While the Fed and the ECB are set to hike interest rates this week, subsiding inflation means that the upcoming EM central bank meetings will tilt towards monetary easing . And we expect that the EM rate cutting cycle will broaden out over the course of …
24th July 2023
Italy has already accumulated so many delays in spending NextGenerationEU (NGEU) money that it will only be able to use a fraction of the funds and any boost to growth is likely to be much smaller than hoped. Meanwhile, timidness in implementing reforms …
July’s flash PMIs suggest that activity slowed further at the start of Q3. Industry remains the weak spot, but the outlook for the services sector has also deteriorated noticeably. And while this seems to be weighing somewhat on employment growth and …
The end to the Black Sea grain deal has put Egypt’s vulnerability to rising global wheat prices back in the spotlight. Even if supply disruptions are avoided, higher wheat prices would add to strains in Egypt’s balance of payments, force the government to …
New home construction has been surprisingly resilient to weaker demand so far this year. But that partly reflects activity being brought forward before building standards were tightened in June. With that boost now over and survey data indicating a …
Occupier demand in Amsterdam has been more resilient than we expected so far this year. In tandem with supply constraints caused by construction delays, this suggests that prospects for rental growth are brighter than we had anticipated over the coming …
China’s stock market has underperformed over recent months and investors once again seem to be discounting a lot of bad news. We think this pessimism is slightly overdone and that Chinese equities will fare better than those elsewhere over the rest of …
21st July 2023
After trailing the rest of Europe last year, the Dublin industrial market has had a change of fortune in 2023 as rent growth continued to improve. With industrial demand set to benefit from a relatively strong domestic economy, greater trade with Northern …
While recent data suggest the US in on a path towards disinflation and a less aggressive monetary policy stance from the Fed, we continue to think that the dollar will rebound in the second half of 2023. Short-term momentum has swung against the dollar as …
The Treasury yield curve has been inverted for a long time by past standards, but we think it could remain so until next year even if there’s a recession in the interim. At the start of this month, it briefly looked as though the beginning of the end of …
Given our view that economic growth will disappoint, we doubt that the positive mood accompanying US banks’ earnings reports will endure over the rest of 2023. But when the outlook brightens, we suspect that bank stocks will recover, helped by lower but …
Mexico’s exports have fared well recently and the current account deficit remains small. But a closer look suggests that the strength of the peso is causing dynamics in the balance of payments to worsen. The Mexican peso has been one of the best …
20th July 2023
Despite today’s big reaction in markets in the UK to better-than-expected inflation news , we still think investors are overestimating the peak in interest rates there and underestimating how much monetary policy will be eased in 2024 and beyond. Indeed, …
19th July 2023
We have made only minor changes to our latest global forecasts which still imply that property will underperform other assets in the short to medium term. Further out real estate returns are set to recover, but, with yield spreads more compressed than in …
Lower energy prices and the reinstatement of the EU’s fiscal rules will contribute to lower budget deficits in the euro-zone next year. Together with tighter monetary policy, this will help to dampen inflationary pressures and to reduce GDP growth. Over …
Table 1 has been updated to include the latest comments and proposals of the candidates. The latest polls ahead of next month’s primaries in Argentina suggest that the country could buck the regional trend by electing a more market-friendly government. In …
One way in which EMs may benefit from the fragmentation of the global economy into US- and China-aligned blocs is via “friend-shoring”. There appears to be evidence that the US is importing a higher share of goods from EMs, mainly Vietnam, Taiwan, Mexico, …
The lower-than-expected CPI inflation data for June probably signals the end of the upward march in mortgage rates. But mortgage rates are likely to plateau rather than fall as the Bank of England keeps interest rates high until next summer and lenders …
Despite the softer tone of the CPI inflation data for June released earlier today, we have raised our forecast for the peak in Bank Rate. Rather than rise from 5.00% currently to a peak of 5.25%, we now think Bank Rate will peak at 5.50%. That’s a bit …
The latest data suggest that the euro-zone remained in recession in Q2. We think that the economy will continue to contract in the second half of the year as the impact of tighter monetary policy feeds through. Construction data for May were published …
Mortgage rates have risen to a level that could cause costs on a fifth of rental homes to exceed the rent. That is likely to lead to a significant number of forced rental property sales, which will undermine the tight supply conditions that have limited …
Provisional data from the Australian Bureau of Statistics suggest that consumer spending slumped in Q2, as households sharply pared back discretionary expenditure. Faced with falling real incomes and depleted savings buffers, we think households will only …
Rebound in sales spreads to pre-construction sector The pick-up in existing home sales this year has spread to the pre-construction market, with new home sales in Toronto rebounding strongly. Together with the surge in housing starts in June, that …
18th July 2023
The blow to Nigeria’s economy from a failed demonetisation exercise is fading but there are already signs that the inflationary effects of the devaluation of the naira and removal of fuel subsidies are weighing on activity. We expect near-term GDP growth …
Here are answers to some of the key questions that kept coming up during meetings with clients last week in New York and Chicago, and around my presentation to the NCREIF summer conference in Chicago . How bad will it get for offices? Our forecast for …
