The Polish central bank’s dovish monetary policy stance is becoming increasingly at odds with the severity of inflation pressures and this reinforces our long-held view that inflation won’t return to the central bank’s target until 2025 at the earliest. …
8th November 2022
In line with changes in our global economic view, we have made significant downgrades to our commercial real estate forecasts for the next couple of years. As a result, we now expect a much bigger drop in property values next year that will cause annual …
Our seasonally-adjusted measure of aggregate EM goods exports recorded a decline in dollar terms in September and leading indicators point to further falls over the rest of the year. And with commodity prices on a downward trend and the global economy …
Brazil’s financial markets have been some of the world’s best performers lately, supported in part by the prospect of centrist policymaking by incoming president Lula. With the presidential election now complete, and Lula set to be inaugurated soon, a …
A strong rebound in working hours in the accommodation and food services sector is one reason why regular pay is growing at the fastest pace in a generation. However, there’s been a broad-based upward shift in the distribution of pay hikes so the …
The proposed price caps on thermal coal and natural gas would knock off around one to 1.25%-pts from overall inflation though the full impact would only materialise in the second half of next year. Wholesale gas and thermal coal prices have surged in …
Higher interest rates have dramatically curbed the demand for home mortgages and auto loans, but there is only limited evidence of banks tightening lending standards, which suggests that they expect loan losses to remain relatively muted . The Fed’s …
7th November 2022
The impending global recession will see sluggish growth or outright contractions in GDP in most major economies, with Europe faring the worst. Accounting for changes in trend growth over time, we think that the depth of the global downturns in the 1990s …
China’s latest trade figures point to weak commodity demand both domestically and globally. Given that we don’t expect the slowdown in global economic growth to trough until early next year, we think commodity demand will remain subdued for a while …
Mexico’s current account deficit is likely to widen over the coming quarters and, while it will remain modest compared with other parts of Latin America, we expect the peso to come under pressure. Mexico’s current account has swung from a surplus of more …
The most measurable climate pledge made to date has been on climate finance – specifically the commitment by advanced countries to provide $100 billion each year to the emerging world by 2020 to fund adaptation and mitigation. With COP27 underway, this …
While front-month European natural gas prices have fallen sharply as concerns have eased around shortages this winter, longer-dated futures haven’t fallen by as much. That reflects how difficult it will be to fill storage without Russian gas flows next …
4th November 2022
The $6bn in new federal spending measures for this year, as outlined in the Fall Economic Update , amount to just 0.2% of GDP and will have little impact on the economic outlook or monetary policy. By utilising only a small part of the windfall from …
3rd November 2022
Gold and silver prices fell following Chair Powell’s hawkish comments yesterday. But if we are right in thinking US rates won’t rise by as much as markets expect, gold and silver prices should increase next year. We forecast prices to rise from $1,630 and …
The differing tones of the Fed, ECB and BoE at their recent meetings have seen yields rise in the US more than elsewhere and reignited the rally in the US dollar. That pattern could last a few more months. But we expect falling inflation in the US to mean …
The recent easing of global supply chain problems could put some downward pressure on euro-zone goods inflation soon. But equipment shortages are still a major problem for manufacturers, while their price expectations are high. And with the labour …
Although the Monetary Policy Committee (MPC) raised interest rates today by 75 basis points (bps), from 2.25% to a 14-year high of 3.00%, it sent the strongest signal yet that it thinks rates won’t need to rise much above 4.00%. But with price/wage …
The surge in energy prices this year has led to a sharp widening in Hungary’s current account deficit and increased its dependence on foreign capital inflows. While the central bank (MNB) seems to have put a floor under the currency recently, it remains …
Today’s decision by the Norges Bank to slow the pace of rate hikes is the beginning of the end for its tightening cycle. But we don’t expect a pivot towards interest rate cuts next year. The Bank signalled at its last meeting that after raising its policy …
Malaysia’s central bank (BNM) raised its main policy rate by 25bp (to 2.75%) today, but with inflation falling and growth set to slow, we think the tightening cycle is nearing an end. Today’s move came as little surprise and was accurately predicted by …
The Fed raised its policy rate by another 75bp today, to between 3.75% and 4.00%, but laid the groundwork in the accompanying statement for a downshift to a 50bp hike at the next meeting in mid-December. With Chair Jerome Powell noting repeatedly that the …
2nd November 2022
Downward revisions to expectations for earnings have taken a toll in the second half of this year so far on the S&P 500, which had been under pressure in the first half from a discount-rate-driven drop in its valuation. We suspect expectations for …
2023 recession increasingly likely Our composite tracking models suggest that the economy is increasingly likely to fall into recession in 2023, although the risks of a downturn beginning before the end of this year still appear relatively low. Our …
Although the aggregate EM manufacturing PMI rose in October, a closer look at the surveys shows that there was a widespread deterioration in EM industry. Highly-open manufacturing economies including Taiwan, Czechia and Poland are struggling in …
The latest manufacturing PMIs are consistent with a significant downturn in global industry. As higher interest rates take a further toll on demand, shortages should continue to alleviate, helping to ease price pressures. However, as the PMIs suggest, …
