CPI food inflation has remained elevated in recent months but, with wholesale price growth easing rapidly, we are confident it will soon fall sharply. That will help to offset the impact of higher oil prices on energy inflation and means there is still …
14th September 2023
South Africa’s unemployment rate has dropped back over the past year or so but it remains far above its pre-pandemic level. The rise in long-term unemployment, which has its roots in both cyclical and structural factors, is particularly worrying and could …
Depressed activity remains consistent with falling house prices The further deterioration of the RICS survey figures in August suggest the peak in mortgage rates seen in July are continuing to dampen demand. And as we don’t think rates will fall …
EM governments’ budget deficits have narrowed and their debt-to-GDP ratios have fallen since the height of the pandemic. But some of the tailwinds that have supported an improvement in fiscal health are set to unwind. Among the major EMs, debt dynamics …
13th September 2023
Although wage growth is clearly falling in the US, the same cannot be said for the UK and euro-zone despite some evidence of labour markets cooling there too. A further fall in inflation expectations and an easing in worker mismatches is probably needed …
Over the last year or so, spreads over sovereign yields have narrowed to their lowest since the euro-zone debt crisis. But while these are expected to widen again over the next year, mostly thanks to falling bond rates, they look set to stay well below …
Data on cell phone usage suggest that cities with a high share of professional, scientific and technical occupations and long commute times are typically associated with poorer downtown recoveries. That is in line with our existing views, but also implies …
12th September 2023
There’s little evidence in the investment and trade data so far to back up the commonly-cited narrative that Mexico is experiencing a “nearshoring” boom. The one sector where there are some signs of this is industrial real estate, which suggests that it’s …
New home sales have brushed off a collapse in overall housing demand, rising 23% in the first half of 2023. More competitive pricing will be providing some support to sales, but the primary factor is the chronic shortage of existing homes for sale, …
After a strong 2022, annual office rental growth has slowed in Italy in H1 2023. And given the contraction in employment we are forecasting, together with increased supply, we think prime rents will largely stagnate both in Milan and Rome until 2025. …
The Q2 Mortgage Lenders and Administrators statistics showed that higher rates are limiting lending and making it more difficult than ever for single-income households to get onto the housing ladder. Meanwhile, arrears took a step up as another cohort of …
The G20 summit which concluded yesterday in New Delhi supported our view that the global economy is fracturing into US and China-led blocs, and that India still leans to the former. While the statement was light on explicit policies, calls to increase …
11th September 2023
The recent weakness of Gross Domestic Income (GDI) is only partly because it includes the losses now being incurred by the Federal Reserve. Even after excluding those, GDI paints a much weaker picture of recent economic performance than GDP. As GDI has …
The devastating earthquake that hit Morocco on Friday evening has severe humanitarian consequences, but, from a purely economic standpoint, it should only have a small and short-lived impact on GDP. The spillovers are also set to be limited on Morocco’s …
The quantitative tools that the PBOC relied on to pump up credit growth during previous downturns have become ineffective due to weak demand. That leaves interest rates as the main avenue for monetary support. But bank lending rates need to decline to a …
Disinflationary pressures easing CPI exited deflation in August, and PPI rose for the first time in nine months. Core inflation remained unchanged after hitting a 11-month high in July, while services inflation rose to its highest in 18 months. We expect …
Market implied rates suggest that investors expect inflation to normalise in the US and Europe in the next couple of years. While we share that view, we think they are overestimating the level of policy rates required to achieve inflation targets. As a …
8th September 2023
The recent rise in oil prices to $90 per barrel means CPI inflation is likely to rise from 6.8% in July to 7.1% in August, but it won’t prevent inflation falling to the 2% target by the middle of next year. Even if oil prices climbed to $100 per barrel, …
The UK government’s failure to award any new offshore wind-power contracts in its latest procurement round ultimately stems from bean-counting stinginess and is nothing that a lot of extra government investment won’t fix. But with the days of ever-cheaper …
Having remained resilient over the past months, inflows into EM bonds and equity markets have turned negative in recent weeks. Inflows into Turkey have weakened despite August’s sharp interest rate hike and while India has continued to see notable …
Although the Canadian dollar has held up relatively well among G10 currencies, we think it will weaken in the coming quarters as investors discount a more dovish policy path for the Bank of Canada (BoC). Despite the broad-based strength in the US dollar …
7th September 2023
Recent patterns in the US stock market are sending mixed signals about the extent to which investors are braced for an economic downturn. Our own view is that equities will struggle to make more headway this year – even if the economy avoids an outright …
We think that the positive impact of lower inflation on households’ real incomes in the coming quarters will be offset by weaker employment and nominal wage growth. As a result, we don’t think that lower inflation will drive a recovery in real consumer …
China’s commodity import volumes rose strongly in August compared to July. Crude oil imports were probably supported by the ongoing recovery in the aviation sector, which we expect to continue in coming months. But greater enforcement of steel output …
The UK government’s decision to block Marks and Spencer’s (M&S’) re-development of its flagship store highlights the challenges in the transition to net zero. In particular, while authorities are using regulation to force owners into greener choices, if …
