The latest polls for this month’s legislative elections in France raise the possibility that Macron’s party and allies may not win a majority. But even so, support from the centre-right might avoid a lame-duck presidency, allowing Macron to push through …
9th June 2022
Today’s policy statement and press conference sets the stage for the ECB to raise interest rates by 75bp by September and we expect that to be followed by two more hikes this year. The Bank’s failure to provide any more details about its backstop plans …
While we doubt it will be the main driver of the US dollar, the ongoing reduction in the size of the Fed’s balance sheet (i.e., “quantitative tightening”, or “QT”) adds to our conviction that the greenback will continue to appreciate over the rest of the …
Cancelling all of the Trump tariffs on China would give a smaller direct boost to China’s export sector than many might think. More important would be the signal a unilateral rollback would give that the US wanted a reset in relations. This would lift …
Commodity import volumes revived a little in May, perhaps as virus-related restrictions started to ease. Although demand should pick up in tandem with activity as major cities re-open, we think that high prices and slower export growth will mean that …
The latest London Crane Survey showed office space under construction rose marginally, but will increase further as supply rises. This supports our view that increased supply over the next two years will keep vacancy rates high. As a result, we expect …
The guidance in the Monetary Policy Report released by Chile’s central bank today, following on from its 75bp rate hike to 9.00% yesterday, suggests that the tightening cycle has a little further to run. We think that double digit inflation alongside …
8th June 2022
The perception of Amazon as a bellwether for the industrial sector made the announcement that it had over-expanded in the last two years a potentially worrying one. But, the fact that Amazon is only cutting back on a small proportion of its space, and …
The Turkish lira has continued to slide and the current backdrop is eerily similar to that which preceded previous currency crises. Sharp and disorderly falls in the lira over the coming weeks are now a real risk. The lira slipped beyond 17/$ this morning …
The view that policy support is best directed towards investment rather than consumption is deeply rooted in China. A few token consumer voucher schemes aside, this doesn’t seem to be changing. In the package of 33 support measures announced by the State …
The Bank of Thailand left interest rates unchanged today, but hawkish comments from the central bank suggest that rates will be raised sooner than we had previously expected. Today’s decision was a close call, with the monetary policy committee voting 4-3 …
The RBI hiked the repo rate by 50bps to 4.90% today, as we had anticipated, and made substantial upward revisions to its near-term inflation forecasts. Further tightening will follow over the coming months. But we also expect policymakers to step up …
While we forecast that the US economy will merely slow rather than enter a recession, we still expect twin sell-offs in stock and bond markets to resume, with value stocks and defensive sectors outperforming. Our US Economics Service is the place to go …
With the RBA set to hike the cash rate to 3% by early-2023, we now expect house prices to fall by 15% from their April peak. While the economy has considerable momentum from reopening in the near-term, plunging house prices will weigh on consumer spending …
The Bank of Canada’s recent communications suggest that it will be unfazed by the second consecutive double-digit drop in home sales in May. This raises the chance of the Bank enacting a larger interest rate hike at its meeting in July and leaves us …
7th June 2022
We forecast the SNB to largely shadow ECB rate hikes over the next 18 months or so, albeit allowing the interest rate differential with the euro-zone to widen from 25bps at present to 50bps by end-2022. But the balance of risks is skewed towards the Bank …
Headline CPI inflation in India is likely to have dropped in May, primarily due to base effects. But beyond May, we expect inflation to resume rising, reaching over 8% by August. The RBI is likely to respond by frontloading policy tightening in the coming …
A falling fertility rate and declining employment among retirement age workers pose downside risks to our long-term forecasts for Japan’s labour force and GDP growth. However, with the female participation rate still climbing from record highs and job …
The 50bp hike in the cash rate today is consistent with our view that interest rates will peak at higher levels than most anticipate and we’re expecting additional 50bp hikes in July and August . That 50bp hike was anticipated by just a handful of …
This Rapid Response was sent to clients immediately after the results of the vote of confidence in Boris Johnson at 9.00pm BST on 6 th June 2022. After winning tonight’s confidence vote, the Prime Minister, Boris Johnson, may double down on Brexit and …
6th June 2022
Unfavourable shifts in commodity prices, the effects of drought and a slow rebound in the tourism sector will hold back Tanzania’s economy over the next couple of years. But while the near-term outlook is weaker than most think, President Hassan’s …
The solid 1.0% q/q rise in Brazil’s GDP in Q1, alongside the strength of the recent survey data, reinforce our view that the economy will fare better than most expect this year. However, we still think that Brazil’s growth prospects remain weaker than …
Egypt’s government is set to kick off its latest privatisation drive later this year, but its track record provides little hope that it will meet targets. The authorities are likely to retain a high degree of control over the economy, holding back Egypt’s …
We doubt that the low saving rate represents a serious threat to the economy. But with slower employment growth likely to limit gains in income later this year, it adds to our sense that the recent strength of consumption growth won’t last much longer. …
2nd June 2022
The latest manufacturing PMIs suggest that industrial activity weakened a touch in May. But while the forward-looking components of the surveys imply that weaker demand will weigh on output in the months ahead, there were some further signs that …
1st June 2022