German prime office rental growth is expected to slow sharply next year as the economy experiences the deepest recession in the euro-zone. Even so, we don’t expect rental growth to underperform as the low level of vacancy means the German markets are in a …
The job openings and quit rates were little changed in September (see Chart 1), but the downward trends over the past six months point to an easing of labour market conditions which will weigh more heavily on wage growth next year. While the initial turn …
1st November 2022
Colombia’s current account deficit has, somewhat surprisingly, widened this year despite the boost to the country’s terms of trade from high oil prices, and now stands at an alarming level. And the funding of the deficit has shifted towards more volatile …
Ahead of the start of COP27 in Egypt on Sunday, this Update explains why one should take the rhetoric of such events with a pinch of salt and focus instead on firm political actions and economic drivers. “COP” stands for ‘Conference of the Parties’ and, …
Russia’s decision to withdraw from the Black Sea Grain Initiative will exacerbate sky-high prices and tight global supply, and adds to the likelihood that prices hover around historical highs for the next few months. To recap, the Kremlin announced at the …
China’s official and Caixin October manufacturing PMIs diverged, but the crux of the matter is that both are painting a picture of weak industrial demand. With the services sector also struggling due to the zero-COVID policy, China’s consumption of both …
The Bank of Japan’s renewed difficulties in defending its 10-year yield target have prompted fresh speculation that it may abandon Yield Curve Control. However, neither concerns about the functioning of the bond market nor worries about a weaker yen …
The Reserve Bank of Australia hiked rates by 25bp today and the upward revision to its inflation forecasts are consistent with our view that rates will peak at an above-consensus 3.85%. However, we still see a good chance that policy will be loosened …
The jump in multifamily housing starts in the first half of 2022 implies a surge in completions over the next couple of years to a multi-decade high. But while rental demand is now moderating, the continued lack of homes for sale means we doubt it will …
31st October 2022
The narrow victory for Lula in the second-round of Brazil’s presidential election yesterday has, so far, thankfully not been contested by Bolsonaro. But there’s still likely to be a negative reaction in financial markets when they open later today. The …
An acceleration of the slowdown in European commercial property investment in Q3 is evidence that economic growth concerns, higher interest rates and tightening credit standards are weighing heavily on activity. We expect investment to decline into 2023 …
28th October 2022
The Bank of Japan revised up its medium-term inflation forecasts while keeping policy unchanged today, but we still think that it won’t snuff out the budding virtuous cycle between incomes and wages . As widely anticipated, the Bank kept its interest rate …
After raising rates by 75bp today, the ECB laid the groundwork for a slower pace of tightening to come. But we still think that the deposit rate will reach 3% next year. And while the Bank will set out some “key principles” for QT in December, we doubt …
27th October 2022
Helsinki office vacancy jumped in Q3 and is likely to trend higher over the next couple of years as occupier demand weakens, completions rise and there are fewer office-to-residential conversions. As such, rental growth will slow, with prospects a bit …
The hawkish language in the statement accompanying the Brazilian central bank’s decision late yesterday, at which it left the Selic rate at 13.75%, reinforces our view that the sharp fall in inflation in the last few months won’t push Copom to cut …
Governor Tiff Macklem shifted his tone notably today, reassuring that the Bank was “trying to balance the risks of over- and under-tightening”, whereas previously the emphasis had stressed that it was better to tighten too much rather than too little. …
26th October 2022
South Africa’s Medium-Term Budget Policy Statement published today showed that the government hasn’t (yet) been tempted to spend the windfall from the improvement in the public finances this year. And, by and large, the government expects to stick to its …
Industrial demand is relatively well-placed to weather the upcoming recession. Vacancy is low going into the downturn and the gradual shift to online shopping will continue. It should therefore be the only sector to avoid a fall in rents. However, …
A closer look at core inflation across EMs suggests that underlying price pressures have started to ease. But they remain very strong by historic standards in most countries – and particularly so in Central and Eastern Europe (CEE). The CEE economies …
Money and lending growth accelerated in September, but the latest Bank Lending Survey revealed that there was a sharp drop in loan demand and that banks have become much more cautious about lending. With the cost of borrowing likely to keep rising, …
We expect European natural gas prices to be high in 2023 as the EU will need to replace Russian gas supply for the entire year. This means demand for LNG imports will be strong, even if gas consumption falls. We forecast that the natural gas price (TTF) …
25th October 2022
Despite stabilising a bit recently, the valuation of UK mid- and large-cap equities in general has fallen recently in both absolute terms and relative to comparable indices elsewhere. While that doesn’t imply that they are bound to outperform in the …
The Treasurer resisted the temptation to spend the tax windfall from high commodity prices in today’s Budget. But with high inflation lifting payments by at least as much as receipts, the government now expects a larger structural deficit. The resulting …
Vietnam’s central bank (SBV) hiked its main policy rate by a further 100bp (to 6.0%) yesterday at an unscheduled meeting as it attempted to support the currency. With the dong likely to remain under downward pressure, further hikes are likely. …
October’s flash PMIs provided further evidence that several of the major advanced economies are heading into recessions. The surveys suggest that activity was already contracting at the start of Q4. And apart from during the initial COVID outbreaks, new …
24th October 2022
