relative picture for some …
One year into his premiership, Anwar Ibrahim has made very limited progress on his key reform objectives. Given his weak position in parliament, we don’t anticipate this will change anytime soon, and we remain downbeat on the country’s medium-term …
Economic growth in Singapore rebounded strongly in the third quarter of the year, but we don’t expect this strength to last. A combination of weaker global demand and high interest rates will cause growth to slow over the next couple of quarters. The …
Faced with much higher interest costs, Finance Minister Chrystia Freeland outlined very little in the way of new spending measures in the Fall Economic Statement today. Most of the focus was on non-monetary housing-related policies that will have little …
21st November 2023
The EU’s criticism of French fiscal policy is not in itself a major concern. But France’s debt-to-GDP ratio may well rise over time rather than declining as the government intends. The key problem is a very large primary deficit which the government plans …
Key insights from our new CE Climate Reporting Tools …
Since early 2020 there has been a clear divergence in performance between data centers and the traditional commercial real estate sectors. Looking forward, we expect the hyperscale sub-sector will continue to outperform off the back of growing cloud …
20th November 2023
We are doubtful that the recent strength of consumption is because real incomes are being understated, as some have suggested. It is more likely that so-called “excess savings” were previously underestimated, but even the latest estimates imply those …
This is an updated checklist which takes into account our latest expectations for the Autumn Statement. The checklist helps clients keep track of the key policies and forecasts announced during the Chancellor’s Autumn Statement at 12.30pm (GMT) on …
In our flagship report on the neutral interest rate (r*), we argued that r* in developed markets will rise and be higher than is widely assumed. (The full report can be accessed here .) For most EMs, r* is also likely to be higher (with China being a …
The intensification of loadshedding has brought growth in South Africa’s economy to a halt this year, but there appears (finally) to be some light at the end of the tunnel. Repairs to existing power plants, independent power projects, and the …
Milan prime office yields appear very low both compared to other alternative assets and other euro-zone countries. By any standards, office property there looks highly overvalued. But looking ahead, as rent growth trails elsewhere in the region, we expect …
Javier Milei’s victory in the final round of Argentina’s presidential election yesterday will bring about a major shift in economic policymaking. We suspect that some of his more radical proposals – namely dollarisation – may not materialise given limited …
Economic growth in Thailand picked up in the third quarter of the year and we expect the economy to record steady, if unspectacular growth over the coming quarters, helped by looser fiscal policy and a further recovery in the tourism sector. GDP growth …
The emerging “goldilocks” narrative is a challenge to our forecast that the dollar will appreciate a bit over the coming months while the more cyclically sensitive currencies underperform, but we continue to think that the renewed optimism about the …
17th November 2023
The US and China once again backed the G20 goal of tripling global renewable energy capacity this week (from 2020), a goal which would help to keep the path to net zero emissions by 2050 on track. However, the speed of the energy transition is uncertain, …
GDP figures for Malaysia published today confirmed that the economy rebounded strongly in the third quarter of the year. However, with interest rates set to remain elevated and exports likely to struggle, we doubt this strength will last. Today’s figures …
With a lot of pessimism seemingly already priced in to China’s “risky” assets, we suspect a thawing in US/China relations could give them a boost. But we think their longer-term outlook is less rosy. Meanwhile, we don’t think US/China tensions will have …
House price declines likely to worsen The fall in new listings in October may ease some concerns about forced home sales but, with the sales-to-new listing ratio declining again, it is still likely that the pace of house price declines will accelerate. …
16th November 2023
Sovereign debt risks across Frontier Markets have eased slightly since last quarter. But dollar-bond spreads in Ethiopia have jumped following its request for debt-service suspension earlier this week. And we think that the risk of default over the coming …
Recent developments will have given policymakers at Norges Bank food for thought ahead of December’s interest rate decision. While we had initially rejected the central bank’s guidance that it would hike once more, we now think three key upside risks have …
While the world’s major central banks now appear to have ended their tightening cycles, we think the Riksbank will raise its policy rate by 25bp again next week, to 4.25%, because of the strength of domestic inflation and weakness of the krona. And we now …
Growing external and domestic headwinds suggest to us that Brazilian financial markets will come under pressure over the short term and are unlikely to resume their outperformance beyond that. Brazilian assets have fared relatively well amid the ongoing …
15th November 2023
We expect growth to slow and inflation to drop to central bank targets in major DMs in 2024. But the latest business expectations surveys on the face of it suggest that the risks to our forecasts are tilted towards activity and inflation being more …
Measures of cross-asset volatility and risk premia suggest that investors are increasingly discounting a fairly rosy market environment over the coming months. This leaves them at risk of disappointment if, as remains our central forecast, the US economy …
November’s IPF Consensus Survey showed that, although euro-zone office rental growth is expected to slow next year, forecasts remained unchanged on average from the May survey. In contrast, given the ongoing deterioration in office leasing and the weak …
The squeeze on Russia’s budget and current account positions has eased over the second half of this year, largely thanks to a rise in oil prices. Higher energy revenues next year should help to limit the impact of a surge in military spending on the …
Our forecasts for commercial real estate values remain well below consensus, even after the latest downgrade. While our sector rankings are consistent with the consensus, we are predicting a more substantial rise in cap rates by end-2025, which will see …
The latest Saudi GDP data paint a downbeat picture in which the recession has deepened amid oil output cuts. But the good news is that the recession looks to be coming to an end. And we think the economy will begin to recover over the coming quarters as …
We think that bonds in Emerging Markets (EMs) will struggle in the next couple of months. Further ahead, though, we expect their yields to fall, as both “risk-free” rates and spreads drop. The yields of EM local-currency and dollar-denominated bonds have …
While wage growth will continue to slow, the smaller-than-expected fall in September supports our view that the Bank of England will keep rates on hold at their current level of 5.25% until late in 2024. Wage growth eased more slowly than we and most had …
14th November 2023
Data over the weekend showed that Egypt’s inflation rate slowed, confirming that September marked the peak, and our baseline scenario is that it will continue to drop back as we head into 2024. The main risk to our view is that there is a disorderly …
13th November 2023
While the official measure of rental growth is running at record highs, pay has risen even faster. So, at face value rental affordability is good by historic standards. But that doesn’t account for the fact that market rents have jumped by more than the …
With vacancy set to stay elevated, development finance remaining expensive, and values to continue falling next year, we expect construction starts will be weak in all sectors over the next 12 months. This will weigh on completions into the medium term, …
10th November 2023
This page has been updated with additional analysis since first publication . In this Update , we present our sovereign debt heat map that provides a snapshot of debt risks across Sub-Saharan Africa. Government debt is still above pre-pandemic levels and …
Flows out of EM bond and equity markets have eased since early October, but we think the recent dollar weakness which has helped to support capital flows into EMs is unlikely to continue. The good news is that current account deficits have narrowed in …