The widely-differing impact of El Niño across continents means that the net effect on global mining output is not clear cut. On balance, though, the likelihood is that it will lead to lower ore output, particularly of copper, and that it will be a factor …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19 th July. Register here to join that 20-minute online briefing. Splitting real GDP growth into the sectors most and least sensitive to …
Swiss inflation has fallen sharply this year to below 2% and we expect it to stay there for the foreseeable future. In contrast to the SNB’s view, we think second-round effects on wages will be quite limited. And as a result, we forecast the SNB to start …
The resurgence in female prime-age participation to a record high is helping to support labour force growth, but the recent rapid pace of improvement is likely to fade soon. Although the overall labour force participation rate continues to be held down by …
17th July 2023
Out of town retail has been among the hardest hit commercial sectors since 2020, but with considerable variation among subsectors. While a weak consumer backdrop will drag on near term rent growth across the board, further out we expect this variation to …
The stock market in the US has rarely rallied in recessions that have taken place there since the mid-1850s. Our forecast is that it will take a knock amid a recession in H2 2023 before powering ahead. We would point to five key examples of the stock …
14th July 2023
Emerging markets (EM) currencies with high short-term yields – i.e., high “carry” – remain the strongest currencies against the US dollar this year, even if their gains over the past week have been relatively small. We think the conditions supporting …
Recent measures have been sector-specific Policymakers have been taking further steps to support the economy this week. But efforts are being directed at struggling sectors rather than the wider economy through broad stimulus measures. The PBOC and …
El Niño is coming but the picture is more nuanced than one of doom and gloom for global production of all crop types. For corn, soybeans, wheat and rice, larger harvests in some regions can outweigh declines in others. For prices, there are still upside …
The recent rise in gilt yields to levels above those seen in the aftermath of the mini-Budget has not triggered a similar rush to sell property assets. In part because past falls in capital values mean multi-asset funds are unlikely to become overexposed …
Data released today show Singapore's economy remains very weak and we continue to expect growth to come in well below consensus this year. With inflation also falling back sharply, we expect the central bank to step in and support the ailing economy by …
June’s soft US CPI print seems to have given investors renewed hope that inflation could fall back to normal levels without the economy slowing too much, if at all. We continue to think that the chance of a more-significant economic slowdown is …
13th July 2023
China’s commodity import volumes remained high in June, helped by the economic re-opening, but they were held back by softening input-related demand for the manufacture of goods for export. As economies in Europe and the US flirt with recession, this will …
Surging mortgage rates are undoubtedly dissuading households from moving due to the cost of giving up low fixed rate mortgages, weighing on home sales and inventory. But a similar decrease in sales in the UK, which does not have long-term fixed rate …
Note: We’ll be discussing macro and market risks around El Niño’s return in a 20-minute briefing on Wednesday, 19 th July. Click here to register. The likelihood of an El Ni ño event over the second half of the year raises the risk that activity is …
The resilience of consumption over the past year is partly because households have been willing to save less of their income than before the pandemic, which lends some support to the idea that consumers have been drawing down a stock of “excess” savings …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19 th July. Register here to join that 20-minute online briefing. Rising interest rates have led lenders to rein in the supply of credit to …
The sharp improvement in South Africa’s budget in recent years has started to reverse. And this trend is set to continue as austerity is eased ahead of the 2024 election and revenues fall short of expectations. The debt-to-GDP ratio will continue to rise, …
Lenders expect narrow spreads to keep upward pressure on mortgage rates The narrowing in interest margins reported by mortgage lenders in the Credit Conditions Survey suggests that mortgage rates won’t fall significantly anytime soon. Meanwhile, it became …
Not so long ago, a higher 10-year TIPS yield almost invariably meant an underperformance of US “growth” stocks vis-à-vis their “value” peers, a lower gold price, and a stronger dollar. That’s changed in 2023, though, with the relationships weakening …
The Bank of Korea today left interest rates unchanged (at 3.5%) and the accompanying statement and press conference were more hawkish than we had anticipated. Accordingly, we are pushing back the timing of when we think the central bank will start to …
Demand falls at fastest rate since last October As we expected, the rise in the average quoted mortgage rate from 4.4% in May to 5.1% in June caused agreed sales and new buyer enquiries to slump. The deterioration in market conditions has left surveyors …
Last year’s sharp weakening of the yen hasn’t boosted goods exports, not least because most exports are invoiced in foreign currency and exporters haven’t slashed prices. Instead, it has lifted corporate profits which has encouraged firms to invest more …
The Bank of Canada’s 25bp hike today, taking the policy rate to 5.0%, is likely to be the last in this cycle. With the labour market loosening, core inflation falling and the survey indicators implying that inflation expectations are normalising, we …
12th July 2023
Given our view that a big stock market rally fuelled by enthusiasm about AI is on the way, we expect equities in some IT and industrials subsectors to outperform, which would favour the US market. Equities in the US have fared markedly better than those …
