The passing of the UAE’s President Sheikh Khalifa bin Zayed al Nayhan today is unlikely to alter the economic outlook with GDP set to grow rapidly amid stronger oil output and looser fiscal policy. That said, the next president will face several …
13th May 2022
We expect US fuel prices to remain historically high this year due to supply constraints. As a result, we suspect that oil consumption in the US will remain seasonably low for much of the rest of the year. US implied product demand has fallen from a …
12th May 2022
We think that currencies in Central and Eastern Europe (CEE) will depreciate further against the euro over the rest of this year. Within the region, we anticipate that the koruna will continue to outperform and the forint will remain a regional laggard – …
Over our five-year forecast, we expect in-migration to the South will see apartment rents there outgrow the national average. But further ahead, the greater ability of supply to respond in the South means that, even if that migration persists, we do not …
Officials are struggling to balance a raft of conflicting goals spanning everything from GDP growth, zero-COVID, exchange rate stability, deleveraging and regulation. We don’t expect much compromise on zero-COVID. In other respects, we expect a fudge: a …
Brazil’s central bank has undertaken the most aggressive tightening cycle of any major economy over the past year, but there has been surprisingly little impact on bank lending. And while we do expect credit growth to weaken, we doubt that it will …
The current bout of high inflation is influencing wage negotiations in the euro-zone and stronger pay growth this year seems all but guaranteed, reinforcing the ECB’s resolve to normalise policy. But as things stand, a wage-price spiral still looks …
11th May 2022
Congestion at the ports of Los Angeles and Long Beach forced some container ships to reroute to the less busy ports of the Gulf Coast, supporting industrial occupier demand in those markets. But we expect that to be only a temporary switch, a view backed …
News of force majeure on one of the pipelines in Ukraine bringing Russian natural gas to Europe just adds to our conviction that Europe is going to struggle to meet its gas needs over the next year. The heightened competition for gas imports suggests that …
The sharp rise in agricultural commodity prices as a result of the war in Ukraine has boosted food inflation to a multi-decade high, adding 0.6%-pts to average inflation in advanced economies compared to our pre-invasion forecast. This effect will fade as …
The South African Reserve Bank is set to shake up its monetary policy setup. This Update provides some clarity on what policymakers will do and why, and what it means for monetary and credit conditions. What is the Reserve Bank planning? In November 2021, …
Russia has suspended the publication of monthly trade data, but figures from its trading partners show that import values plunged 45% m/m in March while exports rose slightly amid high commodity prices. This is likely to remain the case, pushing Russia’s …
Italian prime property values continued to make solid gains in Q1. However, with the economic outlook downgraded and larger increases in property yields expected over the next couple of years, capital value growth is set to slow sharply and by more than …
Bank Negara Malaysia (BNM) raised its main policy rate earlier than many had expected today, but given low inflation and a continued need to support the recovery, we still think that the tightening cycle will be much more gradual than markets expect. …
The hit to household incomes from higher inflation will be much smaller in Japan than elsewhere and consumers have plenty of pandemic forced savings to tap into to sustain spending. But we nonetheless expect the rebound in consumption to disappoint over …
The 6% rise in the minimum wage will help lift wage growth further this year. But a loosening labour market and smaller minimum wage hikes in the years ahead will facilitate a slow down in wage growth from next year. In Q1 the unemployment rate remained …
One benefit of the current rise in inflation, at least for governments, is that it is eroding the real value of public sector debt. But this will reverse only a small part of the pandemic-related rise in government debt ratios in DMs. And the impact on …
10th May 2022
The resignation yesterday of the prime minister, the postponement of talks with the IMF, surging inflation and the collapse of the currency are just some of the many problems facing Sri Lanka. In this Update , we answer five key questions about the …
Policymakers at the ECB are becoming more concerned about inflation expectations, with professional forecasters, financial investors, consumers and firms all anticipating that the pace of price increases will continue to accelerate. This makes it more …
Industrial production in Central Europe performed much better than expected in March given the sharp fall in German production. We still think industry will weaken in Q2 as supply chain disruptions bite, but we’re hopeful that the major economies in …
Ferdinand “Bongbong” Marcos Jr. is eager to resume the “Build Build Build” infrastructure programme of his predecessor and pursue closer ties with China. Extra spending on infrastructure would be welcome and could provide an important boost to the …
9th May 2022
The war in Ukraine has compounded strains in Egypt’s balance of payments and prompted officials to devalue the pound. The key risk now is that the authorities revert to heavily managing the nominal exchange rate (as they appear to have done since the …
Energy commodity imports held up relatively well in April given the widespread COVID-19 restrictions. But the trade data throw up some question marks about demand for industrial metals given the downturn in export volumes and somewhat lower metals imports …
The Indian rupee hit a record low against the US dollar today, but the big picture is that RBI intervention has helped it hold up better than most EM currencies recently. Given that the RBI has ample FX reserves, we expect the rupee to remain more stable …
The sharpest fall in real incomes since the 1990/91 recession won’t prevent a strong rebound in consumption this year and next. But with the tailwind from reopening the economy set to fade, consumption and GDP growth will fall below trend in 2024, …