While the headline job openings and quits rates remain close to record levels, below the surface there are clear signs that labour shortages are easing in the hardest-hit sectors. That provides some support for the idea that a recession is not necessary …
The S&P Global EM Manufacturing PMI for May suggests that the easing of virus-related disruptions in China supported a small rebound in EM manufacturing last month, but the sector remains very weak. And the effects of the war in Ukraine are taking an …
By increasing the demand for accommodation and boosting rents, the shift to remote work will have put some upward pressure on house prices. But while rents have seen an above-trend increase since the end of 2019, that would only have boosted house prices …
The Bank of Canada hiked its policy rate by another 50bp, to 1.5%, today and, after warning that "the risk of elevated inflation becoming entrenched has risen", closed the accompanying statement with an ominous hint that a 75bp hike was now on the table …
Despite a rise in May, China’s PMIs still point to weak Chinese demand, which will continue to weigh on industrial metals prices. However, the war in Ukraine will remain the bigger driver of energy prices. China’s official and Caixin manufacturing PMIs …
While it has rebounded over the past couple of weeks, we expect the renminbi to resume its fall against the US dollar as China’s economy underwhelms , interest rate differentials continue to shift against the renminbi, and the last two years’ strength of …
The EU’s sixth round of sanctions on Russia marks yet another defining moment in the West’s detachment from Russia’s energy trade. The sanctions were widely telegraphed in advance, though, so for now we still forecast that crude oil prices will remain …
31st May 2022
Annual money growth is slowing sharply and, given rapidly rising interest rates, wealth losses and QT, that slowdown has a lot further to run. (See Chart 1.) The growth rate of bank loans is accelerating, however, suggesting that fears of an economic …
It remains a mixed picture when it comes to how well the labour force is recovering in the wake of the pandemic. The recent improvement in some countries supports our view that much of the pandemic-related drop may be reversed eventually. But this could …
Both our view and that of the IPF Consensus is that prime office rental growth will slow as hybrid working shifts take their toll. However, we also think it is likely that a quality gap will emerge, though the evidence of this is not conclusive so far. …
The rapid improvement in the public finances means that the government can provide financial support to households struggling with high energy bills without raising taxes. But if it did decide that more revenue is needed, a windfall tax on mining profits …
House prices in New Zealand are tumbling and all signs point to a further deterioration in the months ahead. On that basis, we are revising up our forecast for the peak to trough decline in prices from 10% to 20%. That’s why we expect the RBNZ’s hiking …
30th May 2022
Even if high inflation continues to put downward pressure on profit margins, we still suspect that the consumer staples sector in the US will be a relative bright spot against a backdrop of underwhelming growth and a renewed rise in bond yields leading to …
27th May 2022
We expect China’s steel output to fall a little this year in line with government objectives. But we think that subdued demand, notably from the steel-intensive construction sector, will lead to lower prices for Chinese steel later in the year . The …
The ECB’s guidance that it can use PEPP reinvestments to contain bond spreads has a few big limitations. If the forthcoming interest rate hikes cause spreads to blow out, the ECB will either need to change the rules governing its reinvestments or, more …
26th May 2022
The extra financial support for households announced by the Chancellor today will help millions of households cope better with the cost of living crisis. But it won’t relieve all the pain and may mean the Bank of England has to pull the interest rate …
The risks of a recession in the euro-zone have risen. While we think a contraction will be narrowly avoided, this will remain a concern for property investors already facing the prospect of higher yields in the near term. Our recent European Economics …
We don’t expect long-term inflation compensation to continue to tumble, and think long-term government bond yields will bounce back before long . After increasing significantly over the past year or so, long-term inflation compensation has fallen quite …
With inflationary pressures remaining intense and policymakers keen to get the deposit rate out of negative territory, we now think the ECB is most likely to raise rates by 50bp in July and by 125bp in total this year. That said, we still think the …
The consensus among professional forecasters is that house price growth will slow but remain positive over the coming years, as a robust jobs market prevents forced sales. But even in the absence of financial distress, we think that a decline in prices is …
Despite the backdrop of inflation at 70% and the lira falling by falling by 10% against the dollar this month, Turkey’s central bank left interest rates on hold at 14.00% today. So long as President Erdogan is in power, rate hikes will remain off the …
The decision by the Bank of Korea (BoK) to hike its policy rate by 25bps, to 1.75%, is likely to be followed by more hikes to tackle elevated inflation. But the Bank is set to turn more dovish further ahead. Today’s unanimous move was no surprise, with …
The rapid rebuilding of inventories over the past few quarters has left it close to normal levels in some sectors. But the bigger picture is that economy-wide inventories are still exceptionally lean, suggesting that price pressures will ease only …
25th May 2022
Recession risk remains low For all the fears that the tightening of financial conditions over the past few months will push the economy into recession, our composite model still puts the risks over the next 12 months at close to zero, principally because …
The outsize role of agriculture in Sub-Saharan African economies and the tendency to rely on imported food products makes the region particularly vulnerable to the agricultural shock caused by the war in Ukraine. In addition to the risk of food shortages, …