Developments in the past few weeks have moved the dial somewhat on the global story. In major DMs, there have been more signs of activity softening either in terms of output or employment, evidence of disinflation continues to mount, and it has become …
According to Halifax, house prices are up by 20% compared to 2019 even after their recent falls. But adjusted for inflation they slipped to a seven-year low in August. High mortgage rates point to a further fall in prices in both real and nominal terms. …
The Budapest office market has underperformed in recent years, with rents lagging the rest of the region. While some weakness is likely for the rest of this year, the outlook is improving. With a more limited supply pipeline and improving demand, Budapest …
M1 narrow money continues to contract at a double-digit annual pace, as higher interest rates temper demand for low-return deposits. Broader money growth is not faring quite as badly, since higher rates are also boosting demand for savings deposits and …
6th September 2023
Higher interest rates lead to forecast downgrades The latest IPF Consensus Survey showed a reversal of last quarter’s forecast upgrades, bringing the consensus view more in line with our own. The surge in interest rates thanks to high inflation is behind …
The more cautious tone of the Monetary Policy Report released by Chile’s central bank today supports our view that, once the large falls in inflation are behind us in early 2024 and the economy recovers, the easing cycle is likely to shift down a gear. We …
Excluding China, aggregate EM GDP growth held up surprisingly well in Q2. That said, we think growth will weaken in most major economies in Q3 and remain subdued over the coming quarters before a modest recovery takes hold in the second half of 2024. Our …
The Bank of Canada accompanied its decision to leave interest rates unchanged with a pledge to hike again if needed, but we doubt it will need to follow through. With recession risks rising and labour market conditions loosening, we continue to think that …
The latest real estate data suggest that the current drop in capital values in the euro-zone will be as bad as the post-GFC correction. But market sentiment has been less negative this time, particularly for occupiers, which we think largely reflects the …
The higher share of floating rate mortgages in Italy and Spain means that household interest spending in both countries has risen much further than in Germany and France. Interest spending is also set to keep rising much more quickly in Italy and Spain in …
The German government is unlikely to announce the kind of big stimulus package that some are calling for. However, fiscal policy will remain much more supportive than it was before the pandemic. The German economy has struggled since the pandemic. In Q2, …
A growing number of indicators suggest that the labour market is no longer much tighter than it was in 2019 and that, as a result, wage growth is also likely to slow towards pre-pandemic levels soon. This suggests that most of the required adjustment in …
The relaxing of planning rules governing new onshore wind installations in England marks a shift away from the de facto ban that was put in place in 2015. But raising the bar for objections to land-based turbines won’t put an end to green-related …
Denver’s poor jobs market performance over the last year appears to have been driven by a combination of a downsizing in Central Bank staff and layoffs in its large telecoms sector. But the former’s weakness is likely to be short-lived and the latter has …
5th September 2023
Having ballooned during the post-pandemic recovery, Colombia’s current account deficit has started to narrow and should continue to do so in the coming quarters. This, alongside the shift in financing towards more stable FDI inflows, leaves the peso less …
The adoption of remote work meant central London was left out of the COVID-19 house price boom. But with house prices in outlying towns and rural areas around the capital starting to stagnate too, there are tentative signs that the relative …
Rising interest rates have pushed down commercial property equities, which implies capital values will come under further downward pressure. That said, the large correction in equities seen in 2022 meant annual growth has now levelled out. That suggests …
The jump in inflation in August was driven by temporary factors and we don’t think this marks the start of a sustained rise in inflation, especially since core inflation continued to drop back. Nevertheless, the rise in inflation last month reduces the …
At first glance, the rise in corporate profits to a record-high last quarter suggests that greedy firms are driving up consumer prices. However, we still think that most of the increase in inflation reflects surging import costs. Most importantly, the …
The RBA retained its tightening bias when it kept interest rates unchanged at 4.10% today. However, we think the Bank’s next move will be a rate cut, perhaps as early as the first quarter of next year . The Bank’s decision to keep the cash rate unchanged …
The Bank of Israel (BoI) left its policy rate on hold again today, at 4.75%, and while our baseline forecast is that the tightening cycle is now over, the BoI’s hawkish comments support our view that it won’t turn to interest rate cuts until Q2 next year …
4th September 2023
The news that the UK economy may now be 1.5% bigger than its Q4 2019 pre-pandemic size, rather than 0.2% smaller, suggests the economy has been much stronger than we previously thought. But with the UK still likely to be suffering from a labour supply …
1st September 2023
Although a rise in Chinese manufacturing output meant that the decline in global manufacturing activity eased slightly in August, the outlook for industry in advanced economies in particular remains weak. Meanwhile, although the PMIs also pointed to a …
EM industry strengthens, but export demand weak The manufacturing PMIs for August pointed to pick-ups in activity in some of the major EMs. But external demand remains soft, which continues to weigh heavily on some of the more export-oriented economies in …
This page has been updated with additional analysis since first publication. Economy may already be in recession The surprise contraction in second-quarter GDP leaves little doubt that the Bank of Canada will keep interest rates unchanged next week. With …