Rises in short-and-long interest rates and the likelihood of further increases over the next 12 months pose a threat to real estate prices. While some have suggested that this will not derail market momentum (and price gains), an array of valuation …
6th May 2022
We expect concerns about global economic growth and monetary policy tightening to push up the spreads of developed market (DM) corporate bonds a bit further over the coming year . After holding broadly steady at low levels for most of last year, the …
We argued two years ago that the pandemic would accelerate changes that were already underway rather than trigger behavioural changes out of the blue. Now that most restrictions have been removed in advanced economies, spending on services and recreation …
We think the euro will eventually weaken further, falling to parity against the US dollar, as the euro-zone economy falters, the terms of trade shock from higher energy prices feeds through, and the global economic outlook continues to worsen. While the …
The struggles of both bonds and equities during the Fed’s rapid hiking cycle of 1994/95 may provide a warning to investors today. The Fed’s 50bp rate hike earlier this week – its first such hike in over two decades – looks set to be followed by a …
While a stronger dollar is generally regarded as a headwind for EMs, we think it will only be a minor one for most major EMs, particularly compared with the headwinds from weakness in China, spillovers from the war in Ukraine, and domestic monetary …
We expect weaker electronics demand and a recovery in supply from South-East Asia to weigh on the tin price, dragging it lower by end-year to $34,000 per tonne from around $41,000 currently . The price of tin has been boosted by the pandemic in two very …
With more monetary tightening to come from the Fed, we think the rise in Treasury yields has further to run and that equities will continue to struggle. At face value, this week’s Fed announcements were quite hawkish : the central bank hiked its target …
5th May 2022
Central banks in Czechia and Poland caught investors by surprise today as the Czech central bank (CNB) unexpectedly re-accelerated the pace of its tightening cycle with a 75bp hike while Poland’s central bank (NBP) slowed the pace of tightening with a …
We held a Drop-In yesterday to discuss our Q2 Global Economic Outlook and the forecasts within it (see an on-demand recording here ). This Update answers several of the excellent questions that we received, some of which we couldn’t fit in during the …
Homebuyers looking for more space were contending with low numbers of larger homes for sale in the first quarter, not helped by an apparent rise in investor demand for bigger properties. But rising mortgage rates will encourage owners of vacant homes to …
With economic concerns worsening in the euro-zone, we expect that the Danish economy will not be immune. And we think that the shifts in the interest rate outlook in particular will have the most significant impact on Copenhagen office performance. Our …
The Monetary Policy Committee (MPC) struck a more dovish tone today while raising interest rates from 0.75% to a 13-year high of 1.00% and saying that it won’t make a decision until after August on whether to shrink its balance sheet quicker by selling …
Poland’s government has shown no signs of meeting President Putin’s demand to get gas flows restored, but we think the economy is relatively well placed to deal with a loss of Russian supplies. As things stand, we do not expect any energy rationing and we …
We think that the surprising stability of the Turkish lira so far this year will not last much longer and we forecast it to weaken against the dollar over the coming months, from ~14.8/$ now to 18/$ by end-2022. This would be a fall of around 20% and, …
As was widely expected, the Norges Bank left interest rates on hold at +0.75% today and all but confirmed that “the policy rate will […] be raised in June”. After June, we forecast two more rate hikes in 2022 and one per quarter next year, which would …
We expect Indonesia’s latest ban on palm oil exports to be short-lived, but constrained supply and the high prices of other edible oils, coupled with elevated oil prices, will support the price of palm oil. We’ve revised up our palm oil price forecast to …
The communications following the Brazilian central bank meeting yesterday, at which the Selic rate was hiked by 100bp (to 12.75%), confirm that the tightening cycle is nearing an end. But even so, with inflation set to remain firmly in double digits over …
With the Fed "highly attentive to inflation risks" it raised its policy rate by a bigger 50bp today, to between 0.75% and 1.00%, and launched its quantitative tightening; with the caps on the value of maturing principal allowed to run off each month set …
4th May 2022
Consensus forecasts hiked again, but pricing correction approaching Consensus forecasts for rents and total returns in 2022 and 2023 have been upgraded in all four sectors since the last survey. But those changes come with property pricing looking more …
The EU proposal to end imports of Russian crude oil and petroleum products by the end of the year has long been in the works. If approved, we expect Russia’s oil exports to fall by around 20% this year, which in turn would keep oil prices over $100 per …
The steep declines in home sales across Canada’s major cities reinforces our view that a downturn in residential investment will prevent the Bank of Canada from raising interest rates by as much as markets are now pricing in, particularly if – as looks …
Having surged over the past two years, there are signs that EM exports may now have passed their peak. That will weigh on economic growth, particularly in parts of Asia. Manufacturers in the emerging world have been among the main beneficiaries from the …
The prospect of tighter monetary policy in the euro-zone has raised the threat of a bigger sell-off in the region’s bond markets. If this happens, we think the ECB would ultimately intervene to prevent any lasting damage. But we doubt that it will agree …
The Reserve Bank today turned even more hawkish with an unscheduled, unconventional 40bp hike that takes the repo rate to 4.40%. We had been among the early hawks on Indian monetary policy and were already expecting more rate hikes than the consensus this …
